RINL-POSCO JV hangs in balance

Visakhapatnam: The Union Budget proposed for 2021-22 kept everyone guessing on the move for strategic sale of Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Visakhapatnam Steel Plant. As consequence, a question mark also hangs over the proposal for joint venture with South Korean steelmaker POSCO for which an MoU has already been signed.

"We cannot say anything at this juncture as disinvestment/strategic sale is a government's decision," a senior RINL official told Bizz Buzz, when he asked to comment on the impact of decision on strategic sale.

Centre has set a target of Rs 1.75 lakh crore from disinvestment/strategic sale during FY22. Though Finance Minister Nirmala Sitharaman reiterated the government's resolve to go ahead with the disinvestment and strategic sale of central public sector undertakings, she has not listed the companies which would be taken up for strategic sale during the next fiscal. RINL is facing severe resource crunch due to heavy debt burden and high cost of production for want of captive iron ore mines. It has invested nearly Rs 17,000 crore in capacity augmentation from 3 million tonne to 6.3 million tonne, and subsequently to 7.3 million tonne. It is also the only major steelmaker without captive mines, entailing heavy burden on its production expenditure.

POSCO's interest to enter into steel production in India is not new. It had attempted to set up a 12-million tonne plant in Odisha's Jagatsinghpur district with an investment of Rs 52,000 crore. The MoU inked in 2005 lapsed five years later due to environmental issues. It also tried to establish a plant in West Bengal in 2008. A joint working group is, at present, studying the feasibility of setting up a joint venture to produce five million tonne of special-grade steel at an estimated cost of Rs 30,000 crore. RINL has a land bank of 20,000 acre. POSCO has sought nearly 3,000 acre near Visakhapatnam Steel Plant. RINL's equity in the joint venture will be the land to be given to POSCO if the proposal materialises.

"POSCO itself may come forward to buy RINL if it is put up for strategic sale," pointed out RINL-recognised union president J Ayodhyaram. RINL unions, which are insisting on retaining RINL as a 100 per cent government-owned company, feel that due to farmers' agitation the Centre may not name CPSUs listed for disinvestment/ strategic sale immediately.