The Union Cabinet has approved a package worth Rs 11,440 crore to help revive the debt-ridden public sector company, Rashtriya Ispat Nigam Limited (RINL), also known as Vizag Steel Plant, the central government announced on Friday.

“The infusion includes Rs 10,300 crore as equity capital into Rashtriya Ispat Nigam Ltd. (RINL) and conversion of Rs 1,140 crore working capital loan as 7 per cent non-cumulative preference share capital redeemable after 10 years to keep RINL as a going concern,” the Cabinet said. Many of the legacy issues that RINL previously faced will be fixed with this revival package, according to Union Minister of Information and Broadcasting Ashwini Vaishnaw.  RINL operates the Visakhapatnam Steel Plant (VSP), which is the only offshore steel plant in the government sector in Andhra Pradesh. The plant has an installed capacity to produce 7.3 million tonnes of liquid steel every year.

However, according to a statement from the Centre, RINL's financial situation is critical. By the end of FY24, RINL's net worth was Rs (-)4,538.00 crore. Its current assets were valued at Rs 7,686.24 crore, while its current liabilities stood at Rs 26,114.92 crore. “RINL has exhausted the sanctioned borrowing limits from banks for working capital and was not in a position to get further loans from banks. RINL also defaulted on the Capex loan repayments and interest payments in June 2024,” the Cabinet said. Significant efforts will be made to modernise the plant and acquire raw materials for RINL at the same time, Vaishnaw said.

“The equity infusion of Rs 10,300 crore into RINL will help it overcome operational problems related to raising working capital and start blast furnace operations in the most productive way. This would allow the company to gradually reach its full production capacity, which is critical and is in the national interest to have stability in the Indian steel market by augmenting steel production and also save the livelihoods of employees (regular and contractual) and those dependent on the operations of the steel plant,” the Cabinet said.

The revival plan for RINL includes starting full production with two blast furnaces in January 2025 and expanding to three blast furnaces by August 2025. To address its financial challenges in the short term, RINL sold its forged wheel plant in Raebareli to the Indian Railways for Rs 2,250 crore last year. The money from this sale was used to pay off bank loans. The plant had been underperforming, which led the railways to import forged wheels for semi-high-speed trains like the Vande Bharat.

After the Russia-Ukraine war, the national transporter started importing these wheels from China.  The Cabinet stated that bringing VSP back to full capacity and keeping it running efficiently will make better use of public resources and help achieve the goals set in the National Steel Policy, 2017.