However, trade union leaders argue that the special package alone is not enough to secure Visakhapatnam Steel Plant's future.
Published Feb 01, 2025 | 10:45 AM ⚊ Updated Feb 01, 2025 | 10:45 AM
HD Kumaraswamy at VSP. (x)
Ahead of the Union Budget session, set to take place on Saturday, 1 February, questions like “Will the Union government’s package of ₹11,440 crore help the Visakhapatnam Steel Plant overcome its financial problems?” have resurfaced.
Until recently, there were doubts, but Union Steel Minister HD Kumaraswamy has now cleared the air.
Speaking to the media during his visit to the steel plant, he said, “We have brought to the notice of the prime minister the status of Visakhapatnam Steel Plant. An initial amount of ₹1,650 crore has been sanctioned in two tranches.”
“The workers’ efforts in producing 14,000 tonnes from two furnaces in December last year restored the Centre’s confidence in the plant. As a result, the prime minister approved a financial aid package of ₹14,440 crore. An action plan will be finalised within 20 days.”
“By June or July this year, all three blast furnaces will be operational, enabling the plant to reach its full production capacity of 7.1 million tonnes. Worker-related issues will also be resolved within three months,” Kumaraswamy said.
One of the key issues facing VSP is the lack of captive mines. The plant currently depends on external mining companies for iron ore, leading to high costs of up to ₹6,000 per tonne.
In contrast, steel plants with their own mines spend only ₹600– 800 per tonne. This cost disparity has resulted in massive annual losses for VSP.
Given that the government has already allocated substantial iron ore mines to private steel giants like JSW and Tata Steel, trade unions have long been questioning why VSP, a public-sector entity, has not received similar support.
Following the Centre’s latest decision, efforts are now underway to allocate iron ore mines to VSP. Key NDA leaders have indicated that discussions are ongoing to secure mines in Chhattisgarh and Odisha. Kumaraswamy himself confirmed that alternatives are being explored to provide VSP with the necessary resources.
Kumaraswamy acknowledged that Chief Minister Chandrababu Naidu had played a crucial role in obtaining the financial package for VSP. He explained that the plant’s financial troubles began after a decision was made in 2014–15 to ramp up steel production.
Furthermore, he revealed that in 2021, the Centre had proposed divesting its stake in VSP. However, the government has now reversed its stance, opting to revive rather than privatize the plant.
“VSP currently has a debt of ₹35,000 crore. It is due to Chandrababu Naidu’s efforts that Prime Minister Modi approved the special package for the plant,” Kumaraswamy said.
After facing an unexpected setback in the 2024 general elections, the BJP has been reassessing several past policy decisions. One of the major reasons for public dissatisfaction was understood to be the push for divestment and privatization of public-sector enterprises. As a result, Prime Minister Modi has decided to withdraw plans for VSP’s privatization.
Additionally, the Andhra Pradesh coalition government has been exerting pressure on the Centre on this issue. A key BJP leader in the state noted that these factors collectively led to the reversal of the privatization plan.
Trade unions have been demanding the merger of VSP with the Steel Authority of India Limited (SAIL). Alternatively, they have suggested that SAIL be given management control of the plant. Union leaders argue that SAIL already possesses vast iron ore reserves, which could make VSP’s operations profitable.
Meanwhile, some proposals have been made to sell unutilized land assets of VSP in Chennai and Hyderabad to clear its debts.
“No private steel plant in the country is running in losses. The Centre has allocated hundreds of acres of iron ore mines to private players. The VSP should receive the same treatment. SAIL has extensive iron ore reserves, and if VSP is merged with SAIL, it can be turned profitable while protecting thousands of workers’ livelihoods,” said Muppalla Subba Rao, President of the Andhra Pradesh Human Rights Commission, speaking to South First.
Finance Minister Nirmala Sitharaman had earlier announced in Parliament that VSP would be privatized, which sparked massive protests at the time.
VSP, which has an annual production capacity of 7.3 million tonnes, has been running at a loss. The plant reported losses of ₹4,848 crore in 2023–24 and ₹2,858 crore in 2022–23. A major reason for this is the rising working capital debt.
Trade union leaders argue that the special package alone is not enough to secure the plant’s future.
J Ayodhya Ram, Vice President of the Steel Workers Federation of India (SWFI) and President of the Visakha Ukku Parirakshana Porata Committee speaking to South First, said, “The Centre approved the package due to pressure from the Andhra Pradesh government. However, financial aid alone will not ensure VSP’s survival. The plant must be merged with SAIL, and captive mines should be allocated.”
“On one hand, the government wants VSP to reach full production capacity by August 2025, but on the other, it is reducing staff, which is contradictory.”
“Over the next three years, nearly 4,000 employees will retire. Without fresh recruitment, there will be a severe manpower shortage. The number of contract workers has already dropped from 20,000 to 14,000,” he added.
(Edited by Sumavarsha)
