Finance And Steel Ministries Should Move For Immediate Merger Of RINL With SAIL, Opines Retired Senior Bureaucrat E.A.S. Sarma

In a hard hitting letter to the Union Finance Minister, Retired Senior Bureaucrat E.A.S. Sarma has asked for dropping the idea of privatization of RINL and instead, go straight merger of the ailing Steel PSU with Steel Authority of India Limited. Below is the copy of the letter written by Mr. Sarma for the benefit of the viewers of www.indianpsu.com –

Smt Nirmala Sitharaman

Union Finance Minister

Dear Smt Sitharaman,

Visakhapatnam Steel Plant:

Steel Ministry’s unprofessional way in handling RINL has brought it to a point of no return

Drop RINL privatisation forthwith, direct SAIL to take it over, in view of the mutual benefits of such a merger, one adding strength to the other

Kindly refer to my letter addressed to you on 6th August, 2024 seeking a financial package to enable Visakhapatnam Steel Plant (Rashtriya Ispat Nigam Ltd. or RINL) to settle the dues to its employees and vendors, and revive the plant, instead of imprudently selling it to private players for a pittance.
In this connection, I refer to a statement made by Shri H D Kumaraswamy, the Union Steel Minister that the Centre would “pump in Rs 15,000 crore to revive the historic Sir M Visvesvaraya Iron and Steel Factory in Bhadravati in Karnataka”, a steel plant that played a pioneering role in triggering all-round development in that State (https://www.businesstoday.in/latest/corporate/story/rs-15000-cr-to-be-pumped-to-revive-historic-visvesvaraya-iron-steel-factory-in-bhadravati-458228-2024-12-23)

If Sir M Visvesvaraya Iron and Steel Factory in Bhadravati is a mascot of development for Karnataka, so is RINL for the northern region of Andhra Pradesh.

RINL became a reality when the local people launched a widespread agitation, some of them even losing their lives, with MPs from this region tendering their resignations to press home the sentiments of the people. But for RINL, the all round development that has taken place in this part of the State, which has been recognised as a backward area in the AP State Reorganisation Act, 2014 and also by Niti Ayog, would not have been possible.The unilateral and highly imprudent decision of the NDA government, of which the present political establishment in AP has since become a part, to privartise RINL, has given rise to a widespread public outcry against it. Our representatives in the Parliament, irrespective of their political leanings, are left with no other alternative than to respect the feelings of the people and reflect their sentiment in one voice.

Intrinsic value of VSP:

VSP has valuable machinery and a rich treasure house of human resources, comparable in to their counterparts anywhere else in the world. They have a huge stretch of land of 19,730 acres, the value of which, even on a conservative basis, would exceed Rs 2 lakh crores, which no private player, domestic or foreign, can afford to pay. If the NDA government attempts to sell such a valuable CPSE for a pittance, let me caution you that it will prove to be an indefensible, highly regressive act of financial impropriety, that will call for a public enquiry.

National Steel Policy (NSP):Para 4.15.4 of NSP-2017 sates, “CPSEs will ..be encouraged to take leadership role in development of steel industry & the community, adopt a more inclusive business model, increase their CSR spends, invest in R&D for indigenous design & engineering and product development for replacement of import” To privatise a CPSE like RINL, which has played a pivotal role in regional development and in promoting self-reliance, would be nothing but a meaningless act of violating its own policy and harming the public interest.

The people of this region are fully aware of the dubious moves on the part of the Steel Ministry to weaken RINL, by deliberately eroding its financial strength, by privatising it slowly, in bits and pieces (blast furnaces handed over to private parties, privatising its auxiliary services like fire safety etc.), demoralising its employees by not paying them their salaries and salary arrears, posing logistic hurdles in RINL accessing inputs, all of which taken together appear to be a well-orchestrated move on the part of the Steel Ministry to create a situation to sell RINL for a pittance to a favoured private player.

NDA’s discriminatory treatment of RINL visa-a-vis private mining companies, in the matter of allotting a captive iron ore mine:

By having access to its own captive iron ore mine would have reduced the unit cost of production of steel for RINL but, for reasons best known to it, the NDA government has deliberately denied that minimum facility for the CPSE, whereas the same NDA government has had no hesitation whatsoever to allot more than one iron ore mine to many private miners. In one case, the NDA government displayed extra-ordinary munificence towards one favoured miner by allotting as many as 13 mines!

ArcelorMittal, a foreign mining company, has recently found favour with the present political establishment in AP, to be given a foothold for setting up a greenfield steel plant, hardly a few miles away from the RINL plant. I am sure that the two NDA partners, one at the Centre and the second one in the State, would collectively work together to expedite clearances for the unit by bestowing on it all kinds of largesse, including a few captive iron ore blocks to allow it to produce steel much cheaper than the steel produced by RINL It would only prove conclusively that both the NDA partners are far more in favour of private players driven exclusively by profits, than a CPSE that stands for social good and self-reliance! A private steel plant with the advantage of a captive iron ore mine will comparatively haveacost edge over RINL, enabling it to steal RINL’s market.

Selling a CPSE to a private player would amount to the government privatising itself, as under Article 12 of the Constitution, read with Article 19(6), a CPSE is to be deemed to be an instrumentality of the State for upholding the public interest.

It is ironical that the NDA government should choose to export as much as 43 MMT of high-quality iron ore annually to a country like China, with whom India has a continuing border problem, but not allot a mine to RINL, a situation that should raise a serious public concern.

Subsidising a profit-earning US semiconductor company for its unit in Gujarat but denying financial assistance to RINL explains NDA’s lopsided approach to CPSEs:

I have extracted below a self-explanatory para from my earlier letter on RINL:
“RINL could have been supported financially from the Central budget to revive one of its blast furnaces but, instead, the Centre forced it to outsource it to a private company, though the same NDA government has had no hesitation whatsoever in announcing a massive subsidy of Rs 2,00,000 crores over five years to profit-earning private companies in the guise of the so-called PLI scheme, as a part of which it recently agreed to provide more than Rs 13,000 crores subsidy to a US company, Micron, to set up a semiconductor unit in Gujarat! While CPSEs like BEML and RINL have created vast employment opportunities and promoted self-reliance, the PLI scheme is an open-ended one without any requirement of the beneficiary companies generating employment and net domestic value addition”I am sure that those who read this letter, circulated widely among the people, would judge the direction in which the present NDA government is moving!

If the NDA government displays reluctance to bale out RINL at this crucial moment, the only inference that the people could draw is that it prefers diverting public money to enrich foreign players to helping out a CPSE like RINL to subserve societal interest!

Penalising RINL’s employees for no fault of theirs:

The clumsy, unethical way in which the Steel Ministry has dealt with RINL so far has resulted not only in “bleeding” such an excellent CPSE but also penalising its devoted employees for no fault of theirs. Not paying an employee for the work already done prima facie amounts to a serious offence on the part of the government for which someone senior in the Ministry should be held accountable. Even one day more of delay in helping out RINL’s employees would aggravate that offence further.

RINL’s privatisation will amount to closing one important chapter of social justice in north AP:

RINL has played a crucial role in creating wide ranging employment opportunities for professionals, promoted social empowerment, and all round growth of auxiliary industry comprising of lakhs of small enterprises.

As on date, it employs 56,000 employees, among whom are 27,900 who belong to SCs/STs/OBCs. NDA’s policies during the last few years have thrown RINL’s highly motivated employees into a limbo of uncertainty, with their salaries remaining unpaid for months, and the future employment and empowerment opportunities permanently closed, as private companies are likely to do away with the services of many employees and appoint outsiders, ending the Constitutional safeguard for reservations for SCs/STs/OBCs.

In other words, the present NDA policy on disinvestment is insensitive to the welfare of employees, and the need for empowering SCs/STs/OBCs.

Successive governments at the Centre and in the States seem to lean towards private corporate players, in abrogation of their mandate in the Directive Principles:

In utter disregard for the fate of RINL, the previous YSRC government in AP, decided to set up a private steel plant near Cuddapah, though the AP State Reorganisation Act envisaged a PSU steel plant there. The same seems to be the case with the present political establishment in the State, as it is moving fast in getting another private player to set up a steel plant a few miles away from RINL’s location. The setting up of such private steel units cosily equipped with their own mines will result in RINL losing remunerative groups of its customers.

I am sure that an independent enquiry into those decisions from the point of view of their overall public interest implications will expose serious improprieties arising from such decisions.

What next?

During the initial years of its inception, RINL started as a unit of SAIL in 1970 to serve its southern markets. It was only in 1982 that it assumed its present corporate identity as RINL. In other words, RINL is not a stranger to SAIL In fact, to start with it, it was a part of SAIL.
Therefore,

In stead of continuing to harp on privatising RINL, demoralising its employees and aggravating anger among the public here, I feel that the NDA government, without wasting any time further, should immediately take steps as follows:

1. Had the Steel Ministry taken corrective steps during the last few years to nurture RINL and allow it to be viable, its problems could have been resolved much earlier and its revival would have been feasible. However, the Steel Ministry’s unprofessional way in handling RINL has brought it to a point of no return. At this belated stage of irreparable damage having been caused to RINL’s finances and its employees’ morale, the Steel Ministry should take an immediate decision to direct SAIL to take over RINL to revive it in all respects. SAIL has sufficient access to good-quality iron ore resources and adequate financial strength to be able to resurrect RINL. In the long run, such take-over will be mutually beneficial for both SAIL and RINL, one adding strength to the other.
2. Both SAIL and RINL are “arms” of the State under Article 12 of the Constitution and SAIL taking over RINL is highly appropriate. It will be totally consistent with the NSP of 2017. The integrated avatar of the merged CPSE will lead the steel sector both on domestic and global fronts.

3.The highest priority should be given to payment of salaries and salary dues to RINL’s employees and boost up their morale

4. SAIL’s take over will restore the financial credit-worthiness of RINL on all fronts enabling its discontinued operations to revive. It will enable RINL to settle its outstanding dues to banks and vendors.
5. Mergers/ acquisitions are not unusual in the corporate sector. The Steel Ministry, which has been responsible in a way for RINL’s woes, should work out the merger scheme so as to ensure the welfare of RINL’s employees in all respects and their future opportunities for promotions etc.
6. Make an announcement of that decision in the Parliament at the earliest opportunity.
7. The case of RINL clearly shows the futility of NDA government’s wholesale disinvestment policy, which in my view needs to be revisited afresh

I hope that the Finance and the Steel Ministries stop dragging their feet and start undoing the injustice done to RINL without any further delay.

Regards,

Yours sincerely,

E A S Sarma

Former Secretary to the Government of India

Visakhapatnam