The government has recently infused about Rs 1,650 crore into Rashtriya Ispat Nigam Ltd (RINL), a state-owned steel manufacturer currently facing significant operational and financial challenges. This financial support was outlined in an official document from the Ministry of Steel, which also describes measures being taken to keep RINL operational. Rashtriya Ispat Nigam Ltd, also known as Vizag Steel, is a central public sector undertaking under the ownership of Ministry of Steel, Government of India based in Visakhapatnam, India.
The Indian government is actively working with the State Bank of India (SBI) to resolve the financial troubles faced by Rashtriya Ispat Nigam Limited (RINL), a state-owned steel producer. According to sources familiar with the situation, SBI has presented potential solutions to help RINL recover from its debt crisis. These solutions were discussed in a meeting with officials from the Department of Financial Services (DFS) and the Ministry of Steel. Click here to read this news in detail.
According to the Ministry’s document, the government provided Rs 500 crore as equity support on September 19, 2024, followed by a working capital loan of Rs 1,140 crore on September 27, 2024. These funds are intended to bolster RINL’s capacity to continue operations amid its financial difficulties.
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Additionally, SBICAPS, a subsidiary of the State Bank of India (SBI), has been commissioned to prepare a detailed report on RINL’s sustainability. SBICAPS is expected to evaluate RINL’s financial health and offer insights into measures that could enhance the company’s long-term viability.
The Ministry of Steel noted in the document, “RINL is in serious financial trouble, and we are taking several steps in consultation with the Ministry of Finance to keep RINL operational.”
Background of RINL and Current Challenges
Rashtriya Ispat Nigam Ltd (RINL) is a government-owned steel production company under the Ministry of Steel. It operates a major steel plant with a production capacity of 7.5 million tonnes, located in Visakhapatnam, Andhra Pradesh. In recent years, RINL has encountered severe financial and operational issues, with its overall liabilities surpassing Rs 35,000 crore.
The company’s financial struggles have impacted its production capabilities. Of its three blast furnaces, two were shut down temporarily until October 2028, when the second blast furnace was finally reopened after being offline for nearly four to six months. This temporary reduction in production capacity has added to RINL’s operational constraints.
Government’s Move Toward Disinvestment
In January 2021, the Cabinet Committee on Economic Affairs (CCEA) granted in-principle approval for the complete disinvestment of the government’s stake in RINL. This decision includes the divestment of RINL’s stakes in its subsidiaries and joint ventures through a strategic privatisation process. The move to privatise RINL has sparked significant backlash, especially from workers’ unions.
Worker Opposition and Key Concerns
One of the main reasons cited by workers’ unions for RINL’s financial challenges is the absence of captive iron ore mines. Unlike other primary steel producers, who enjoy cost advantages by sourcing iron ore from their own mines, RINL has had to procure iron ore at prevailing market prices. This reliance on external sources not only increases raw material costs but also adds transportation expenses, which further strain the company’s finances.
J Ayodhya Ram, a prominent union leader opposing RINL’s privatisation, explained: “RINL never had captive mines. All other primary steelmakers who use blast furnaces benefit from captive mines, which helps lower their raw material costs. We, on the other hand, have always purchased iron ore at market prices, adding transportation costs on top of that.”
Future Prospects and Government Strategy
The government’s recent capital infusion and loan support are part of a broader effort to stabilise RINL’s operations. The Ministry of Steel, along with the Ministry of Finance, is exploring ways to make RINL financially sustainable, especially as privatisation discussions continue. The report being prepared by SBICAPS will likely play a crucial role in shaping the future strategy for RINL, providing insights that could support either restructuring or operational improvements.
The Ministry has also urged all relevant departments and officials to communicate these developments to employees handling pension and related benefits, ensuring a coordinated approach as RINL navigates this challenging period. The government remains committed to exploring viable paths to secure RINL’s future while also addressing the concerns of workers and other stakeholders.
