VIZAG STEEL PLANT (VSP)
1. Context
Ever since Finance Minister Nirmala Sitharaman announced the 100% strategic sale of the Rashtriya Ispat Nigam Limited (RINL), the corporate entity of the Visakhapatnam Steel Plant (VSP), in January 2021, employees of the plant affiliated to various unions such as AITUC, CITU and INTUC, have protested against the move and stalled all plans of takeover by any private company. The VSP is the only shore-based steel making public sector unit (PSU) in the country
2.Vizag Steel Plant (VSP)
- Vizag Steel is considered one of the major contributors to India's steel production capacity. It plays a crucial role in the industrialization of Andhra Pradesh
- Visakhapatnam Steel Plant, commonly known as Vizag Steel, is an integrated steel producer located in Visakhapatnam, Andhra Pradesh, India
- It is operated by the Rashtriya Ispat Nigam Limited (RINL), which is a public sector undertaking (PSU) under the Ministry of Steel, Government of India
- The foundation stone for the plant was laid in 1971, but the production started only in 1991.
- The Indian government announced plans to privatize Vizag Steel, which led to widespread opposition from the employees and local population. Many argue that the plant is a symbol of local pride and a significant employer in the region
- Several political parties and trade unions have demanded that the government roll back its privatization decision, emphasizing the need to protect public sector industries
3. What is the Status of Vizag Steel?
- The Legal and Assessment Committee members have been unable to access the plant, preventing the government from issuing an Expression of Interest, as ongoing protests continue to block them. As a result, the sale process has been postponed, and the Union Government has ceased providing support to the plant.
- Over the past three years, the plant has incurred significant losses, and its production has sharply declined, with only one out of three blast furnaces in operation. Employee benefits have been slashed, and salaries are consistently delayed by 20 to 30 days each month.
- The plant is facing severe financial difficulties, struggling to even procure imported coking coal for its coke oven from warehouses at the Gangavaram and Visakhapatnam ports. Currently, the plant employs around 12,600 permanent staff and 14,000 temporary workers
4. Legacy of Vizag Steel Plant (VSP)
- The Visakhapatnam Steel Plant (VSP) holds a deep emotional connection with the people of Andhra Pradesh. The movement to establish the plant in Visakhapatnam began in 1963 when Chidambaram Subramaniam, a senior Congress leader and minister, announced plans for a shore-based steel plant in the city.
- Following this proposal, the State Assembly, led by Chief Minister Kasu Brahmananda Reddy, passed a unanimous resolution on July 1, 1966, supporting the plant’s establishment in Visakhapatnam.
- However, little progress was made until Amrutha Rao, a leader from Guntur, initiated a fast unto death at the Visakhapatnam District Collector’s office on October 15, 1966.
- This sparked widespread protests, with students from various colleges across Andhra Pradesh taking up the cause.
- The movement escalated into state-wide strikes, resulting in the deaths of 32 people in November. The slogan "Visakha Ukku Andhrula Hakku" (Visakha Steel: the right of the people of Andhra) echoed across the country, putting immense pressure on the Congress-led central government.
- On April 10, 1967, Indira Gandhi announced in Parliament that the steel plant would be established in Visakhapatnam. Around 20,000 acres of land were acquired from 68 villages, and on March 20, 1990, the plant’s first blast furnace was inaugurated
5. Why did the Central Government to sell?
- The Visakhapatnam Steel Plant (VSP) holds a substantial land bank of around 20,000 acres, valued at approximately ₹1 lakh crore. Employees believe that private companies are eyeing this land for its real estate potential.
- The plant is equipped with modern technology and has the capacity to scale up production to 20 million tonnes. It produces high-quality steel and has a strong presence in the market, along with the advantage of two major ports within a 20 km radius.
- Despite these strengths, the plant has not been allocated any captive iron ore or coal mines. According to the Mines and Minerals Act, every steel plant must be granted access to iron ore mines for long-term viability. Without this, VSP has to spend an additional ₹4,000 crore annually to purchase iron ore at higher prices.
- This financial burden, along with interest payments on accumulated loans amounting to ₹18,500 crore, has hindered the plant’s growth. Former VSP Chairman Y. Sivasagar Rao pointed out that, despite repeated requests, the Union Government has not yet allocated a mine to the plant
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The protesters have two key demands. First, they are calling for the allocation of a captive mine to the Visakhapatnam Steel Plant (VSP). CPI(M) State Secretariat member and veteran leader Ch. Narasinga Rao argues that instead of selling the plant, the Union government should grant it captive mines and write off its loans, as VSP has already contributed over ₹58,000 crore in taxes to the Centre.
The second demand is for VSP to be merged with the Steel Authority of India Limited (SAIL). SAIL is planning to expand its capacity by 20 million tonnes, requiring an investment of around ₹6,000 crore. By acquiring VSP, restarting all its furnaces, maximizing production, and supplying iron ore from its own mines, SAIL would gain a 7.3 million tonne steel production facility. This, according to VSP employees and union members, would be a mutually beneficial solution for SAIL, VSP, and the government.
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6. What is a Public Sector Unit (PSU)?
A Public Sector Unit (PSU) is a government-owned corporation or enterprise in which the government holds a majority stake, typically 51% or more. PSUs are established by the government to undertake commercial activities in various sectors, such as energy, infrastructure, manufacturing, and finance, with the aim of promoting economic development and public welfare. These units operate with a degree of autonomy but are accountable to the government.
In India, PSUs are categorized into three types:
- Central Public Sector Enterprises (CPSEs): Owned and managed by the Central Government.
- State Public Sector Enterprises (SPSEs): Owned by individual state governments.
- Statutory Corporations: Established by an Act of Parliament or state legislatures.
7. Way Forward
The proposed strategic sale of VSP has become a political issue and was a key topic in the 2024 elections. All political parties, including NDA allies like TDP and JSP, as well as the now opposition party YSRCP, pledged to save the plant and prevent its sale by the Centre. A meeting on October 8 in Delhi, involving the Finance Minister, Steel Minister, and Chief Minister, reportedly discussed either a revival package or a merger with SAIL. However, this conversation has been ongoing for some time, and the future of RINL-VSP remains uncertain
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Previous Year Questions
1. Which one of these public sector undertakings (PSUs) is NOT a 'Maharatna'? (TSPSC 2016)
A.Indian Oil Corporation
B.Coal India Limited
C.Hindustan Petroleum Corporation
D.ONGC
Answer (C)
As of the TSPSC 2016 exam, Hindustan Petroleum Corporation Limited (HPCL) was not classified as a 'Maharatna' PSU. It was a 'Navratna' at that time. However, the other companies listed—Indian Oil Corporation, Coal India Limited, and ONGC—are 'Maharatna' PSUs
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Source: The Hindu
