The government has approved a ₹11,440 crore revival plan for Rashtriya Ispat Nigam Limited (RINL), which runs the Visakhapatnam Steel Plant (VSP). This includes ₹10,300 crore as fresh equity and converting ₹1,140 crore of loans into preference shares. Data indicates that the company has been profitable in only 15 of the last 30 years, highlighting its persistent struggles.
The government has approved a ₹11,440 crore revival plan for Rashtriya Ispat Nigam Limited (RINL), which runs the Visakhapatnam Steel Plant (VSP). This includes ₹10,300 crore as fresh equity and converting ₹1,140 crore of loans into preference shares. The funds will help restart operations, tackle financial troubles, and bring the plant back to full production, starting with two blast furnaces by January 2025 and three by August 2025. This move is expected to boost India’s steel output, support the goals of the National Steel Policy, 2017 and also to secure livelihoods.
In this context, we explore the key aspects of the World and India’s steel sector and take a closer look at RINL to understand the challenges weighing down this critical steel plant.
Global Crude Steel Production has been stable since 2018
The world has witnessed an extraordinary rise in crude steel production over the past seven decades. From just 189 million metric tons in 1950, global production soared to an impressive 1,892 million metric tons by 2023, driven largely by the rapid pace of urbanization and industrialization, thereby raising the demand for steel. However, in recent years, the production of crude steel has nearly stabilized, with a marginal growth of 0.4% between 2020 and 2023. Asia alone contributes to more than 70% of the global crude steel production, with China and India leading. India accounted for 3.1% of global crude steel production in 2001, which rose to 4.83% in 2010, and in 2023, India’s share stood at 7.4%.
The highest annual growth rate of 7.4% was recorded during 1950-55, followed by 6.2% between 2000-05. In more recent decades, the pace has moderated, with average annual growth rates of 4.6% between 2005-10, 2.5% between 2010-15, and 3% from 2015-20. However, the COVID-19 pandemic significantly slowed global production, reducing the growth rate to just 0.4% annually from 2020 to 2023.
Indian Crude Steel production at two-decade high
India’s crude steel production reached a historic high of 144.3 million tonnes in 2023-24, marking a 13.45% year-on-year increase from 127.2 million tonnes in 2022-23, according to the Joint Plant Committee (JPC). While the annual growth rate averaged 9% during 2004-05 to 2010-11, it slowed to 5.6% between 2011-12 and 2017-18, before recovering slightly to 6% from 2018-19 to 2023-24.
A closer look at the sector-wise distribution reveals the private sector’s growing dominance, with its share rising from 63% in 2004-05 to 83% in 2023-24, as the public sector’s contribution declined. India’s production capacity has nearly doubled over the past decade, climbing from 91 million tonnes in 2011-12 to 179.1 million tonnes in 2023-24. Despite this, capacity utilization has averaged 77% over the last five years.
In terms of production methods, the Basic Oxygen Furnace (BOF) remains the primary route, accounting for 45% of total output, followed by the Induction Furnace at 32%, and the Electric Arc Furnace (EAF) at 23%.
Brief about Visakhapatnam Steel Plant
Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Visakhapatnam Steel Plant, is a Navaratna Public Sector Enterprise (PSE) under the Ministry of Steel, recognized with the status in 2010. It holds the distinction of being India’s first shore-based integrated steel plant, renowned for its long products catering to a variety of industrial sectors.
However, the plant has faced a significant challenge since its inception—it was not allocated captive mines for iron ore, the primary raw material for steel production. This lack of dedicated mines has forced RINL to rely on the open market for its iron ore supply, placing it at a competitive disadvantage. Below is the brief strength and weakness chart for Visakhapatnam Steel Plant, as provided in their 2022-23 annual report.
Positive profits only for 15 years in last three decades
In 2022-23, Rashtriya Ispat Nigam Limited (RINL) reported a turnover of ₹22,778 crore, a 19% decline from its record-high turnover of ₹28,215 crore in 2021-22. This marked a significant drop from the company’s peak, which had nearly tripled since 2006-07 when it was ₹9,151 crores. However, RINL’s financial performance over the years reveals a troubling pattern—the company has been profitable in only 15 of the last 30 years, highlighting its persistent struggles. Further, the utilization of the plant remained at an average 79% between 2018-19 to 2022-23.
Rashtriya Ispat Nigam Limited (RINL) has had a turbulent history, marked by key restructuring efforts and strategic investments that shaped its trajectory. In 2000, the then government announced a ₹1,333 crore restructuring package to rescue the company from being referred to the Board for Industrial and Financial Reconstruction (BIFR). This intervention, driven by strong trade union efforts, helped RINL achieve temporary profitability. Over the years, the company made significant investments to expand its operations, including ₹2,000 crore for a forged wheel manufacturing plant in Raebareli, which was eventually handed over to the Railways. Additionally, RINL invested ₹360 crore nearly seven years ago to gain control of the Orissa Minerals Development Company (OMDC). However, this acquisition faced significant hurdles, such as the expiration of leases for six mining blocks and a ₹1,500 crore penalty imposed by the Supreme Court for violations that occurred prior to RINL’s ownership of OMDC.
Despite these efforts, RINL eventually slipped back into losses after an initial period of profitability. The decline was attributed to weak market demand and rising raw material costs, which exposed deeper systemic issues within the company. These challenges highlight the limitations of temporary fixes like restructuring in addressing the long-term structural and operational inefficiencies that continue to undermine RINL’s financial performance.
Almost 60% expenditure is incurred on raw materials
One of RINL’s long-standing challenges is its lack of captive mines for iron ore and coal, forcing the company to rely on open-market purchases at prevailing market rates. This has significantly impacted its profitability, as raw material costs remain a major contributor to its financial struggles. Despite repeated requests to state governments like Odisha, Chhattisgarh, and Andhra Pradesh to allocate iron ore deposits under Section 17A(2A) of the MMDR Act, 2015 and appeals by the Ministry of Steel to the Odisha government for an iron ore block, no progress has been made.
RINL’s financial data reveals that raw materials consistently account for a substantial portion of its expenses, averaging 60% of total expenditure. The share of raw material costs in total expenditure has risen from 46% in 2002-03 to 65% in 2022-23, with a peak of 73% in 2008-09. The cost of procuring iron ore for RINL has seen a sharp rise in recent years, reaching Rs. 4119 Crore in 2022-23, down from ₹7,213 crores in 2021-22, and marginally above ₹4,090.62 crores in 2020-21 and ₹3,867.84 crore in 2019-20. Among raw material expenses, coal and coke continue to dominate, with 54% of the total cost of materials including trial run expenses between 2020-21 and 2022-23, with iron ore costs following closely behind at 36%, while the cost of other raw materials account for the rest 10%. further straining the company’s financial health.
