Chief Minister Y.S Jagan Mohan Reddy has suggested several measures to revive the Visakhapatnam Steel Plant (VSP). In a letter written to Prime Minister Narendra Modi, Mr. Jagan Mohan Reddy said that the steel sector was witnessing a V-shaped recovery.
The VSP has achieved the highest ever capacity utilisation of 6.3 MTPA against the installed capacity of 7.3 MTPA since December last year, making a monthly profit of close to ₹200 crore. Such performance for two years will help augment the financial situation of the PSU immensely, Mr. Jagan Mohan Reddy pointed out.
Stating that the VSP is purchasing iron ore from the Bailadila mines of the NMDC at market price, putting it at a cost disadvantage of around ₹5,260 per MT of steel at ore level, he said many of its competitors had captive mines which was helping them meet more than 60% the requirement.
Pointing out that even the Steel Authority of India Limited (SAIL) had its captive mines with reserves of iron ore sufficient for 200 years, the Chief Minister said this excess cost of iron ore had cost implications of more than ₹3,472 crores for the VSP. “It is essential to create a level playing field for all players. Allotment of captive mines to the VSP will help it tide over this cost disadvantage. Allotting captive mine in Odisha will go a long way in reviving the plant,” said Mr. Jagan Mohan Reddy.
He suggested that short and long-term loans could be converted into equity, taking off the repayment pressures and the interest burden. The high cost debt which was ₹22,000 crore was being serviced at interest rates as high as 14%.
“Conversion of these loans into equity by banks to address the interest burden and listing the VSP on the stock exchange, giving the banks an exit option through the stock exchange route can also be explored. These measures can ease the burden of debt servicing and improve the financial sustainability,” the Chief Minister said.
Monetising land
The steel plant has nearly 7,000 acres of un-utilised lands. The Centre can monetise these land by plotting and sale by the VSP. The amounts realised can make the company cash rich . The State government will accord all the necessary permissions for land use conversion, he said.
