AP: Reports of Govt's Planned Incentives for ArcelorMittal-Nippon Steel Reveal Its True Priorities

The Wire

3 days ago

Vizag Steel Plant. Photo: Av9, CC BY-SA 4.0, via Wikimedia Commons
Real journalism holds power accountable
Since 2015, The Wire has done just that.
But we can continue only with your support.
Contribute Now
New Delhi: The news that ArcelorMittal Nippon Steel (AM/NS) India is poised to receive a staggering incentive package for the first phase of its Anakapalli greenfield project – a facility just 60 km from the Vizag Steel Plant (VSP) – is not just a business development; it's a damning indictment.
For years, the VSP has been met with carefully worded 'packages' from the Union government, platitudes from state leadership and a persistent, deafening silence on its most critical need: captive iron ore mines.
The AM/NS deal is eye-watering. For an initial investment of Rs 56,000 crore in a 7.3 million tonne capacity plant, the Andhra Pradesh government is reportedly offering benefits spread over two decades.
These include stamp duty exemptions, 100% GST reimbursement for 15 years, electricity duty waivers, subsidised power at Re 1/unit and industrial water at Rs 50/kL.
Furthermore, AM/NS is being facilitated with a captive port, a critical logistical advantage.
This proactive, comprehensive support is precisely what the VSP has been starved of for decades.
Contrast this with the narrative spun around the VSP. Following the Union cabinet's approval of an Rs 11,440-crore 'special package' for the plant earlier this year, chief minister N. Chandrababu Naidu confidently declared the privatisation threat 'over,' urging VSP employees to 'work hard and utilise taxpayers' funds efficiently.'
This, even as his government was evidently deep in negotiations to roll out the red carpet for AM/NS.
Indeed, that VSP package – a mix of equity and repayable preferential shares – was fraught with questions from the start, doing little to address the plant's Rs 35,000 crore-plus liabilities or its fundamental structural infirmity: the lack of captive mines, which makes its raw material costs up to ten times higher than for competitors.
The Department of Investment and Public Asset Management confirmed only in April, in response to a query by labour leader Padi Thrinadha Rao, that its policy of 100% disinvestment for the VSP remains firmly 'unchanged.'
This renders the Rs 11,440 crore package, and Naidu's assurances, as little more than political obfuscation – a temporary balm designed perhaps to quell public discontent or, more cynically, to ready a 'distressed' asset for a private suitor, as Communist Party of India (Marxist) leader Ch Narsingha Rao astutely pointed out earlier this year.
One cannot help but wonder: what if even a portion of the AM/NS bonanza, say the Rs 28,000 crore, had been strategically directed towards VSP?
Such an infusion, coupled with a genuine commitment from both the state and the Union government to secure captive iron ore mines could have decisively addressed its debt burden and operational inefficiencies.
It could have unshackled the VSP from reliance on expensive market-rate ore, allowing it to leverage its prime land assets (worth an estimated Rs 2 lakh crore) and operate at its full 7.3 million tonne capacity, potentially generating profits to clear remaining debts within years. This is not fantasy; it's basic industrial economics.
Instead, we witness the state government actively soliciting Union government assistance for AM/NS's raw material supply and fast-tracking its clearances, including a 2.9 km stretch of coastline for a captive port. This is the kind of proactive support the VSP has only dreamt of.
As former Union secretary E.A.S. Sarma has consistently highlighted, the refusal to grant the VSP captive mines, while readily allocating them to private players, is the 'root cause of VSP's financial woes.' The state's facilitation of a direct competitor, AM/NS, complete with a captive port that could erode the Visakhapatnam Port Trust's viability, adds insult to injury.
The narrative that the VSP is a 'white elephant' due to worker inefficiency, a line subtly pushed by asking employees to 'work hard' to justify taxpayer money, crumbles under scrutiny. The VSP has demonstrated profitability even in challenging periods (Rs 930 crore in 2020-21). The 'laziness' jibe is a convenient, if disingenuous, deflection from the systemic handicaps imposed upon it.
The NDA government's actions, both at the Union government and in Andhra Pradesh, reek of a meticulously orchestrated strategy: publicly project concern for the VSP with insufficient, conditional aid, while paving a golden path for a major private competitor.
The Rs 11,440-crore VSP package increasingly looks like a pre-privatisation touch-up, an attempt to make the books slightly more palatable before the eventual strategic sale, a sale the Union government remains committed to. The new AM/NS incentives reveal where the government's true priorities and energies lie.
This isn't merely about fiscal prudence or fostering industrial growth; it's about a fundamental, perhaps ideological, bias. If the state can underwrite nearly half the initial investment for a private entity like AM/NS with long-term sops, its failure to offer a truly transformative, structurally sound revival plan for the VSP – a plant intrinsically linked to Andhra's identity and employing thousands – is a profound betrayal.
The 'double-engine' government, it appears, runs full steam for private enterprise, while the engine meant to power public sector revival sputters on rhetoric and half-measures.
The thousands of VSP employees, whose 'steely resolve' has kept the plant running and protests alive for over three years, deserve more than hollow assurances and the sight of a new, heavily subsidised competitor rising nearby.
They deserve genuine commitment, starting with the one thing that can truly level the playing field: captive mines and support on par with what is now being offered to AM/NS.
Anything less confirms that the pronouncements of saving VSP are just that – talk, designed to mislead and hoodwink, while the groundwork for its dismantling continues apace.