Steel in the new Millennium - 3a - Sectoral Activities

The steel industry in industrialized countries has been stagnating. India is one of the few countries where the steel industry is poised for rapid growth. India's share in world production of crude steel increased from 1.5% in 1981 to 2.3% in 1991. While plant closures and privatization are rare in India, the private sector is considered to be the engine of growth in the steel industry in the future and technological changes and modernization are taking place in both the public and the private sector integrated steel plants in India. A major aspect of industrial restructuring in Indian steel is that it is taking place in a humane, non-surgical manner. Downsizing that may be occurring is managed through voluntary manpower reduction, the non-filling of vacancies created by natural attrition and retraining and redeployment to new facilities.

This paper focuses on the human resource/industrial relations policies and practices in the public sector giant, Steel Authority of India (SAIL) which accounts for over 40% of India's crude steel production. SAIL comprises nine plants, including five integrated and four special steel plants. Of these one was nationalized and two were acquired; several were set up in collaboration with foreign companies. SAIL also owns mines and subsidiary companies like Bharat Refractories in Bokaro and Mahrashtra Electrosmelt Limited in Bombay.

The commissioning of Tata Iron & Steel Company's production unit at Jamshedpur, Bihar in 1911-12 heralded the beginning of modern steel industry in India. At the time of independence in 1947 India's steel production was only 1.25 Mt of crude steel. Following independence and the commencement of five year plans, the Government of India decided to set up four integrated steel plants at Rourkela, Durgapur, Bhilai and Bokaro. The Bokaro plant was commissioned in 1972. The most recent addition is a 3 Mt integrated steel plant with modern technology at Visakhapatnam.

Out of Rs. 32.2 billion ($9 bn at 1997 exchange rates) outlaid by SAIL during 1951-97, Rs. 7.4 billion (23%) were earmarked for modernization and technological improvements and another Rs. 9 billion (28%) for increasing capacity. The rest was spent on plant maintenance or product diversification. Table 1 provides data on crude steel and finished steel production between 1990-91 and 1994-95. Tables 2 and 3 provide a general summary of steel production and raw material consumption at integrated plants in India over the same period. In 1991-95 India's steel imports increased by 50% and steel exports by 278%. An analysis of the ratio of saleable steel (semis and finished steel) to the total number employed reveals that the average productivity increased by 40%, from 46.5 tonnes to 64.9 tonnes per worker per year during this period.

Table 1. Steel production and consumption, 1990-91-1994-95

(Million tonnes)

Producer	Process	1990-91	1991-92	1992-93	1993-94	1994-95
Bhilai	OH	1 074	2 156	2 323	2 395	2 415
	LD	1 437	1 588	1 619	1 633	1 636
Bokaro	LD	2 806	3 417	3 589	3 712	3 656
Durgapur	OH	875	871	558	296	274
	TH	-	-	118	322	393
	BOF	-	-	-	-	269
Rourkela	OH	223	227	218	180	22
	LD	1 023	1 007	1 039	968	966
IISCO	OH	324	364	363	322	344
ASP	EAF	135	209	215	227	219
Total SAIL		8 897	9 839	10 042	10 055	10 384
RINL	LD	112	587	1 052	1 355	1 940
TISCO	OH	1 173	1 176	1 191	1 200	1 155
	LD	1 121	1 239	1 286	1 287	1 633
VISL	LD	25	24	11	-	-
	EAF	55	58	59	76	80
Others	EAF	3 868	3 296	2 976	3 700	4 570
Total		15 139	16 219	16 617	17 673	19 762
OH%	31	30	29	26.7	24.3
	LD%	42	48	52	50.7	51.1
	EAF%	27	22	19	22.6	24.6
Consumption		15 497	14 804	15 363	15 079	18 530

Demand for and supply of steel

During the 1960s India's steel demand was forecast to reach 100 Mt by the year 2000. Subsequent estimates, however, have been far lower. Domestic demand for finished steel is expected to increase from the present level of about 20 Mt to 30.7 Mt by 2001. In 1994-95 India's steel consumption was 18.7 Mt, barely 26 kg per capita in terms of crude steel, compared with 675.9 kg. in Japan, 532.3 kg in the Republic of Korea and 71.3 kg in China. A 50% increase in the domestic demand for steel is visualised during the Ninth Plan period 1997-2002 (India, 1996a) but even this latest projection could be considered optimistic. A sub-committee of the Ninth Plan Working Group on Iron and Steel (India, 1996c) estimated demand for finished steel at 21 Mt in 1996-97, 31 Mt in 2001-02 and 47 Mt in 2006-07. The forecast is essentially based on the hypothesis that changes in demand for steel can be explained satisfactorily by changes in GDP. It was assumed that the average annual growth rate of GDP would be 6.05% up to 2001-02 and 6.5% thereafter.

Changes in Government policy

Since 1991-92 the Government has announced and implemented the following major changes in the iron and steel industry (India, 1996b; 12):

* Removal of iron and steel from the list of industries reserved for the public sector.

* Exemption of iron and steel industry from the provisions of compulsory licensing.

* Inclusion of iron and steel in the list of high priority industries for purposes of foreign investment.

* Deregulation of pricing and distribution of iron and steel.

* Reduction of duty on import of capital goods.

* Liberalization of import and export policy.

Expanding role of the private sector

The gap in domestic supply compared to current levels of demand for iron and steel, projections of increasing domestic demand in the future and the deregulation of pricing and distribution have induced the private sector to respond positively. While part of the projected increase in demand will be met through the modernization and expansion of existing steel plants, the private sector will create new facilities. Nineteen units with a total capacity of about 11 Mt (saleable steel) involving an estimated Rs.194 billion ($5.4 bn) have already been sanctioned by the all India financial institutions. Five of these new units have already been commissioned and others are in various stages of implementation (India, 1996b; 92). The projects under implementation include: Lloyd Steel and Nippon Denro in Maharashtra, Essar Gujarat in Gujarat, Jindal Strips in Madhya Pradesh, Jindal Vijaynagar Steels in Karnataka, Malvika Steel in Uttar Pradesh and Tatas in Orissa.

Notes:

¹ International Management Institute, New Delhi.

Updated by BR. Approved by OdVR. Last update: 28 September 2000.

Steel in India SAIL's integrated plants

Part a

Introduction

Demand for and supply of steel

Changes in Government policy

Expanding role of the private sector

Steel in India
SAIL's integrated plants