Open Letter Alleges Pressure on Vizag Steel for Privatisation

Newsclick Report | 23 Dec 2023

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Former Secretary to the Government of India, E A S Sarma, raises serious concerns about alleged attempts by the Steel Ministry to pressure VSP into involving private companies in its operations.

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New Delhi: Former Secretary to the Government of India, E A S Sarma, has written a scathing open letter addressed to Nagendra Nath Sinha, Union Steel Secretary, raising serious concerns about the Steel Ministry’s alleged attempts to pressure the Visakhapatnam Steel Plant (VSP) into involving private companies in its operations, and thus, potentially paving the way for privatisation.

Sarma said, in an earlier letter dated August 29, 2023, he had expressed his concerns. In the open letter, he expresses distress over the Steel Ministry’s actions, stating, “Now, I find yet another instance of your Ministry becoming a party to VSP’s Board entering into an MOU with the Jindal Group to run its third blast furnace.” This move, according to Sarma, reinforces his fear that the Ministry is facilitating the handover of the steel plant, along with its valuable assets and skilled workforce, to private entities at a minimal cost instead of taking measures to strengthen the public sector enterprise’s financial position.

He contends that the Steel Ministry possesses the technical expertise to revive the blast furnace and suggests alternatives, including “allotting a captive iron ore mine and providing liquidity support to the plant as a medium-term measure of relief.” Sarma suggests that external pressures on the Ministry may be driving attempts to weaken the steel plant, diminish its perceived value, and eventually hand it over to a preferred private party.

The former Secretary also highlights the legality of such actions, stating, “To hand over any part of the steel plant to a private party would therefore constitute a brazen illegality.” He points out that the vast land acquired for the steel plant, obtained under the pretext of public purpose, cannot be transferred to private entities without violating the law.

Sarma dismisses the Steel Ministry’s assertion that decisions regarding the blast furnace are solely managerial, emphasising that “two senior officers of your Ministry are part of VSP’s Board of Directors.” He questions the Ministry’s reluctance to provide debt-restructuring and liquidity support to VSP while noting the substantial subsidies granted to private companies under the Production Linked Incentive (PLI) scheme.

In a demand directed at the Steel Ministry, Sarma insists on several actions to secure the future of VSP, including “allotting a captive iron ore mine to VSP, extending debt-restructuring facility and liquidity support, desisting from alienating any land to private agencies, avoiding involvement of private companies in running any component of the plant, and making a public announcement that VSP will not be privatised at all.”

Sarma concludes his letter with a stern warning, cautioning that the people of north Andhra, VSP employees, and those who lost lands to the steel plant will closely monitor every move by the management and the Steel Ministry. He anticipates “widespread public dissatisfaction in this part of Andhra Pradesh” if the Ministry fails to adhere to the demands outlined in his letter.

The former Secretary has also marked a copy of the letter to the Comptroller and Auditor General (CAG), suggesting the need for a thorough audit to investigate what he perceives as potentially a “scam of a huge magnitude.”