NMDC to Supply Iron Ore to RINL for Longer Term, Ensuring Operational Viability

Historically, Rashtriya Ispat Nigam Limited (RINL), a loss-making state-run steelmaker in India, has had a long-term agreement with NMDC Limited to purchase iron ore but the quality of NMDC’s ore was being downgraded in most cases. This will ensure RINL’s operational viability by providing a guarantee of supply of raw materials, i.e. iron ore and coal, in large quantities, RINL sources said on February 28.

It follows another agreement signed in July after the Indian government approved a $1.31 billion (1 billion euros) financial package to revive the debt-ridden steelmaker. The assistance to RINL, which has been facing a liquidity crisis that halted its operations for lack of funds to buy raw materials, is part of efforts to aesthetically inject life in plants across the country.

RINL, which doesn’t have captive raw materials like other state-run steelworks, has a long-term supply agreement with NMDC—a government-run iron ore giant—in critical need of its survival. The steelmaker, based in Vishakhapatnam, owns three blast furnaces with a total capacity of 7.3 million metric tons (mt). But production has been halted amid the raw material scarcity.

RINL needs around 600,000 mt of iron ore in fully installed capacity to maximize the production of crude steel. The new supply arrangement with NMDC will meet this need, giving the company the green light to restore and maintain its production capacity.

RINL’s financial rehabilitation has received impetus with the Indian government’s financial package and the secured iron ore link. Experts say the timely execution of the supply agreement and judicious use of financial assistance is vital for RINL to get back on track and play a role in meeting India’s steel production targets.

However, in this context, this development is indicative of the government’s commitment to take corrective actions to revive major public sector enterprises in the steel sector, especially concerning RINL.