Visakha Ukku, the steel plant in Visakhapatnam, is facing an increasingly challenging situation, leading to concerns among various stakeholders. The plant’s production capacity is currently constrained, resulting in higher production costs and significant financial losses for the industry. Labor unions are expressing their worries, pointing out three key aspects—financial assistance, allocation of special mines for raw materials, and support from the Steel Authority of India Limited (SAIL)—which are crucial for the center to sustain the plant. Without immediate action, Visakha Steel is at risk of becoming a sinking ship.
At present, the annual production capacity of steel at Visakha Ukku is 73 lakh tonnes, equating to a daily production target of 21 thousand tons. However, Blast Furnace-3 (BF-3) has been non-operational since January 2022 due to a shortage of coal. The remaining two blast furnaces have been struggling to meet the demand, producing a maximum of 15 thousand tons per day. Unfortunately, there has been a recent decline in production from these two furnaces, causing further concern. On the 14th and 15th of this month, BF-1 and BF-2 produced only 7,724 tonnes and 7,615 tonnes, respectively. As a result, the plant has to rely on product sales to purchase raw materials, settle loan payments, and pay employee salaries. The decrease in production has also affected sales, exacerbating the financial strain.
Compared to the Steel Authority of India Limited (SAIL), the Visakhapatnam plant incurs an additional production cost of Rs.6 thousand per ton. With the recent reduction of production by half, this cost is projected to increase by an additional Rs.2 thousand. To resume production in Blast Furnace-3, funds amounting to Rs.4000 crores are required for a four-month period, with a monthly expenditure of Rs.1000 crores for raw material procurement. The revival of BF-3 hinges on RINL (Rashtriya Ispat Nigam Limited) issuing an Expression of Interest (EoI) to attract potential investors. However, there may be further delays in this process, despite the initial intention to complete the tenders this month.
The situation at the Visakha plant is reminiscent of the troubles faced by Neelachal Ispat, another public sector company in South India, in recent years. Visakhapatnam Steel, being the largest volume producer among public sector companies in the region, is currently in a state of uncertainty. Labor unions fear that if immediate measures are not taken, the plant may follow a similar path to Neelachal Ispat, which encountered significant challenges and eventually ceased operations. Urgent action is needed to prevent such a fate and restore stability to the Visakha Ukku plant.