Govt to decide on RINL funding next month after viability report

The government is likely to decide next month whether to grant additional funds to beleaguered steel manufacturer Rashtriya Ispat Nigam Ltd (RINL), which has total outstanding liabilities of about Rs 35,000 crore, according to multiple sources familiar with the matter.
 

The Centre is awaiting a technical viability report, due November, from a UK-based consulting firm.
 

"Following the report's submission, both the government and the banks will evaluate the necessary funding for the company and will provide financial support accordingly,” said a senior government official on the condition of anonymity.
 

RINL is the corporate entity of Visakhapatnam Steel Plant or Vizag Steel – the country’s first shore-based integrated steel plant at Visakhapatnam. It owns an integrated steel plant of 7.3 million tonne per annum liquid steel capacity.

 

In January 2021, the Cabinet Committee on Economic Affairs (CCEA) approved 100 per cent disinvestment of the government's stake in the Navratna entity, along with RINL's stakes in its subsidiaries and joint ventures through strategic disinvestment by way of privatisation. However, the Centre could not implement the strategic disinvestment due to resistance from the Andhra Pradesh government and trade unions.
 

Another source stated that the report by the consultancy firm will determine the future of RINL as a merger with Steel Authority of India Limited (SAIL) is also being considered.
 

An email sent to the Steel Ministry and RINL remained unanswered until the time of going to press.

 

Report to address declining output
 

“The report will examine all aspects of RINL, including its equipment, the reasons for declining production, supply chain issues, and its requirements in terms of tools and funding. It will also assess the extent of damage incurred, the reasons for non-operational machinery, and why production levels have not improved. All of these factors will be addressed in the report,” said a second source.
 

RINL's liabilities include Rs 7,500 crore owed to vendors and Rs 18,000 crore to banks. In September of this year, State Bank of India presented a proposal to the secretaries of the Department of Financial Services (DFS) and the Ministry of Steel to explore potential solutions for RINL's financial challenges.
 

“In the meeting that took place last month, there were discussions about the possibilities of restructuring (the company), as RINL's financial situation is very precarious. We certainly need a concrete solution. However, no bank is currently willing to lend to the company,” said a senior bank official, requesting anonymity.

 

Banks back merger with SAIL
 

Sources indicate that banks were in favour of merging RINL with SAIL.
 

“A merger of RINL with SAIL would lead to stability. Banks support this merger as they believe it would stabilise RINL’s financial situation, which has been troubled for a long time. If this does not happen, RINL’s survival will be in jeopardy. Ultimately, the government must make the final decision, although a no-objection certificate (NOC) from the banks will also be required,” said a bank official.
 

The official noted that while the company was facing challenges, it possessed considerable potential.
 

"Historically, its output has remained under 5 million tonnes. However, with appropriate investment, it can produce up to 18 million tonnes," he added.  
 

RINL has one subsidiary, Eastern Investment Limited (EIL) with 51 per cent shareholding. EIL, in turn, has two subsidiaries, Orissa Mineral Development Company Ltd. (OMDC) and Bisra Stone Lime Company Ltd. (BSLC).