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VSP caught in turbulence
Mounting raw material costs and lack of captive mines, coupled with increasing steel imports, are casting a shadow over Rashtriya Ispat Nigam Limited (RINL), the holding company of Visakhapatnam Steel Plant (VSP).
Visakhapatnam: Mounting raw material costs and lack of captive mines, coupled with increasing steel imports, are casting a shadow over Rashtriya Ispat Nigam Limited (RINL), the holding company of Visakhapatnam Steel Plant (VSP).
The Navaratna company, once a forerunner in the steel industry, is teetering on the brink of turning into a sick unit! The VSP suffered losses to the tune of Rs 1,421 crore during the 2015-16 financial year.
Labour organisations point out that if the company has a captive mine, the raw material costs could have come down by 70 per cent, thereby easing an additional burden of Rs 1000 crore.
“VSP is purchasing the raw material at `5,000 per tonne, whereas private companies with captive mines procure the same for `500. If the production cost is `1,200 crore per one million tonnes a month, the raw material alone costs `800 crore.
In contrast, private companies spend only `200 crore on mining. This is the reason why private companies could deliver products those are comparatively cheaper than that of the VSP” said Ch Narsinga Rao, CITU State President.
The Union government announced concessions on 187 types of steel products, of which 70 products are churned out by 70 products of Steel Authority of India (SAIL) and VSP.
Private companies are selling products at Rs 23, 000 per tonne in the open market. But the production cost of VSP is Rs 29, 000. It has to sell at Rs 32, 000 per tonne to make profits. In addition, Chinese steel is available for Rs 23, 000 in the market. All these factors added to the woes of the VSP, resulting in losses.
The Chairman and Managing Director of RINL, P Madhusudan, however, admitted that due to low steel prices, the net realisation declined 24 per cent over the previous year, resulting in a net loss of 1,421 crore,.
The company has achieved a sales turnover of 12,271 crore in 2015-16, recording a growth of five per cent in value and 39 per cent in volume over the last year.
Labour organisations staged several protests demanding that captive mines be allocated to VSP. Even both the Central and State governments were asked to do so. However, apathetic attitude of the governments pushed VSP into the dark.
Having considerable orders on hand, the company is all set to go in for an expansion with a whopping Rs 42, 000 crore. Ironically, it has no sufficient land for this purpose. As much as 1,400 acre of the land belonging to the VSP was taken away by the State government for some other purpose. In turn, no land or compensation was given to the VSP.
The management of the VSP devalued its land price as part of the expansion, which is also driving another nail into the coffin. Even the company is trying to setup a 1,000-MW power plant with the help of NTPC.
“We strongly protest the idea of divesting the shares at throwaway prices. We are paying almost Rs 23, 000 crore in the form of taxes,” Narsiga Rao said. The management, however, says that the situation was temporary and expressed hope that they will overcome it pretty soon, they said.
