MC Exclusive I Govt likely to announce RINL financial restructuring package by December

CCEA in 2021 had approved strategic disinvestment of RINL

The government is expected to roll out a restructuring package for Rashtriya Ispat Nigam Limited by December; it is aimed at reviving RINL, which is an ongoing concern, according to a senior government official. This package is anticipated to address the company's ongoing working capital issues and may include financial assistance.

The restructuring plan will outline management changes and efficiency measures, ensuring that RINL can break even without relying on continuous government support. "We can't afford to have a situation similar to Air India, where funds are funnelled endlessly," the official told Moneycontrol.

“The Cabinet should take up the restructuring package for RINL before December. Before December we should have the package, can’t go beyond it. If any plan is to work, it must include technical details on current challenges and potential risks. Financial assistance will likely be part of the package, but a thorough study on impact analysis must be conducted before it,” the official added.

Once the government provides the necessary support, the PSU must undertake operational changes to achieve profitability or at least break even. “It’s crucial we take a clinical view on this and clearly define performance expectations for RINL,” the government official further said.

In September 2022, the government infused Rs 1,640 crore into RINL, with Rs 500 crore as equity and Rs 1,140 crore as working capital loan. This helped RINL avoid becoming a non-performing asset (NPA) and allowed the PSU to secure letters of credit for coal imports to keep its blast furnaces running. However, the official cautioned that this was only a temporary solution.

In January 2021, the Cabinet Committee on Economic Affairs (CCEA) approved the strategic disinvestment of the government’s stake in RINL. The company currently employs 6,500 officers, 12,000 regular workers, and 20,000 contract workers.

“The Cabinet decision on disinvestment remains, but our immediate focus is on keeping the blast furnace operational. The government will assess the techno-feasibility of the required support and the necessary management changes. The government needs to examine technical support needed, what commercially went wrong, and what capacity and efficiency are needed for RINL to break even. Along with that have to consider management changes needed which the PSU is not addressing."

"We cannot let it be in the Air India situation, where the government keeps on putting money endlessly. We should see light at the end of the tunnel," the official said.