Cabinet approves Rs 11,440 crore revival package for debt-hit RINL

Union minister of information and broadcasting Ashwini Vaishnaw said that with this revival package, many of the legacy problems that RINL used to face will be resolved

The Union Cabinet has approved a Rs 11,440 crore package to bail out debt-laden public-sector undertaking (PSU) Rashtriya Ispat Nigam Limited (RINL), or Vizag Steel, the central government said on Friday.

 

With this revival package, many of the legacy problems that RINL used to face will be resolved, said Union Minister of Information and Broadcasting Ashwini Vaishnaw.

 

“The infusion includes Rs 10,300 crore as equity capital into RINL and Conversion of Rs 11,440 crore working capital loan as 7 per cent non-cumulative preference share capital redeemable after 10 years to keep it as a going concern,” said the official statement of the Cabinet that met on Thursday.

 

 

RINL operates the Visakhapatnam Steel Plant (VSP), the only offshore steel plant under the government sector in Andhra Pradesh. It has an installed capacity of 7.3 million tonnes per annum (mtpa) of liquid steel.

 

According to the Centre’s statement, the financial condition of RINL is critical. At the end of FY24, RINL had a negative net worth of Rs 4,538.00 crore, while current assets stood at Rs 7,686.24 crore, and current liabilities were Rs 26,114.92 crore.

 

“RINL has exhausted the sanctioned borrowing limits from banks for working capital and was not in a position to get further loans from banks. RINL also defaulted on the capex loan repayments and interest payments in June,” the Cabinet said.

 

Simultaneously, a lot of efforts will be made to secure raw material for RINL and modernise the plant, according to Vaishnaw.

 

“The equity infusion of Rs 10,300 crore into RINL will help it overcome operational problems related to raising working capital and start blast furnace operations in the most productive way. This would allow the company to gradually reach its full production capacity, which is critical and is in the national interest to have stability in the Indian steel market by augmenting steel production and also save the livelihoods of employees (regular and contractual) and those dependent on the operations of the steel plant,” the Cabinet said.

 

The revival plan envisages that RINL will start full production with two blast furnaces in January 2025 and with three blast furnaces in August 2025.

 

Among other short-term bailout measures, RINL had tried to stave off its financial issues by selling its forged wheel plant in Raebareli to the Indian Railways last year for Rs 2,250 crore. The proceeds of this transaction were reportedly used to pay off bank loans.

 

Poor performance from the plant had forced the Railways to import forged wheels for semi-high-speed trains, such as Vande Bharat. After the Russia-Ukraine war, the national transporter imported these wheels from China.

 

The revival and continued operation of VSP at its full capacity will ensure efficient utilisation of public resources and help in achieving the objectives of the National Steel Policy, 2017, the Cabinet said.