Amaravati,  Andhra Pradesh Chief Minister Y.S. Jagan Mohan Reddy has written to Prime Minister Narendra Modi opposing the proposed privatisation of Rashtriya Ispat Nigam Limited (RINL), the corporate entity of the Visakhapatnam Steel Plant.

The Chief Minister on Saturday wrote a letter urging Modi to reconsider disinvestment of the steel plant and suggested a few alternatives to the move, saying the steel plant stands as an icon of Telugu achievement in the people's collective psyche.

Reddy wrote that the recent decision of the Cabinet Committee on Economic Affairs (CCEA) which has given in-principle approval for 100 per cent strategic disinvestment of Government of India's shareholding in RINL along with management control by way of privatisation and the media reports about the Union Cabinet's clearance of the same has raised concerns in the state.

In the letter, he said, "the Visakhapatnam Steel Plant (VSP) is a Navratna company providing employment opportunities to nearly 20,000 people directly and many others indirectly".

Jagan Mohan Reddy said the plant was realised after many sacrifices by the people of Andhra Pradesh.

"The people of my state rallied for the Visakhapatnam Steel Plant in which 32 people have laid down their lives. On April 17, 1970, the then Prime Minister Indira Gandhi had announced the Government of India's decision to establish a steel plant at Visakhapatnam culminating the decade-long public agitation "Visakha Ukku-Andhrula Hakku" in the undivided Andhra Pradesh," the Andhra CM added.

The plant registered a good performance between 2002 to 2015 earning profits with positive net worth, the CM said. The plant pragmatically turned-around in 2002 after being reported to the Board of Industrial and Financial Reconstruction (BIFR) as a sick company.

The company has nearly 19,700 acre of land at present and the valuation of these lands alone could exceed Rs one lakh crore due to the location of the plant in the urban area and rapidly expanding urban sprawl.

At present, RINL has a capacity of 7.3 million tonne and has taken up plant modernisation and capacity expansion recently which made the plant to borrow loans from banks to take up the expansion.

Owing to the unfavourable steel cycle globally, the company was making losses since 2014-15 and was finding it difficult to service the debt. One of the major structural issue that leads to high cost of production is the absence of captive mine thereby affecting the profitability, the letter said.

Reddy said the plant would again become a profitable venture provided some support from the Government of India instead of taking the disinvestment route by some turnaround measures such as allotting captive iron ore mines to bring down the input costs, swapping high-cost debt with low-cost debt, and converting debt into equity through equity conversion.

"As compared to all sectors of the economy, the steel sector is also seeing a V-shaped recovery. RINL has achieved the highest-ever capacity utilisation of 6.3 million tonnes per annum (MTPA) against the capacity of 7.3 MTPA from December 2020 and started making a monthly profit of nearly Rs 200 crore. Continuing this performance for a further period of two years will help the financial situation immensely."

The Chief Minister called for allotment of captive mines for RINL to tide over cost disadvantages. Orissa is blessed with iron ore and the captive mine in Orissa would go a long way in reviving the plant.

Reddy also suggested that short-term loans along with long-term loans could be converted into equity taking off repayment pressures and interest burden.

"The high-cost debt of Rs 22,000 crore is being serviced at interest rates as high as 14 per cent. Conversion of these loans into equity by the banks so as to remove the interest burden and listing the entity on the stock exchange giving the banks exit option through the stock exchange route through the general public may also be explored."

"These measures could ease the burden of debt servicing and improve the financial sustainability."