New Delhi
The Indian government has injected Rs 1,650 crore into the financially troubled Rashtriya Ispat Nigam Ltd (RINL), a state-owned steelmaker, to sustain operations and alleviate cash flow issues. This includes Rs 500 crore in equity and a Rs 1,140 crore working capital loan, as disclosed by the Ministry of Steel on Sunday.
RINL, which operates a 7.5 million-tonne steel plant in Visakhapatnam, Andhra Pradesh, has faced severe operational and financial challenges. The Ministry of Steel, in coordination with the Ministry of Finance, is exploring various strategies to stabilize the company. As part of this process, SBICAPS, a subsidiary of the State Bank of India, is preparing a detailed report on RINL’s financial sustainability.
A major disadvantage for RINL, as highlighted by union representatives, is the lack of captive iron ore mines. Unlike other primary steel manufacturers that benefit from cost-effective raw materials through in-house mining, RINL has to purchase iron ore at market prices, which raises its production costs significantly. This, coupled with high transportation expenses, has contributed to the company’s financial distress.
In January 2021, the government approved the strategic disinvestment of RINL, aiming to privatize 100% of its stake in the company, including its share in subsidiaries and joint ventures. This decision, however, has faced opposition from RINL’s workers’ unions, who argue that the lack of captive mines has hindered RINL’s competitiveness. Union leaders believe that privatization without addressing these structural disadvantages could undermine the plant’s long-term viability.
