With severe erosion in the working capital base during 2015-16 and forecast that the grim scenario will continue this year also, the demand for merger of the Rashtriya Ispat Nigam Limited (RINL) with the National Mineral Development Corporation (NMDC) is gaining pace.
Net loss
Though the management of the RINL, corporate entity of the Visakhapatnam Steel Plant (VSP), had broached the idea earlier, after the 34th annual general meeting of the company it was confirmed it had incurred a net loss of Rs. 1,421 crore after several years. Cutting across party lines, all the unions decided to redouble their efforts for merger.
Both the RINL and the NMDC come under the same Ministry and their corporate offices are located in Telugu-speaking States.
A RINL top official had written a letter in 2010 seeking the Centre’s approval for the merger. NMDC is also foraying into steelmaking.
At one point of time, RINL had also mooted its merger with steel major SAIL.
But now, due to the fallout of the recession and dumping of cheap steel from China and other countries on SAIL, there is not much interest to pursue it.
“They have iron ore mines and want to produce steel and we have the manpower and a land bank of over 20,000 acres. Merger with NMDC is the best available solution as it is mutually beneficial,” Visakha Steel Employees’ Congress (recognised union) general secretary Mantri Rajasekhar told The Hindu . Due to adverse market conditions, all steel producers, including SAIL, are not doing well.
Biggest handicap
An official admitted that lack of raw material security was the biggest handicap of the RINL, because of which it was coughing up a heavy amount towards sourcing iron ore from the NMDC’s mines in Chhattisgarh.
The RINL spends almost 55 per cent on raw material and 22 per cent on salaries, and the remaining goes for maintenance and overheads, leaving no scope to make profit, Mr. Rajasekhar said.
The company is estimated to have incurred a heavy net loss in the first quarter. The sales registered a slight increase in August and September. The RINL clocked a turnover of Rs.12,271 crore with a growth of 5 per cent in value and 39 per cent in volume in the previous year. Steep fall in steel prices led to net realisation of 24 per cent lower than the previous year, thus severely affecting the finance, resulting in a net loss.