EXCLUSIVE: MMTC won’t extend funds to NINL, says not responsible for payment of salaries

• The payment of salary to the employees falls within the exclusive domain of NINL, said MMTC in a letter accessed by PSU Watch

• MMTC said that the total exposure towards the outstanding working capital extended by MMTC to NINL is to the tune of Rs 3,200 crore

New Delhi: In the backdrop of a severe financial crisis facing Odisha-based NINL (Neelanchal Ispat Nigam Limited), its primary promoter MMTC Limited has withdrawn itself from the scenario and has said categorically that it cannot be held responsible for helping NINL meets its working capital expenditure. In a letter accessed exclusively by PSU Watch, MMTC has said, "The payment of salary to the employees falls within the exclusive domain of NINL as it is a part of the day to day operations of the said Company. It is respectfully stated that NINL cannot wriggle out of its obligations to pay salaries to its employees by shifting it on MMTC Limited."

The statement comes as regular employees of NINL have been awaiting payment of salaries for the last three months, while contractual workers are waiting to be paid for the last four months. Employees at NINL have spent the nationwide lockdown, imposed to contain the spread of Coronavirus, without salaries. They have been on protest ever since lockdown restrictions were eased in order to demand payment of dues. One contractual employee is also alleged to have committed suicide because of financial troubles arising out of the situation.

NINL is in crisis because it deployed idle, surplus labour: MMTC

In the letter addressed to the District Magistrate of Jajpur, Odisha, MMTC said that the majority of operations of NINL plant have been suspended since July 2019 and thereafter, full operation of NINL plant has been stopped since April 2020. "Accordingly, advisory guidelines were issued for taking cost reduction measures by downsizing contractual and outsourced laborers. However, it seems that NINL has not taken concrete steps in this regard and continued to deploy idle/surplus contractual/outsourced labourers which has resulted into this crisis."

MMTC says it has already extended Rs 3,200 cr to NINL

MMTC Limited has also said that it has already extended financial assistance to NINL. "By way of First Addendum 3.7.2019 to the Agreement dated 14.11.2018 executed between MMTC and NINL, Clause 4.3 was amended to the effect that the total Working Capital Advance limit and Trade Credit Limit stands revised to Rs 1,425 crore and Rs 1,375 crore, respectively, making the total credit upto a limit of Rs 2,800 crore outstanding at any point of time during the financial year 2019-2020." However, it added that the total exposure towards the outstanding working capital extended by MMTC to NINL has exceeded a sum of Rs 2,800 crore and is to the tune of Rs 3,200 crore.

MMTC has proposed to sell NINL saleable stock to extend funds

MMTC has proposed to sell saleable goods produced by NINL and use the proceeds of the sale to extend any further loan to the company. "Without prejudice to our rights and remedies available in law, it is humbly submitted that MMTC be permitted to sell the saleable stock (on which there is no lien of any third party) in the open market to third parties and from the sale proceeds realized, any further loan can be extended to NINL," the letter said.

Why is the crisis continuing?

NINL has been piling losses for a long time. The Centre has been considering the revival of the loss-making plant through merger or disinvestment for quite some time and a Cabinet nod was given to the NINL disinvestment plan in January this year. However, at a meeting in September 2019, the government had asked NINL's shareholders to infuse capital proportionate to their stakes to keep the company running until its disinvestment.

And this is where MMTC's claim does not add up. If all shareholders have been asked to extend funds to keep NINL running till its strategic disinvestment, why is MMTC absolving itself of the responsibility? PSU Watch has reached out to the MMTC management but is yet to get a response from them.

In view of the COVID situation, the government's strategic disinvestment plan for NINL is already in soup, as are the other disinvestment plans. 

And now, since MMTC has also refused to extend funds to NINL, the financial crisis facing the company is set to continue. Sources at NINL have said that a meeting is scheduled to take place with the concerned ministries in New Delhi but has been delayed because of the rising number of COVID cases in the capital.

NINL has a complex shareholding pattern with MMTC holding 49.78 percent share and the Odisha government at 32.47 percent. The rest of the shares are held by NMDC Ltd, IDBI Bank, MECON, BHEL and Odisha PSUs IPICOL and OMC.