Workers Face Joblessness as Centre Expedites Karnataka Steel Plant Closure

New Delhi: Thousands of contractual workers are staring at imminent poverty as the Narendra Modi government has decided to shut down a steel plant in Karnataka’s Bhadravati industrial city.

The decision to shut down the 105-year-old Visvesvaraya Iron and Steel Plant (VISP) from the net financial year was confirmed by Union steel minister Jyotiraditya Scindia in the Rajya Sabha on Monday.

As many as 1,340 VISP contractual workers have been protesting since January 19.

The main reasons mentioned by Scindia for closing the plant are the “failure” to find successful bidders for disinvesting the steel-making unit and the “lack of a captive iron ore block”, which has caused loss for several years in a row. 

An iron ore block of more than 140 hectares in NEB Range of the state’s Bellary district was allotted to the plant by the Congress-led United Progressive Alliance (UPA) government in October 2011. However, the block could never be operationalised due to legal issues.

“Efforts were made to allocate a mining lease for 140 hectares of iron ore in Bellary district vide notification of ministry of mines dated 21/10/2011 which could not be operationalised as the matter went under litigation. The matter remains unresolved till date,” Scindia said in a statement in Parliament.

VISP workers' union told NewsClick that the litigation resulted from overlapping coordinates of the mining block specified in the October 2011 UPA gazette notification and leasehold areas of private mine owners.

“The dispute was on roughly 14 hectares of land with leasehold areas of private mining operators. Even if the government decided to forego the disputed land, the total leasehold area of VISP would have been more than 126 hectares,” said union president J Jagadeesh.

“That would have been sufficient for our plant because we are not into mass production but production of specialised steel as per requirements of various clients in defence, automobile, Railways and power sectors,” he added.

The primary section of the plant, which produced raw steel to be forged in accordance with client requirements in the secondary section, had shut down in January 2017 due to the non-availability of coke at competitive prices. The secondary section has been procuring raw material from other units to produce specialised steel since then.

Jagadeesh alleged that the government was “never interested in amicably resolving the boundary dispute” of the coal block. “Another iron ore block was allotted to the plant in nearby Ramanadurga area. It would be preposterous to claim that the non-availability of iron ore is a factor for closing the plant when the allocation of the Ramanadurga block is still valid.”

In fact, SAIL had filed an application for allocation of 245.20 hectares in Block No. 13/1 of Ramanadurg in November 2013 following the uncertainty over the NEB block. However, considering the limited requirements of raw steel for VISP, the Karnataka government allocated only 150 hectares in Ramanadurga Forest Range in a gazette notification on February 20, 2019.

Merely four months later, however, the Centre issued a bid for strategic disinvestment of the plant. After failing to find a successful bidder despite the repeated extension of the deadline, the Centre scrapped the decision last October.

The Department of Investment and Public Asset Management released a statement: “Multiple EOIs (expressions of interest) had been received and qualified bidders had conducted due diligence. However, due to insufficient bidder interest in proceeding further with the transaction, the government of India, with the approval of alternative mechanism (empowered group of ministers) has decided to annul the EOI and thereby terminating the present transaction.”

On November 22, SAIL floated an open global tender to appoint a third party to seek the Centre’s mandatory statutory clearance for the Ramanadurga block. The scope of the work included forest clearance and felling trees to start mining.

The plant, along with its assets and liabilities, had been taken over as a subsidiary unit by SAIL from the Karnataka government at a token price of Rs 1 in 1989 when the Congress was in power at the Centre with then-PM Rajiv Gandhi handing over a golden key to SAIL as a token gesture for the takeover.

Subsequently, successive governments promised investment in the plant but without much result. Scindia, whose father was Rajiv Gandhi’s trusted ally and aide, claimed in Parliament on Monday that the Centre’s total investment in terms of plants and machinery for VISP since it was taken over by SAIL was Rs 389 crore.

The plant suffered a massive jolt in 2004 when operations in the mines from where it was procuring iron ore in Chikkamagaluru were suspended after the area was included in the wildlife restricted zone of the Western Ghats.

“Surprisingly, the Karnataka government had been easily finding iron ore blocks for the private sector all these years while failing to allot a single block to VISP,” Karnataka AITUC general secretary Vijay Bhaskar told the Newsclick

“A massive amount of iron ore in the Bellary region was looted by the mining Mafia with political links 15 years ago. The government is least concerned about the fate of the families that will be thrown into disarray once the steel plant closes,” Bhaskar added.

The decision to shut down VISP has had a political impact with the Congress questioning the reason for not allocating an iron ore block to the plant despite Bellary—once the hotbed of illegal iron ore mining by the infamous Reddy brothers of the BJP—being near Bhadravati.

Congress communications general secretary-in-charge Jairam Ramesh, tweeted: “Today in RS, Govt admitted that Visveswaraya Iron & Steel Plant of SAIL at Bhadravati in Karnataka is being closed. One reason given is the plant doesn’t have a captive iron ore source in Karnataka. It’s amazing that private steel companies have mines in the state but not SAIL!”

Today in RS,Govt admitted that Visveswaraya Iron & Steel Plant of SAIL at Bhadravati in Karnataka is being closed. One reason given is the plant doesn’t have a captive iron ore source in Karnataka. It’s amazing that private steel companies have mines in the state but not SAIL!1/2

— Jairam Ramesh (@Jairam_Ramesh) February 13, 2023

“This is despite Bhadravati being less than 250 kms away from Ballari. In fact, mining lease was allocated in October 2011 but the Modi Sarkar did nothing,” he added.

In fact, the state’s mining department website lists the who’s who of the country’s business fraternity among leaseholders of iron ore blocks in Karnataka. Many of these iron ore leases are in Bellary.

Apart from the contractual workers, the plant employs 211 permanent employees and approximately 50 executives.

“However, only contractual workers would be jobless. Permanent employees will be absorbed elsewhere by SAIL. Their jobs are not in danger and they are not a part of the agitation,” a senior SAIL official requesting anonymity told Newsclick.

There is “hardly any other industry in and around Bhadravati that can accommodate the contractual workers. Mysuru Paper Mills, the only other industry in the vicinity that had viable employment opportunities, was already closed by the government a few years ago”, the official added.

VISP’s public relations department declined to comment on any package of unemployment benefits, social security and welfare for the families of the contractual workers.

The contractual workers have decided to not give in to the pressure of shutting down the plant.

Chief minister Basavaraj Bommai assured the Assembly on Thursday that VISP will not be shut down, The New Indian Express reported. “We will call for expressions of interest from interested bidders to revive VISP. I have also spoken to steel industrialists. They were positive of reviving VISP. We will make all attempts to ensure that the plant is not shut,” he said replying to Bhadravathi MLA Sangamesh.

The writer is an independent journalist.