The entire industry is closely watching how the merger of Visakha Steel Plant with SAIL (Steel Authority of India Limited) will help the plant overcome its current crisis. In the past, when the proposal for a merger with SAIL was made, labor unions strongly opposed it, insisting that the plant remain as Rashtriya Ispat Nigam Limited (RINL). As a result, the merger plan was put on hold. However, in 2021, the central government announced its strategic disinvestment from Visakha Steel. Since then, developments in the steel industry have rapidly evolved.
The primary drawback of Visakha Steel Plant is that it is a government-owned plant without its own mines. It relies on importing raw materials or purchasing low-grade coal from domestic mines, which has led to frequent shortages of raw materials, pushing the plant into financial difficulties. Despite achieving high production, the plant struggled due to lack of support and rising debt, especially as the central government moved forward with the strategic disinvestment plan, leaving the steel plant facing massive losses.
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Workers’ livelihoods have been thrown into uncertainty: During election periods, all political parties promised to protect Visakha Steel. The current coalition government has made several statements to this effect. Measures like staff reduction and the introduction of Voluntary Retirement Schemes (VRS) have caused unrest among workers. Recently, the dismissal of 4,000 contract workers has left many of their lives in turmoil, according to labor union leaders. Additionally, the early leave of CMD Atul Bhatt, even though he still had two months remaining in his term, has raised suspicions, with reports suggesting that the Ministry of Steel had asked him to take leave. Baghchi was appointed as the in-charge CMD.
The steel plant has also focused on safeguarding its valuable land bank from any transfer, seeing it as a means to secure some financial stability. Steps have been taken to sell non-core lands, and approximately 1,600 acres were leased to NMDC to set up a pellet plant. NMDC also requested a deduction from the ₹3,000 crore owed to them in exchange for the land lease, with the Ministry of Steel mediating and deciding that ₹500 crore must still be provided to the steel plant, facilitated by the State Bank of India (SBI).
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Worker unrest: Last month, around ₹1,500 crore was credited from the sale of the Rae Bareli wheel plant to the Railways, but this amount was kept on hold by SBI as part of debt payments. Additionally, the handling of the 8,000-acre land reserve in Visakhapatnam has been a major concern, with the Ministry of Steel needing to approach the issue strategically. While the merger with SAIL is seen as a positive step, labor unions are concerned that the reduction of contract workers and the transfer of permanent staff could lead to production losses. Addressing these concerns is critical for the financial success of land sales or transfers. The steel plant’s current uncertainty must be resolved within the next few weeks, clearing the path for the SAIL merger.
