RINL plant days away from shutdown due to coal supply crisis

About ₹700 crore worth of coking coal and limestone belonging to the steelmaker and crucial for its operations are stuck at the port where workers have been agitating for better wages. 

If the situation is not resolved immediately, the plant could be forced to shut as early as this weekend, one of the two persons cited above said. Only one of RINL’s three blast furnaces is running at present due to the shortage of coal.

The steelmaker’s management is running pillar to post to evacuate its goods from the port. The company plans to attempt evacuation of the supplies using trucks on Wednesday evening.

Workers at the Gangavaram port are on strike demanding higher wages. The strike started on 12 April.

“It has been nearly a month that we have been operating in this throttled regime,” said the second person. “A company like us that is already not in a good position financially cannot continue to operate like this for long, especially with so much cargo that we have paid for being stuck like this.”

The curtailed production has put additional pressure on the company’s already strained financials, with its equipment operating below capacity. The company is likely to default on its fixed expenses like interest payments, power bill and employee wages if the situation isn’t resolved immediately, this person said.

“If RINL can’t produce steel, it will not get cash. If it doesn’t get cash, it will shut,” the first person said.

RINL and the Adani Group did not respond to Mint’s emails seeking comment.

To be sure, the company is importing supplies via the nearby Visakhapatnam Port Trust in the interim to keep its furnaces running. However, that port is already overloaded because of the shutdown of the Gangavaram port.

Gangavaram port is the primary route for raw materials import for RINL. A conveyor belt connects the steelmaker to the port for raw material transport.

Larger Issues

RINL is a Navratna company under the Union ministry of steel. The plant was established in 1982 with an objective to generate employment and boost industry in Visakhapatnam, Andhra Pradesh.

The government had in 2021 identified the loss-making company as one of the assets that will be privatized as part of a wider divestment drive. However, no headway has been made on that front amidst local political opposition.

The unlisted company made a loss of over ₹2,859 crore in FY23. It needs ₹400-500 crore a month to run its operations, said the first of the two people cited above. This person estimated that the company has 6-12 months of runway before it runs into a serious financial trouble.

Meanwhile, recapitalization of the asset is not an option that the government is considering, according to a third person. All the three people spoke to Mint on the condition of anonymity.

The stalemate, if not resolved, could jeopardize more than 13,500 jobs at RINL.

Executives of private steel companies have earlier told Mint that the plant is an attractive acquisition target, given its proximity to the Gangavaram port and its valuable land bank. The fact that the plant produces long steel also adds to its allure. Currently, a majority of India’s large steelmakers are geared towards making flat steel products.

Long steel refers to products such as wires, rods and bars that are used in construction, automotive, and manufacturing sectors, whereas flat steel refers to coils and sheets of finished steel.