Vizag Steel: What matters most

It was in 1966. I Just finished my 5th class and joined high school in the sixth class. One day when we went to the school we were told students were on strike in support of Visakhapatnam Steel plant and that one Amruta Rao was on fast-unto-death demanding the same.

Any holiday for whatever reason is a good news at that age. All the students gathered at the village centre and the village centre reverberated with slogans of "Visakha Ukku Andhrula Hakku." After deflating a tyre of an RTC bus and closing down some shops, the students dispersed. A few days later, it was announced in the evening regional news that the then Chief Minister Kasu Brahmanandam Reddy gave a glass of lemon juice to the fasting Amruta Rao who broke his fast. Brahmanandam Reddy promised to impress on the Centre to sanction the steel plant at Visakhapatnam at the earliest. In between, in police firing around 30 people died in the state.

The steel plant at Vizag was announced by the then prime minister Indira Gandhi in 1970, maybe in a routine course since there was a gap of four years between the agitation and the announcement of steel plant. There was delay in taking up the work even after announcement and actual construction started in the 80s and was completed by 90s and from then onwards, Vizag Steel has been functioning like any other public sector undertaking – most of the time in losses with occasional years of profit. Presently the Central government is finalising plans for its disinvestment. This proposal of the central government is being opposed locally by some citing that the factory owes its existence to the sacrifices made during the course of the agitation for the steel plant and it is a symbol of Andhra Pride.

One fundamental point these people miss is that the fight was for Visakhapatnam Steel plant, not necessarily for steel plant in public sector. Given the 1956 industrial policy in those days, the capital-intensive core sector like steel factories were reserved to be established in public sector. That's why Vizag Steel plant was also established in the public sector. Today, even after disinvestment Vizag Steel Plant will not go anywhere. It will remain at the same place and in all probability there is going to be a capacity expansion consequent on privatisation adding to a number of jobs and to the overall economy of the Andhra Pradesh state.

Public sector undertakings (PSUs) established in the 50 and the 60s turned out to be white elephants by the 80s and instead of giving a fair return on investment, they needed to be funded by tax payers money to cover up their loses and keep them afloat. When the country faced economic crisis in the 90s, a slew of reforms were brought in, one of them being disinvestment of government share in the public sector. This process started by PV Narasimha Rao as the Prime Minister and was continued by his successors Vajpayee and Manmohan Singh and presently by Narendra Modi. The present government has come with a policy of disinvestment wherein they have divided the public sector enterprises into strategic and non-strategic and are exiting the non-strategic area in full and in the strategic area retaining some and disinvesting the other. Vizag Steel plant is not being singled out for disinvestment. Already another steel plant in Orissa, Nilanchal is privatised and is now a TATA concern.

One point that is raised with reference to Vizag Steel plant is non-allocation of captive mines leading to the steel plant incurring losses. At a time when it was possible to get allocation of captive mines, for reasons unknown, the management did not pursue for captive mines. Today, after the coal mine scam the mines are going by auction and an exception may not be made exclusively for Vizag Steel plant. In any case, whoever is buying the Vizag Steel plant will also have to run it without captive mines.

Today, to be profitable in the long run, a steel plant will have to have a capacity of about 20 million tons. Vizag steel plant capacity is about 7 million tons. To expand it to 20 million tonnes, an investment of Rs 50,000 crore may be needed. That much of money the government may not have. If private investment is going to come in and expand the capacity to a level where the plant can be competitive, that would be a better option than to run it at sub-optimal level and finally close it down account of losses.

Anybody who has the interests of the Vizag Steel plant should ask the following questions and get a clear commitment from the central government rather than blindly opposing disinvestment in the Steel plant:

1. Is expansion of the Steel plant from present 7 million tonnes to 20 million tonnes and above within a specific time frame is one of the tender conditions?

2. Is there a firm commitment on employment security to the present employees and safeguarding their interests?

3. Vizag Steel plant has an excess land Bank of about 15,000 acres. Is this land being transferred to a separate special purpose vehicle under the government for commercial and residential development instead of being allotted to the firm taking over the Vizag Steel plant? Displaced persons who have not got any benefit from the Steel plant should be made stakeholders in this new SPV and their interests can be taken care of.

In Andhra Pradesh media, political class and the intellectuals have an immense capacity not to look for safeguarding the interests when major events are unfolding, but blindly oppose it only to realise later that the state has suffered a lot in the bargain. It happened when the State was bifurcated. That the state was going to be bifurcated was well known. If we were alert and bargained we could have got a better deal including a stake in Hyderabad.

Without doing that everyone blindly opposed the bifurcation only to realise after the state division was done we have lost a lot in the process of division itself. I hope same will not repeat itself with reference to Vizag Steel plant.

(Writer is a former Chief Secretary of Andhra Pradesh)