The slogan for the agitation for the Visakhapatnam Steel Plant in 1960s and 70s, ‘Visakha Ukku – Andhrula Hakku’ epitomises the struggle and sacrifice by the people of then united Andhra Pradesh, for the setting up of the plant.
The slogan once again appears to reverberate not only in Visakhapatnam district but across the State, as it then did. And this time it is to save the biggest Central Public Sector unit in the State from being privatised.
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The establishment of the VSP or its corporate entity Rashtriya Ispat Nigam Ltd., was unique as it did not happen overnight. It took almost over two decades for the first brick to be laid, after it was first announced by the then senior Congress leader and parliamentarian C. Subramanian in 1963. Before the first shore-based plant could roll out its first steel in 1991, it saw an intense agitation by students and youth across the State, since 1966.
The year 1966 was when the history of the steel plant was written in blood, as 32 protesters from across the State, including 12 in Visakhapatnam and five each in Guntur and Vijayawada, were killed in police firing, in the first week of November. It saw two stalwarts – Amruta Rao and P. Sesaiah – taking up an indefinite fast.
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The plant finally got the official nod when on April 10, 1970, the then Prime Minister Indira Gandhi made a statement in Parliament, confirming the setting up of a public sector steel plant in Visakhapatnam. She laid the foundation of the pylon, which still adorns the main gate, on January 20, 1971.
From then, it took almost 20 years for the first blast furnace Godavari to be commissioned and be dedicated to the nation by the then Prime Minister V.P. Singh. Production began in October 1991.
But even during the construction phase, things were not smooth for the plant. Acquiring 22,000 acres from 68 villages by displacing over 19,000 families was no mean task. Repeated change of design to suit the Soviet machinery and lack of interest from the government, saw the construction moving at a slow pace.
In fact, in 1985, Rajiv Gandhi’s cabinet even planned to shelve the project and tried to reduce its capacity to 3 million tonne liquid steel.
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The initial estimate was ₹1,900 crore, but by the time it reached production stage, the cost of construction had crossed ₹8,000 crore. Though the Union government had given ₹4,986 crore, the balance had to be raised at a high interest rate by RINL from the market.
BIFR
Since commencing production in 1991 with two blast furnaces – Godavari and Krishna – the VSP piled up losses of over ₹4,000 crore till 2000, due to high interest rates on loans and high cost of raw material.
In 2000, the plant was referred to the BIFR (Board for Industrial and Financial Reconstruction). After much persuasion by trade unions and political parties, the Union government led by Atal Behari Vajpayee agreed for restructuring and converted ₹1,333 crore of debts to equity, thus reducing the financial burden of the plant by ₹521 crore per annum.
Disinvestment
Immediately after restructuring, the VSP bounced back making profits from 2002 to 2008. It made a bumper profit of about ₹2,800 crore in 2004-2005 financial year.
The expansion project increasing production from 3.2 million tonnes to 6.3 was sanctioned and the then Prime Minister Manmohan Singh had laid the foundation stone for it on May 20, 2006.
Due to sluggish market, the VSP ended up in losses in 2009 and 2010 and the first proposal for 10% disinvestment was mooted. After a sustained agitation, the Centre rolled back the proposal.
Disinvestment was again back in 2014 and SEBI valued the plant at ₹4,890 crore on its book value and proposed an IPO. But following an agitation the proposal was dropped.
For the VSP, 2014 was one of the worst years, as its accumulated losses rose by another ₹1000 crore, after Hudhud cycone devastation.
Mines
Since its inception about five decades ago, the management, employees and trade unions have been pitching for captive iron ore mines.
"This is the only shore-based steel plant and the only one without captive mines. The Central government has never thought of allocating an iron ore mine to the plant," says CPI State assistant secretary J.V. Satyanarayana Murthy.
The plant is not making operating losses. All its losses are due to interest on loans and high cost of raw material. "Since 1991, our accumulated losses are around ₹12,973 crore and profits are ₹18,069 crore. We have paid over ₹42,000 crore as taxes. Despite that we have not been allotted mines," say members of the VSP’s Steel Executives Association.
According to Mr. Narasinga Rao, in the first DPR M.N. Dastur, the consultant of the VSP, had proposed that the plant be allotted the 4th and 5th block of Bailadila iron deposits. But the government never took a call on it.
The steel plant requires about 10 million tonnes of iron ore annually. It purchases it at ₹4,000 to ₹4,500 per tonne. Captive mines can reduce the cost to ₹1,500-1,800 per tonne, says Mr. Narasinga Rao.
As per the recognised trade unions, the VSP had also been urging the State government for allotting mines in Anantapur and Prakasam and even in Bayyaram (now in Telangana). But the appeals never found an ear.
POSCO plant
Amidst its capacity expansion to 7.3 million tonne, RINL has signed an MoU with South Korean steel major POSCO in October 2019 for setting up a greenfield steel plant at an estimated cost of ₹30,000 crore on the steel plant premises.
As per the MoU, POSCO wishes to have at least 50% shareholding while that of RINL is still to be worked out. This has become a bone of contention between the employees, trade union and the management.
While the former oppose it vehemently, the management and the government are keen to go ahead, says Mantri Rajsekhar, general secretary of INTUC.
Amidst all these, the Union government has listed RINL-VSP for strategic sale.
While many say that allotting captive mines and restructuring loans can save the plant from being privatised, as the sale proposal is based on the fact that it is a ‘loss-making’ PSU, a few say that it can be merged with NMDC or SAIL.
