RINL to overcome coal struggles

Visakhapatnam: Even when the Central government is keen on privatising Visakhapatnam Steel Plant (VSP), the shortage of coal is another worrying factor pushing the organisation towards losses. The statistics show that a loss to the tune of Rs 420 crore was incurred due to various reasons in the first quarter of the financial year. However, the management and trade unions are considering measures to improve the coal reserves and earn profits at least from August.

Coal used to be supplied at Rs 3,000 to Rs 6,000 per tonne from Coal India Limited, Mahanadi Coalfields Limited and Singareni, but the supply has become limited due to lack of production and shortage of rakes. Following the shortage, the RINL management has doubled up the amount spent on a tonne from the open market.

Meanwhile, production of the plant has already fallen by 65 per cent. Instead of producing 20,000 tonnes a day, the company is at present producing 65 percent of its capacity.

Global tenders have been invited for around 3.75 lakh tonnes of coking coal to be imported. Currently, a tonne is available at Rs 15,000 in the open market.

The management said that the organisation is suffering losses as the market value is lower than the production cost. Similarly, with the shortage of coal in the international market, the Central government gave top priority to supply the coal to thermal power projects. With this, companies such as the VSP have to buy coal from the international market at a premium price.

The financial burden on the company has increased as the price of coal imported from the US and Australia has gone up to $160 per tonne approximately. These are the prime reasons for the huge loss incurred by RINL, especially in April, May and June.

Earlier, the RINL management faced difficulty importing coal from the mines through rakes as the Railways could not provide the required rakes. According to sources, about 45 rakes of coal are required every month to run the plant. But in the past three months it was difficult to get rake even on alternate days.

The union leaders D Adi Narayana and Mantri Rajasekhar said that the situation was somewhat better in July. This apart, the steel plant is also facing challenges in the form of electricity as it has to spend crores of rupees on power for the past three months.

The VSP has a 350 MW thermal power plant and 120 MW plant that converts waste gas into electricity. Due to the insufficient coal supply, now the power production is less than 50 per cent. Shortage of coal and other reasons the production in Blast Furnace 3 has stopped from January. This has invariably affected the production of a gas-based power plant.

In the last four months, the management had spent about Rs 70 to 80 crore on electricity alone.

However, relief comes in the form of a slight drop in the coal price in the international market. "Following which, the VSP is likely to witness profits in August end. Also, if the Central government allocates own mines to RINL plus a loan of Rs 5,000 crores, most of the plant's struggles could be resolved," opined Neerukonda Ramachandra Rao, president of VSP INTUC.