New Delhi: Chief Minister Y.S. Jagan Mohan Reddy met Union minister for Petroleum, Natural Gas and Steel Dharmendra Pradhan on the second day of his two-day Delhi visit and discussed for over an hour matters regarding the Kakinada Petro Complex and the Visakhapatnam Steel Plant (VSP).
The chief minister reiterated his appeal to Dharmendra Pradhan to stop privatization of the VSP and requested him to consider alternatives suggested by the state in reviving the plant. He said that 32 people have laid down their lives to set up the plant in Visakhapatnam, where nearly 20,000 people are employed and thousands more are having indirect employment.
Further, the chief minister explained that VSP has performed well and made profits between 2002-2015. The plant has gone through an expansion by taking loans, but due to the slump in international market during 2014-15, the organisation fell into debts with an increase in operational costs and lack of own mines.
In fact, he said, VSP has achieved the highest ever capacity utilization of 6.3 MTPA against the installed capacity of 7.3 MTPA and started making a monthly profit of close to Rs 200 crores and continuing this performance for another two years will result in improving the overall financial situation. The plant has 19,700 acres of land which is worth in crores and can be monetised to clear the crisis.
Currently, the RINL is purchasing iron ore from NMDC Bailadila mines at a market price of around Rs 5,260 per MT of steel. Many of its competitors have captive mines for over 60 percent of their requirement and buy only the rest from NMDC. Even SAIL has its own captive mines with reserves of iron ore sufficient for 200 years.
This excess cost of iron ore has cost implications of more than Rs 3,472 crores for the plant and it is essential to have an allotment of captive mines in order to overcome the cost disadvantage. The chief minister requested to allotment of the captive mines in Odisha which will help in reviving VSP. Besides these, Jagan suggested other possibilities in restructuring the finances of VSP, where all the short-term and long-term loans could be converted into equity easing the burden.
The plant has a debt of Rs 22,000 crore which is being serviced at interest rates as high as 14 per cent. Conversion of these loans into equity and listing the entity on the stock exchange, would remove the interest burden totally, he proposed, where the banks would also earn cash through the stock exchange. He said that the plant has supplied over 7,000 MT of oxygen during the second wave of COVID-19, saving lives in hard times and further assured that the state is ready to work with relevant central departments to protect this company.
Discussing the Kakinada Petro Complex, the chief minister stated that it was promised and listed in the AP Reorganization Act that a petro complex will be set up at Kakinada SEZ. He said that DPRs have been prepared for the project by the HPCL-GAIL companies together with a capacity of 1 million metric tons and at the cost of Rs 32,900 crore.
As the Centre has asked for Rs 975 crore per annum under the Viability Gap Funding for 15 years, the chief minister requested to cut down the VGF since the state could not bear such a burden in the present circumstances. Asserting that the central government has reduced the corporate tax by 25 per cent and an overall rate of interest across the world had also been reduced, the chief minister said that the project can be made possible without any VGF.
He said that members have already been nominated for the working group on behalf of the state government to discuss the project modalities and asked the Centre to issue immediate directions to start the project.
Dharmendra Pradhan assured Jagan that a petro complex will be set up in Andhra Pradesh and is also positive about the Viability Gap Fund. He told the chief minister that a meeting will be scheduled next week with the chief secretary and the officials of the Petroleum Department to finalise the procedures.