Project Report on Comparative Analysis of Public and Private Sector Steel Companies in India

TITLE

“Comparative analysis of Private and Public sector steel companies with special reference to TATA Steel and SAIL.”

Prepared and Submitted by: ------------------Amit Agrawal MBA (IB), 2006-08 School of Economics,

DAVV, Indore. CONTENTS 1)

TITLE

2)

INTRODUCTION World Steel Industry : An Overview b) Indian steel Industry c) What is Private limited and Public limited d) Private sector companies in India e) Public sector companies in India a)

3)

REVIEW OF LITERATURE

4)

OBJECTIVES

5)

RESEARCH METHODOLOGY a) Research design b) Data collection method

6)

DATA ANALYSIS

Comparison between TATA Steel and Steel Authority of India

a) Production b) Financials c) Research and Development d) Environment e) Workforce and Welfare of Society f) Technology g) Safety measures Measures taken by Indian government to improve the industry.

National Steel Policy, 2005.

7)

FINDINGS

8)

BIBLIOGRAPHY

INTRODUCTION World Steel industry: An overview Steel, the recycled material is one of the top products in the manufacturing sector of the world. The Asian countries have their respective dominance in the production of the steel all over the world. India being one among the fastest growing economies of the world has been considered as one of the potential global steel hub internationally. Over the years, particularly after the adoption of the liberalization policies all over the world, the World steel industry is growing very fast. Steel Industry is a booming industry in the whole world. The increasing demand for it was mainly generated by the development projects that have been going on along the world, especially the infrastructural works and real estate projects that has been on the boom around the developing countries. Steel Industry was till recently dominated by the United Sates of America but this scenario is changing with a rapid pace with the Indian steel companies on an acquisition spree. In the last one year, the world has seen two big Mergers & Acquisitions deals to take place:•

The Mittal Steel, listed in Holland, has acquired the world's largest steel company called Arcelor Steel to become the world's largest producer of Steel named Arcelor-Mittal.

•

Tata Steel of India or TISCO (as listed in BSE) has acquired the world's fifth largest steel company, Corus, with the highest ever stock price.

It has been observed that Steel Industry has grown tremendously in the last one and a half decade with a strong financial condition. The increasing needs of steel by the developing countries for its infrastructural projects have pushed the companies in this industry near their operative capacity. The most significant growth that can be seen in the Steel Industry has been observed during the period 1960 to 1974 when the consumption of steel around the whole world doubled. Between these years, the rate at which the Steel Industry grew has been recorded to be 5.5 %. This roaring market saw a phase of deceleration from the year 1975 which continued till 1982. After this period, the continuous fall slowed down and again started its upward movement from the early 1990s. Steel Industry is becoming more and more competitive with every passing day. During the period 1960s to late 1980s, the steel market used to be dominated by OECD (Organization for Economic Cooperation and Development) countries. But with the fast emergence of developing countries like China, India and South Korea in this sector has led to slipping market share of OECD countries. The balance of trade line is also tilting towards these countries. The main demand creators for Steel Industry are Automobile industry, Construction Industry, Infrastructure Industry, Oil and Gas Industry, and Container Industry. New innovations are also taking place in Steel Industry for cost minimization and at the same time production maximization. Some of the cutting edge technologies that are being implemented in this industry are thin-slab casting, making of steel through the use of electric furnace, vacuum degassing, etc. In the year 2004, the global steel production has made a record level by crossing the 1000 million tones. Among the top producers in the steel production, China ranked 1 in the world.

Indian Steel Industry

Iron and steel, is vital to the Indian economy for economic growth and economic well-being. No practical substitutes exist on a large scale for iron and steel because of the relatively high cost of alternative materials. Worldwide, there are broadly two major categories of steel players—Integrated steel producers (ISPs) and mini-mills/secondary producers, although variations and combinations of the two exist. The key difference between the two is the type of iron bearing feedstock they consume. In an integrated mill, this is predominantly iron ore, with a smaller quantity of steel scrap. A mini-mill produces steel uses mainly steel scrap, or increasingly, other sources of metallic iron such as directly reduced iron (DRI)/hot briquette iron (HBI). The iron and steel industry not only directly accounts for about 2% of GDP, it also has a bearing on how the consumer goods and downstream infrastructure sectors develop. Further, with a share of approximately 10%, the sector is amongst the largest contributors to the central excise. India accounted for 3.4% of the estimated world steel production of 1,129 million tonnes (mt) during 2005. At present, India is the 7th largest crude steel producing country in the world. In 2006-07, production of Finished (Carbon) Steel was 49.350 million tonnes (Prov). Production of Pig Iron in 2006-07 is estimated to be 4.960 Million Tonnes (Prov). The share of Main Producers (i.e SAIL, RINL and TSL) and secondary producers in the total production of Finished (Carbon) steel was 35% and 65% respectively during the period of April-December, 2006.

Size of Industry•

India is among the top 10 global suppliers of steel in the world.

•

More than 35 million tonnes of steel is produced in India per annum.

•

India is also the largest producer of sponge iron in the world.

•

This sector represents around Rs. 1 trillion of capital investments, and directly provides employment to around 0.5 million, with the integrated steel plants accounting for a 40% share.

•

The iron and steel sector also contributes around 6.2% of India’s manufactured goods exports and 4.6% of total exports by value.

Structural Characteristics of Indian Steel Industry•

The industry is dominated by large integrated players like SAIL and Tata Steel in steel.

•

The Public sector has a significant presence in this industry, Steel Authority of India Ltd. (SAIL) has 32% of India’s installed capacity of crude steel.

•

Tata Steel and Essar Steel are the major private players in the industry.

•

The industry’s fortunes depend on general global economic conditions but it is particularly sensitive to the performance of the automotive, construction, durable equipment, and other industrial products industries. The trend in the last few years in steel prices shows that the steel industry is cyclical.

•

The global (and Indian) steel industry also suffers from cycles of over capacity and shortages. This too leads to cyclically falling/rising prices and industry losses/profits.

•

Integrated steel producers (ISPs)—Tata Steel and SAIL—face high fixed costs, and thus in a downturn, the percentage profit margins come down significantly. The downturn phases have witnessed depressed prices at the firm level and widespread operating losses.

•

Economic logic differs for mini mills that can vary output more quickly when prices fall.

What is Private Limited and Public limited? Now let’s first understand the meaning and difference between Public Sector Company and Private Sector Company. The term “Private Company” refers to ownership of a business

company

in two different ways— First, referring to ownership

by non-governmental organizations; and second, referring to ownership of the

company's stock by a relatively small number of holders who do not trade the stock publicly on the stock market. In countries with public trading markets, a privately held business company is generally taken to mean one whose ownership

shares

or interests are not

publicly traded.

Often, privately held companies are owned by the company founders and/or their families and heirs or by a small group of investors. Sometimes employees also hold shares of private companies. Most small businesses are privately held. Private companies may be called proprietorships,

corporations, limited liability companies, partnerships, sole

business trusts, or other names, depending on where and how they are

organized. The term "Public Company" thus refers to a

government-owned corporations.

and the

ownership of assets and interest is shared by people. Normally, the shares of a

public

company are owned by many investors. However, a company with many shareholders is not necessarily a public company. The shares of a public company are often traded on a stock exchange. The value or "size" of a public company is called its market capitalization It is able to raise funds and

capital

through the sale of its securities. This is the

reason why public corporations are so important: prior to their existence, it was very difficult to obtain large amounts of capital for private enterprises. In addition to being able to easily raise capital, public companies may issue their securities as compensation for those that provide services to the company, such as their directors, officers, and employees.

Private Sector companies in India The private sector of the Steel Industry is currently playing an important and dominant role in production and growth of steel industry in the country. During the period (April-December 2006), 20.5 million tonne of steel was produced by Private Sector steel units, out of the total production of 33.15 million tonne in the country. The private sector units consist of major steel producers in one hand and relatively smaller & medium units such as Sponge iron plants, Re-rolling mills, Electric Arc Furnaces and Induction Furnaces on the other. They not only play an important role in

production of primary and secondary steel, but also contribute substantial value addition in terms of quality, innovation and cost effectiveness.

TATA Steel: Tata Steel is India's largest integrated private sector steel company. Established in 1907, The Company is backward integrated with owned iron ore mines and collieries. Tata Steel has an integrated steel plant, with an annual crude steel making capacity of 5 million tonne, located at Jamshedpur, Jharkhand. The steel works is situated at Jamshedpur in the state of Jharkhand, India. The factory covers 800 hectares of land. West Bokaro sub division in Hazaribagh district overs 2000 hectares of land in which mining and coal beneficiation activities are performed. Jharia Division occupies 2500 hectares of land for its industrial, mining and domestic activities in the district of Dhanbad both in the state of Jharkhand. The iron ore and dolomite mines are located at Noamundi in the state of Jharkhand and at Joda, Kalamati, Khondbond and Gomardih in the state of Orissa. Over the years, Tata Steel has emerged as a thriving, nimble steel enterprise due to its ability to transform itself rapidly to meet the challenges of a highly competitive global economy and commitment to become a supplier of choice. Constant modernization and introduction of state-of-the-art technology at Tata Steel has enabled it to stay ahead in the industry. Tata Steel has completed the first nine months of fiscal 2006-07 with impressive increase in its production and sales volumes. The hot metal production at 4.1 million tonne is 8.2% more compared to the last year in the corresponding period and crude steel production at 3.7 million tonne is higher by 7.9% compared to the last year in first three quarters. The saleable steel production at 3.7 million tonne registered a significant increase of 11%. The total sales of 3.53 million tonne has grown by 11.7% over last financial year in the corresponding period. The domestic sale of long products has increased by 30%.

Tata Steel is continuing with its programme of expansion of steel making capacity by 1.8 million tonne to reach the rated capacity of 6.8 million tonne in fiscal 2007-08 and thereafter to 10 million tonne by fiscal 2010. Tata Steel’s greenfield projects in Orissa and Chhattisgarh are progressing on schedule with placement of equipment order for Kalinganagar project in Orissa and commencement of the land acquisition process. Jharkhand project is waiting announcement of R & R policy of the state Government. The construction work of ferrochrome project in South Africa is in full swing. Acquisition of Corus: Recently Tata Steel acquired the Anglo-Dutch steel maker Corus, thus emerging as the fifth largest steel producer in the world. The steel major has won the Prime Minister's Trophy four times. This award is instituted by the Indian ministry of steel and awarded to the country's best integrated steel plant. In 2000, it became the first Tata company to win the JRD Tata QV award, given to the company with 'world class' operations under the Group's

Tata Business

Excellence Model

Areas of business Apart from the main steel division, Tata Steel's operations are grouped under strategic profit centres like tubes, growth shop (for its steel plant and material handling equipment), bearings, ferro alloys and minerals, rings, agrico and wires. Tata Steel's products include hot and cold rolled coils and sheets, tubes, wire rods, construction bars, structurals, forging quality steel, rings and bearings. In an attempt to 'decommoditise' steel, the company has recently introduced brands like Tata Steelium (India's first branded cold rolled steel), Tata Shaktee (galvanised corrugated sheets), Tata Tiscon (re-rolled bars), Tata pipes, Tata bearings, Tata Wiron (galvanised wire products) and Tata Agrico (hand tools and implements). Tata Steel is also exploring opportunities in the ferro-chrome and titanium businesses. Joint ventures, associates and subsidiaries

Tata Steel has numerous joint ventures and subsidiaries. Among them are: •

Tinplate Company of India

•

Tayo Rolls

•

Tata Ryerson

•

Tata Refactories

•

Tata Sponge Iron

•

Tata Metaliks

•

Tata Pigments

•

Jamshedpur Injection Powder (Jamipol)

•

TM International Logistics

•

mjunction services

•

TRF

•

Jamshedpur Utility and Service Company (JUSCO)

•

The Indian Steel and Wire Products(ISWP)

•

Lanka Special Steel

•

Sila Eastern Company

ESSAR STEEL LTD. Essar Steel is an integrated steel producer, with operations all along the value chain. Essar Steel produces some of the world’s best steel at its state-of-the-art steel complex at Hazira, Gujarat. It is also India’s largest exporter of flat products, sending half of its production abroad, mainly to the highly demanding markets of the west, and the growth markets of South East Asia and Middle East. Essar ensures excellent customer services through a modern distribution network. Essar Steel’s core manufacturing facilities are located at its steel complex in Hazira, Gujarat. The Hazira complex includes a 5.5 million tonne per annum Hot Briquetted Iron (HBI) plant, a 4.6 mtpa continuous caster slab facility, a 3.6 million tonne per annum Hot Rolled Coils (HRC) and a 1.2 mtpa cold roll mill complex with all down stream facilities. The facilities are complemented by its own 8.0 mtpa pellet plant at Vishakapatnam and 0.4 million tonne per annum cold rolled coil plant at Indonesia. Expansion

Presently Essar Steel has embarked upon a capacity expansion for enhancement of its production capacity from 4.6 million tonne per annum to 7.6 million tonne per annum. The capacity expansion programme will consist of 2 units of Corex units of 1.5 million tonne per annum each. Further value addition will be carried out by Continuous Strip Caster Mill, conventional Slab Caster Mill and a 5.2 meter Wide Plate Mill. Products All Essar Steel’s products are world class, meeting the highest international standards, supported by excellent marketing and service.

JSW STEEL LTD. JSW Steel Ltd. is a 3.8 million tonne per annum integrated steel plant, having a process route consisting broadly of iron ore beneficiation – pelletisation – sintering – coke making – iron making through blast furnace as well as Corex process – steel making through BOF–continuous casting of slabs – hot strip rolling. The production facilities include 3.0 million tonne per annum iron ore beneficiation unit, 5.0 million tonne per annum pellet plant, 3.2 million tonne per annum sinter plant, 1.2 million tonne per annum coke ovens, 0.9 + 1.3 million tonne per annum blast furnaces, two Corex units of 0.8 million tonne per annum each, 3 X 130 t converters, three slab casters, and a 2.5 million tonne per annum hot strip mill with state-of-the-art coil box technology. JSW Steel has a distinction of being certified to ISO-9001:2000 Quality management system, ISO-14001:1996 environment management system and OHSAS 18001:1999 occupational health and safety management system. During this year, JSW Steel has also been conferred with a number of awards. Production Performance (in million tonne) Items

2003-04

2004-05

2005-06

April-Dec.06

Pellets

3.25

3.61

3.80

2.93

Hot Metal

1.63

1.96

2.40

2.19

Slabs

1.61

1.87

2.25

1.95

Hot Rolled Coils

1.54

1.78

2.10

1.48

JINDAL STEEL AND POWER LTD. (JSPL) Jindal Steel and Power Ltd. (JSPL), part of the $4 billion Jindal Organisation, has business interests in steel, power generation, mining iron ore, coal and diamond exploration/mining. The current turnover of the company is over Rs. 3,000 crore. JSPL is the world’s largest producer of coal based sponge iron. The product range encompasses 27 steel slabs, rounds, blooms and beam blanks. JSPL is producing rails and H beams and columns in technical collaboration with JFE Corporation, Japan. These H-beams are the most desired option of structural engineers worldwide. JSPL is the largest private sector investor in the state of Chhattisgarh with a total investment commitment of more than Rs. 10,000 crore. The company is also setting up a 6 million tonne steel plant in Orissa with an investment of Rs. 13,500 crore and a 5 million tonne steel plant in Jharkhand with an investment of Rs 11,500 crore. Jindal Power Ltd., wholly-owned subsidiary of JSPL, is setting up a 1000 mega watt O.P. Jindal super thermal power plant at Raigarh, with an investment of over Rs. 4,500 crore. JSPL has been rated as one of the best environmentally managed companies in India and committed to environment protection as an integral part of their business activities.

ISPAT INDUSTRIES LTD. (IIL) Ispat Industries Ltd. (IIL) has set up integrated steel plants at Dolvi (district Raigad), a backward region of Maharashtra, with a capacity of 3 million tonne of hot rolled coils per annum. The plant has got a 2.24 million tonne per annum sintering plant, 2 million tonne per annum blast furnace and 1.6 million tonne per annum gas based sponge iron plant. IIL have uniquely combined the usage of hot metal and sponge iron in the electric arc furnace for production of liquid steel for the first time in India. IIL have also adopted the state-of-art technology called Compact Strip Production (CSP) process, which has been installed for the first time in India and produces high quality and very thin gauges of Hot Rolled Coils (HRC). The IIL’s products are accepted in the domestic and international market.

The production performance of IIL during last three years has been as follows: (in million tonne) 2003-04

2004-05

2005-06

1.40

1.42

Sponge Iron

1.29 1.06

2006-07 (Up to Dec06) 1.14

1.05

0.89

0.85

Hot Rolled Coils

1.62

1.97

2.15

1.97

Items Hot Metal

The two thin slab casters each with designed capacity to cast 55 and 60 mm slabs with Iiquid Core Reduction (LCR) features available. Ispat’s casters have achieved global benchmark in annual production, as confirmed by Steel Melting Shop (SMS) Demag, the technology supplier.

The other major Private steel companies are •

JISCO.

•

Saw Pipes.

•

Uttam Steels Ltd.

•

Mukand Ltd.

•

Mahindra Ugine Steel Company Ltd.

•

Usha Ispat Ltd.

•

Kalyani Steel Ltd

•

Electro Steel Castings Ltd.

•

Sesa Goa Ltd.

•

NMDC.

•

Lloyds SteeI Industries Ltd.

Public Sector companies in India

Steel Authority of India Limited (SAIL) Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets. The Government of India owns about 86% of SAIL's equity and retains voting control of the Company. However, SAIL, by virtue of its ‘Navratna’ status, enjoys significant operational and financial autonomy Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL manufactures and sells a broad range of steel products, including hot and cold rolled sheets and coils, galvanised sheets, electrical sheets, structurals, railway products, plates, bars and rods, stainless steel and other alloy steels. SAIL produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomite mines. The company has the distinction of being India’s largest producer of iron ore and of having the country’s second largest mines network. This gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and dolomite which are inputs for steel making. SAIL's wide range of long and flat steel products is much in demand in the domestic as well as the international market. This vital responsibility is carried out by SAIL's own Central Marketing Organisation (CMO) and the International Trade Division. CMO encompasses a wide network of 34 branch offices and 54 stockyards located in major cities and towns throughout India.

With technical and managerial expertise and know-how in steel making gained over four decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide. SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at Ranchi which helps to produce quality steel and develop new technologies for the steel industry. Besides, SAIL has its own in-house Centre for Engineering and Technology (CET), Management Training Institute (MTI) and Safety Organisation at Ranchi. Our captive mines are under the control of the Raw Materials Division in Kolkata. The Environment Management Division and Growth Division of SAIL operate from their headquarters in Kolkata. Almost all our plants and major units are ISO Certified. Integrated Steel Plants •

Bhilai Steel Plant (BSP) in Chhattisgarh

•

Durgapur Steel Plant (DSP) in West Bengal

•

Rourkela Steel Plant (RSP) in Orissa

•

Bokaro Steel Plant (BSL) in Jharkhand

•

IISCO Steel Plant (ISP) in West Bengal

Subsidiary Maharashtra Elektrosmelt Limited (MEL) in Maharashtra Joint Ventures SAIL has promoted joint ventures in different areas ranging from power plants to e-commerce. •

NTPC SAIL Power Company Pvt. Ltd

•

Bokaro Power Supply Company Pvt. Limited

•

Mjunction Services Limited

•

SAIL-Bansal Service Centre Ltd.

•

Bhilai JP Cement Ltd

•

SAIL has signed an MOU with Manganese Ore India Ltd (MOIL) to set up a joint venture company to produce ferro-manganese and silico-manganese at Bhilai.

MAHARASHTRA ELEKTROSMELT LTD. (A Subsidary of SAIL) Maharashtra Electrosmelt Ltd. is situated in Chandrapur, Maharashtra and is a major producer of ferro manganese and silico manganese for captive use of SAIL plants. The authorised and paid-up share capital of the company as on 31.3.2006 was Rs. 30 crore and Rs. 24 crore respectively. SAIL’s holding is approximately 99.12% of the paid-up capital. Financial Performance During the year 2005-06 the company recorded a turnover of Rs. 247.33 crore (including conversion income of Rs. 171.10 crore) and made a net profit after tax of Rs. 20.97 crore. The turnover and net profit after tax of the company during April, 2006 to December, 2006 were Rs. 220.26 crore (provisional) and Rs. 17.48 crore (provisional) respectively. Production Performance The production of all grades of ferro alloys during 2005-06 is as under: (in tonne) Materials

2005-06

April- Dec 2006

High Carbon Ferro Manganese

51525

49493

Silco Manganese

46712

32921

Medium Carbon Ferro Manganse

2344

164

RASHTRIYA ISPAT NIGAM LTD. (RINL) Visakhapatnam Steel Plant (VSP) is the first shore based integrated steel plant located at Visakhapatnam in Andhra Pradesh. The plant was commissioned in August 1992 with a capacity to produce 3 million tonne per annum of liquid steel. The plant has been built to matching international standards in design and engineering with the state-of-the-art technology, incorporating extensive energy saving and pollution control measures. VSP has an excellent layout, which can be expanded to over 10

million tonne per annum capacity. Right from the year of its integrated operation, VSP established its presence both in the domestic and international markets with its superior quality of products. VSP has been awarded all the three International Standards Certificates, namely, ISO 9001:2000, ISO 14001:1996 and OHSAS 18001:1999. The company has taken significant strides in the area of Corporate Social Responsibility. Production Performance (in million tonne) Items

2004-05

2005-06

2006-07 (April-Dec06)

Hot Metal

3.920

4.153

3.040

Liquid Steel

3.560

3603

2.676

Saleable Steel

3.173

3.237

2.419

NATIONAL MINERAL DEVELOPMENT CORPORATION LTD. (NMDC) Incorporated on November 15, 1958, the National Mineral Development Corporation Ltd (NMDC) a Government of India Enterprise, is engaged in the business of developing and exploiting mineral resources of the country (other than coal, oil, natural gas and atomic minerals). At present, its activities are concentrated on mining of iron ore, diamonds and silica sand. NMDC operates the largest mechanised iron ore mines in the country at Bailadila (Chhattisgarh) and Donimalai (Karnataka). The silica sand project is at Lallapur, Allahabad and the diamond mine is situated at Panna (Madhya Pradesh). Mining activities at DMP, Panna were stopped with effect from 22.08.2005 on receipt of notice from Madhya Pradesh Pollution Control Board. The case is pending with Hon’ble Supreme Court of India. NMDC is following up the case for early hearing. All the iron ore production units have been accredited with ISO 9001:2000 and ISO 14001:2004 certifications. R&D Centre of NMDC was also accredited with ISO 9001:2000 certification. Iron Ore

NMDC produced 17.27 million tonne of iron ore during the year 2006-07 (up to December 2006). Domestic sales of iron ore was 15.50 million tonne during the year (up to December 2006). Exports of iron ore produced by NMDC is canalised through MMTC Ltd. Iron ore is exported to Japan, South Korea and China. In 2006-07, NMDC exported 1.78 million tonne of iron ore valued at approximately Rs. 429.80 crore. Capital Structure The authorised share capital of the company is Rs. 150 crore. The paid up equity share capital was Rs. 132.16 crore. Outstanding loans from Government of India are nil. Financial Performance The financial performance of the company for the year 2005-06 and 2006-07 (AprilDec. 06) are given below: Particulars

2004-05

2005-06

2006-07 (April-Dec.06)

Sales/Turnover

2226.55

3,710.92

2,790

Gross Margin

1287.49

2,889

2,455

Profit Before Tax

1223.65

2,770.13

2,410

MSTC LTD. MSTC Ltd. (formerly Metal Scrap Trade Corporation Ltd.), a Government of India Enterprise, was set up on September 9, 1964 as a canalising agency for the export of scrap from the country. With the passage of time, the Company emerged as the canalising agency for the import of scrap into the country. Import of scrap was decanalised by the Government in 1991-92 and MSTC has since then moved on to marketing ferrous and miscellaneous scrap arising out of steel plants and other industries and importing coal, coke, petroleum products, semi finished steel products like HR coils and export of primarily iron ore. The company has also established an e-

auction portal and undertakes e-auction of coal, diamonds and steel scrap and has developed an e-procurement portal in house.

Capital Structure The company has an authorised capital of Rs. 5 crore and paid up capital was Rs. 2.20 crore as on 31.12.2006 of which approximately 90% is held by Government of India and balance 10% by members of Steel Furnace Association 16 of India, Iron and Steel Scrap Association of India and others. Paid up capital of Rs. 2.20 crore includes bonus shares issued in the year 1993-94 in the ratio 1:1.

FERRO SCRAP NIGAM LTD. (FSNL) Ferro Scrap Nigam Ltd. (FSNL) is a wholly owned subsidiary of MSTC Ltd. with a paid up capital of Rs. 2 lakh. The company undertakes the recovery and processing of scrap from slag and refuse dumps in the nine steel plants at Rourkela, Burnpur, Bhilai, Bokaro, Visakhapatnam, Durgapur, Dolvi, Duburi and Raigarh. The scrap recovered is returned to the steel plants for recycling/disposal and the company is paid processing charges on the quantity recovered at varying rates depending on the category of scrap. Scrap is generated during iron and steel making and also in the rolling mills. In addition, the company is also providing steel mill services such as scarfing of slabs, handling of BOF slag, etc. Financial Performance Particulars

2004-05

2005-06

2006-07 (AprDec.2006)

Total Turnover i.e, Service charges realised including miscellaneous Income,etc

. 9,818.22

10,679.37 7,655.57

Gross Margin before Interest & Depreciation

1,678.79

1,865.14

1,052.84

Interest & Depreciation

830.14

1,009.70

847.28

Profit before Tax

848.65

855.44

205.56

MANGANESE ORE (INDIA) LTD. (MOIL) Manganese Ore (India) Ltd. (MOIL) was established in 1962. It is the largest producer of manganese ore in India. At the time of inception, 49% of its shares were held by the Central Province Manganese Ore Co Ltd. (CPMO) and the remaining 51% in equal proportion by Government of India and the State Governments of Madhya Pradesh 17 and Maharashtra. Subsequently, in 1977, the Government of India acquired the shares held by C.P.M.O. in MOIL and MOIL became a wholly owned Government company with effect from October, 1977. As on 30.11.2006, Government of India held 81.57% shares in MOIL with State Governments of Maharashtra and Madhya Pradesh holding 9.61% and 8.82% shares respectively. MOIL Produces and Sells following Grades of Manganese Ore � High grade ores for production of ferro manganese . � Medium grade ores for production of silico manganese. � Blast furnace grade ore required for production of hot metal � Dioxide ore for dry battery cells and chemical industries. Production and Financial Performance The physical and financial performance of the Company during 2004-05, 2005-06 and 2006-07 (April-Dec. 2006) are given below in the table:

2004-05

2005-06

2006-07 (up to Dec.2006)

943.00

865.00

825.33

b) Electrolytic Manganese Dioxide(tonne)

1,123.00

1,301.00

460.00

c) Ferro Manganese (tonne)

10,325.00

6,170.00

8,294.00

2. Turnover (Rupees in crore)

378.78

334.09

294.63

3. Profit before Tax (Rupees in crore)

202.27

169.00

120.87

Items 1. Production a) Manganese Ore (thousand tonne)

KUDREMUKH IRON ORE COMPANY LTD. (KIOCL) Kudremukh Iron Ore Company Ltd (KIOCL), an 100% Export Oriented Unit, ISO 9001:2000 and ISO 14001 company was established in April, 1976 to meet the long term requirements of Iran. An iron ore concentrate plant of 7.5 million tonne capacity was set up at Kudremukh. This project was to be financed in full by Iran. However, as Iran stopped further loan disbursements after paying US $ 255 million, the project was completed as per schedule with the funds provided by Government of India. While the project was commissioned on schedule, consequent upon the political developments in Iran, they did not lift any quantity of concentrate. As a diversification measure, the Government approved the construction of a 3 million tonne per year capacity pellet plant in Mangalore in May, 1981. The capacity of the pellet plant was increased to 3.5 million tonne with additions/modifications. The plant went into commercial production in 1987 and is now exporting blast furnace grade pellets to China and also to domestic units such as Ispat Industries Ltd. and Rastriya Ispat Nigam Ltd. Aerial view of Pellet Plant, Mangalore.

Production

A target of 3.1 million tonne and 3.05 million tonne was set for production of iron ore concentrate and iron oxide pellets respectively during the year 2005-06. Actual production was 2.922 million tonne of concentrate and 2.834 million tonne of pellets. The target set for production during the year 2006-07 is 3.05 million tonne of pellets. In pursuance of directive of Hon’ble Supreme Court dated 30-09-2005, the mining activities at Kudremukh were stopped on 31-12-2005. Therefore, there is no production of iron ore concentrate during the year 2006-07. As against a target of 1.88 million tonne of pellets fixed for the period April to November, 2006, the actual production was 0.275 million tonne which represents 15% target fulfilment. There is shortfall in production of pellets up to November, 2006 during 2006-07. The shortfall in production of pellets is on account of operational problems being encountered in the pellet plant after switching over to usage of 100% hematite ore from magnetite ore. There was excessive generation of su er fines (slimes) affecting filtration, clogging of filters, overflow and contamination of process water due to filling of cooling pond affecting production. While efforts are continuing to rectify the problems, the operation of pellet plant is yet to stabilize and normal production is yet to commence. The sales revenue during the last five years and up to November, 2006, during 200607 is detailed below: (Rs. in lakh) Years

Concentrate

Pellets

Total

2006-07 (up to December, 2006)

-

12,427

12,427

2005-06

12,091

1,11,137

1,23,228

2004-05

16,050

1,69,327

1,85,377

2003-04

20,209

82,729

1,02,938

2002-03

21,135

51,579

72,714

2001-02

21,571

50,598

72,169

Financial Performance An overview of the performance of KIOCL during the year 2006-07 (up to November, 2006) together with actuals for the previous three years, is indicated below:

(Rs. in lakh)\ 2006-07(up to December, 2006)

2005-06

2004-05

2003-04

Total value of Sales

12,427

1,23,228

1,85,377

1,02,938

Gross Margin

2,620

68,706

1,20,863

45,945

Profit after Tax

1,029

35,630

64,984

30,070

Inventories(excluding finished stock)

20,417

15,843

8,720

7,616

Particulars

BIRD GROUP OF COMPANIES Consequent upon nationalisation of the undertaking of Bird and Company Ltd in 1980, the following seven companies came under the administrative control of the Ministry of Steel, Government of India: (a) The Orissa Minerals Development Company Limited (OMDC) (b) The Bisra Stone Lime Company Limited (BSLC) (c) The Karanpura Development Company Limited (KDCL) (d) Scott & Saxby Limited (SSL) (e) Eastern Investments Limited (EIL) (f) Burrakar Coal Company Limited (Burrakar) (g) Borrea Coal Company Limited (Borrea) The status of the companies is as under: a) Burrakar and Borrea coal companies became non-operational after nationalisation of coal mines. The two companies are in the process of liquidation. The official liquidator has already taken over the assets and liabilities of these two companies.

b) EIL being an investment company is having a major stake in the equity shares of operating companies under the Bird Group. c) OMDC, BSLC, KDCL & SSL are operating companies under the Group. Status of the Companies at the Time of Nationalisation At the time when the Bird Group of Companies came under the administrative control of the Ministry of Steel, Government of India, all of them were financially sick and burdened with various problems. With the financial support from the Government of India, problems relating mainly to excessive manpower, erosion of working capital and outstanding liabilities could be settled to a considerable extent.

REVIEW OF LITERATURE R.S. PANDEY sees a bright future for the steel industry in India provided, of course, the iron ore mining policy to be announced by the government soon acts as a catalyst for growth. He discusses the industry's problems and prospects in an interview. When

asked about the steel sectors i.e. private and public he expressed his expert views. The interview was published in a magazine ‘FRONTLINE’ in the December 2006. Excerpts: The public sector steel companies in India are doing extremely well. And, therefore, they will have a decisive role to play. In fact, SAIL and RINL [Rashtriya Ispat Nigam Ltd.], which has the Vizag steel plant, have undertaken massive expansion plans. Between 1992-93 and now, the share of the public sector in steel production had gone down. Today, its share is 41 per cent while that of the private sector is 59 per cent. In 1992-93, the private sector had a share of only 37 per cent. In terms of finished steel, the private sector, even in 1992-93, had a 67 per cent share and this has now grown to 71 per cent. But the public sector units are growing, even if the private sector is growing faster. During 2006, SAIL and RINL decided on major capacity expansion plans. SAIL is going to increase its capacity from the current 13 million tonnes of hot metal to 22.5 million tonnes in just four years. RINL is set to expand its capacity from three million tonnes to 6.3 million tonnes in the next three years. So that is a major expansion of capacity for the PSUs. The public sector should be encouraged all the more. Let there be a healthy competition between public and private sector producers. The question of exit comes when they do not perform. Look at the stock prices of SAIL. A few years ago, the scrip was at below Rs.10 per share. Today, it is more than Rs.130, and the expectations are that it will go up even higher. When talked about the labour productivity he says, Yes, labour productivity is low, in SAIL in particular. But it is improving. The steel major is going to adjust much of its existing manpower in the expansion phase when its capacity is going to almost double. The management had also undertaken a massive VRS [voluntary retirement scheme]. In RINL, labour productivity is not all that bad. Besides, SAIL has done very well in various other techno-economic parameters in the last two and a half years. In 2003-04, SAIL's manpower productivity was 127 tonnes per man per year. In 2005-06, it went up to 150 tonnes per man per year, an

improvement of 20 per cent. In blast furnace productivity also, there has been an improvement, as also in the production of high-end special steels and capacity utilisation. With the improved turnover, which comes from higher capacity use and higher manpower productivity, SAIL's profits have surged. Its gross profit more than doubled between 2003-04 and 2005-06. The general presumption was that the spurt in profits was largely due to the high prices of steel. An analysis has shown that as far as SAIL is concerned, the higher profit is 29 per cent owing to the price factor in steel and other input costs, and 71 per cent owing to improvement in capacity use and other factors that are just mentioned.

OBJECTIVES •

To compare Private and Public steel sector with refrence to TATA Steel and Steel Authority Of India.

•

To analyse potential of both the companies i.e. TATA Steel and SAIL.

•

To analyse measures taken by Indian government to improve the industry and study the National Steel Policy 2005

•

To analyse the future of Indian steel industry.

Research Methodology This section deals with the research design used and data collection method used. a). Research design:In case of my research “Comparative analysis of Indian private and Public sectors with special reference to TATA Steel and SAIL” the descriptive research is found to be more appropriate.

Descriptive research studies are those studies, which are concerned with describing the characteristics of a particular individual, or a group. This study is concerned with specific prediction, narration of facts and characteristics concerning individual, group of situation are all examples of descriptive research studies. b). Data collection method:According to my topic of research I found that the use of secondary data is the only right choice. For that I mainly used Internet and collective various data from government and private websites. I visited to the library and went through various books and journals for collection of the relevant data for the research.

DATA ANALYSIS Comparison between TATA Steel and Steel Authority of India The Public sector undertakings (PSUs) under the Ministry of Steel have shown significant improvements in the last two years. The combined profit before tax of all 15 PSUs of the Steel Ministry exhibited an enhancement of more than two times, from Rs. 5,568 crore in fiscal 2003-04 to Rs. 11,497 crore in 2005-06.

The profit before tax for all PSUs also exhibited a significant improvement of around 26% in the three quarters of 2005-06 (April-December 2006) amounting to Rs.10,566.40 crore as against a combined profit before tax of Rs.8,368.75 crore in the comparable period of last year. Contribution of PSUs to public exchequer has also gone up significantly. For example, the contribution of five leading companies, namely, SAIL, RINL, NMDC, KIOCL and MOIL, to Central and State exchequer by way of excise duty, customs duty, dividend, corporate tax, sales tax, royalty etc. has gone up by more than double, from Rs. 5,761 crore in 2003-04 to Rs.13,110 crore in 2005-06. On the other hand, the Private sector of the Steel Industry is currently playing an important and dominant role in production and growth of steel industry in the country. During the period (April-December 2006), 20.5 million tonne of steel was produced by Private Sector steel units, out of the total production of 33.15 million tonne in the country. The private sector units consist of major steel producers in one hand and relatively smaller & medium units such as Sponge iron plants, Re-rolling mills, Electric Arc Furnaces and Induction Furnaces on the other. They not only play an important role in production of primary and secondary steel, but also contribute substantial value addition in terms of quality, innovation and cost effectiveness. For comparing both the companies i.e. Tata Steel and SAIL lets analyse both the companies on following parameters:

Production Chart showing production of both the companies:

Quantity : '000 Tonnes 2007-08 APR-DEC'07

APR% AGE OF DEC'06 CURRENT ACTUA PRODUCTION L OVER

%CAPACITY UTILISATION

APRAPRDEC'07 DEC'06 APRDEC' TARGE ACTUA 07 T L

TARGET TARGE TENTATIV ACTUAL T E SAIL i)BSP ii)DSP iii)RSP iv)BSL v)ISP vi)ASP vii)VIS L TATA

APRDEC'06

4950.0 1840.0 1813.0 4350.0 500.0 147.0

3711.0 1358.0 1345.0 3263.0 376.0 107.0

3732.0 1433.0 1536.0 3097.0 352.0 114.0

3578.0 1345.0 1512.0 3001.0 345.0 113.0

100.6 105.5 114.2 94.9 93.6 106.5

104.3 127.0 106.5 106.0 101.6 108.0 103.2 95.0 102.0 94.0 100.9 65.0

121.0 99.0 106.0 91.0 92.0 64.0

139.0

105.0

116.0

119.0

110.5

97.5

130.0

134.0

5000.0

3744.0

3709.0

3738.0

99.1

99.2

99.0

100.0

TATA Steel : The company had a Production target for the year 2007-08 was 5 million tonnes (mT) but it could produce only 4.93 (mT). For the first 3 quarters of the years company set a target of 3.744 (mT) but could produce 3.709. However for the same period in last year company produced 3.738 (mT) steel a capacity utilisation of 100% as compared to 99% this year.

Steel Authority of India : The company had a aggregate production target of 13.739 (mT) for the year 2007-08 but it could produce only 12.6 (mT) a growth of 4% over the previous year. However for the first 3 quarters of the years company set a target of 10.265 (mT) and produced 10.380 as compared to around 10 (mT) for the same period last year. SAIL had a capacity utilisation of 103% this year as compared to 101% last year.

Financials TATA Steel :

The year 2006-07 has seen the highest turnover and profits, continuing the trend of the past four years. The Company achieved the best ever sales turnover and profitability during the year under review. A robust Indian economy, firm steel prices, higher volumes and several improvement initiatives contributed to the record performance. Finished steel sales were higher by 11.33% at 4.51 million tonnes over the previous year. Export turnover was lower by about 5% due to lower volumes. Average price realisation improved mainly due to higher prices of hot rolled coils/sheets. Operating profit was higher by over Rs. 1,000 crores at Rs. 6,973 crores (2005-06: Rs. 5,938 crores), an increase of 17% over the previous year. Net interest charges were higher at Rs. 174 crores (2005-06: Rs. 125 crores), due to additional borrowings for the Company’s domestic expansion programs and funding Company’s contribution for financing the acquisition of Corus Group plc. After providing for Rs. 819 crores for depreciation (2005-06: Rs. 775 crores) and Rs. 152

crores towards employee separation scheme (2005-06: Rs. 53 crores), the profit before tax rose by 20% to Rs. 6,262 crores (2005-06: Rs. 5,240 crores). Net Profit after taxes was higher at Rs. 4,222 crores (2005-06: Rs. 3,506 crores), an increase of 20% compared to the previous year. The record financial results would not have been possible without a matching performance by the operating departments including the raw materials division. The year witnessed the best ever crude steel production by the Company at 5.05 million tonnes, an increase of 6.7% over the previous year. Jamshedpur Plant became the first plant in India to produce more than 5 million tonnes of crude steel in a year. The upgraded “G” Blast Furnace produced over 2 million tonnes of hot metal, as against its rated capacity of 1.8 million tonnes. Among the Finishing Mills, the output at the Cold Rolling Mill and the Hot Strip Mill exceeded their rated capacities. The all-round increase in production was backed by improvements in operating practices and productivity resulting in a reduction in consumption of raw materials, energy, refractories etc.

Steel Authority of India: Financial Year 2006-07 has been eventful year for the company with further momentum in improving operational efficiencies, laying strong foundation and building road map for modernisation and expansion of SAIL Plants, with several new initiatives undertaken, with its human resource at the core. During the year, the company got the distinction of first metal company in the country to reach a market capitalization of Rs. 50,000 crore. There have been improvements in all financial parameters which are shown in the table given below-

SAIL set new record in achieving the turnover of Rs.39,189 crore and profit before tax of Rs.9423 crore, registering growth of 21% & 65% respectively over previous year. The company recorded net profit after tax (PAT) of Rs.6202 crore, an increase of 55%.

Research and Development Chart showing production of both the companies: (Rs. Crore)

TATA Steel : The R & D laboratory was set up in 1937. Today, Tata Steel is the first in India to develop galvannealed skin panels. It is the only Indian supplier of bake hardening steel for body panels. Research is undertaken at Tata Steel in the areas of raw materials including coal, coke, energy conservation, waste utilisation, sintering, blast furnace productivity and phosphorous reduction, product development and improvement in life of plant and machinery. The Company spends 7% of its turnover for R&D 17 patents have been sealed and over 100 are in process

Steel Authority of India : Research and Development Centre for Iron and Steel (RDCIS) has provided innovative technological inputs to different units of SAIL, with special emphasis on cost reduction, product development and application, quality improvement, energy conservation

and

automation.

Several

new

products

were

developed

and

commercialised like DMR 249 Gr. A at Bhilai Steel Plant (BSP), Bokaro Steel Plant Steel (BSL) and Rourkela Steel Plant (RSP), Spade M-1 steel as per CDA 99 specification at RSP, Fe 415 Gr. Thermo Mechanically Treated (TMT) rebar with micro-alloying at BSP, high strength corrosion resistance roof bolt grade bars at Durgapur Steel Plant (DSP), earthquake resistant TMT rebars (Fe-415) at DSP, CuMo pearlitic rail at BSP, high strength micro alloyed rails at BSP etc. The RDCIS strengthened its technology marketing efforts by providing consultancy services, organising specialised testing and transfer of technological innovations to outside customers like M/s Power Grid Corporation of India, Gurgaon; M/s Refcom (India) Pvt

Ltd., Purulia (West Bengal); M/s Sarvesh Refractories, Rourkela; M/s Balmer Lawrie Ltd., Kolkata, and M/s Monarch Electronics, Kolkata, etc. During the year, 1998 technical papers were published/presented, besides filing of 31 patents and 29 copyrights. The scientists at the RDCIS won nine national level awards. In addition, RDCIS won the prestigious “DSIR National Award 2005 for R&D achievements in New Materials” given by the Ministry of Science and Technology, Government of India.

Environment TATA Steel: Tata Steel’s efforts at Environment Management are well recognised. It’s Steel Works in Jamshedpur, all its mines, collieries and manufacturing divisions in its out has an ISO-14001 certified service provider.locations are certified to ISO-14001. Jamshedpur is the only town in the country which Significant achievements by the Company include an improvement in environment and resource conservation, including a reduction in green house erosion, raw materials and water consumption. The Company has increased waste re-use and re-cycling. Constant upgradation and modernisation has resulted in several state-ofthe-art pollution control systems being installed to prevent and control pollution. The Company has almost doubled its capital investment in Pollution Abatement in the last five years.

Emissions, effluents and wastes Greenhouse Gas (GHG): Of the six Greenhouse Gases, Carbon Dioxide is of most relevance to the steel industry. Considerable reduction has been effected by Tata Steel in the Carbon Dioxide emission rate, as is evident when the credit for slag granulation is taken into account. Other Greenhouse Gas emissions do not result from Tata Steel’s activities. Ozone depleting substances: The Steel Works reduced use of refrigerants to 7.044 tonnes in 2003-04 as against 7.90 tonnes used during the previous year. Hazardous Waste under Basel Convention: The Company does not import or export any waste, deemed hazardous under the Basel Convention. All hazardous wastes generated are handled as per the requirement of the Hazardous Waste Management and Handling Rules 1989/2000.

Emissions

Tata Steel has undertaken several initiatives, which have resulted in considerable reduction in stack emission. Emissions are well below the Indian and international standards. The emission load including particulate matter, Sulphur Dioxide and Oxides of Nitrogen have dropped as a result of the improvement initiative undertaken at the Steel Works.

Waste handling Most of the solid waste generated from Steel Works is recycled or reused. 18% of the solid waste generated, amounting to approximately 5,50,000 tonnes in 2003-04 was used to fill low-lying areas and for peripheral road construction around Jamshedpur. About 2,00,000 tonnes of fly ash and bottom ash, generated in the power plants was dumped in a designated dump area.

Effluent Management Waste water from the steel making process is being treated with best available physio-chemical methods as well as being recycled. Waste water from the coke plant is treated biologically where organic pollutants are oxidised and decomposed by micro organisms. The Company has reduced the levels of total pollutant discharge in waste water streams from 0.211 in 1999-2000 to 0.178 in 2003-04.

Steel Authority of India : Corporate environmental policy of SAIL emphasises “conducting operations in an environmentally responsible manner to comply with applicable regulations and striving to go beyond”. SAIL recognizes its responsibility to continuously improve its energy efficiency and optimize resource consumption through various measures viz. improvement in process technology in the areas of raw materials, coke, iron and steel making, reuse/recycle of the by-products generated and conservation of energy and water.

Solid Waste Management During 2005-06, SAIL produced approximately 13.4 million tonne of crude steel and generated 5.6 million tonne of Blast Furnace (BF) slag, 1.3 million tonne Steel Melting Shop (SMS) slag and 0.6 million tonne of other process wastes. Utilisation of

these wastes are being made through internal recycling and selling to outside agencies. The wastes generated in the steel plants are being utilized mainly through their Sinter plant. SAIL plants have achieved 70% utilisation of solid wastes generated during April-September, 2006.

Environmental Plantation Trees have a significant role in protection of environment and ecological balance. Extensive afforestation programme are being followed in all the plants and mines. The basis of choosing the species of plants mainly depends on local soil characteristics and prevailing meteorological conditions. The green belt developed by afforestation adds to the aesthetic environment, which becomes dust and noise barriers. A total number of 1,45,521 saplings have been planted covering an area of 63.7 hectare in 2005-06 as against 77,242 nos of saplings planted in an area of 36.6 hectare in 2004-05 in and around the steel plants of SAIL.

Environmental Recognitions SAIL plants have been awarded various prizes for environmental management in their plants viz. “Sustainability prize in independent unit category”, 2006 instuted by the Confederation of Indian Industries (CII) for exemplary performance in the environmental, economic andsocial dimensions of sustainable development and the Greentech Environment Excellence Gold Award,Golden Peacock Environment Excellence Award in the metal sector, 2005 instuted by the World Environment Foundation and the Jawaharlal Nehru Memorial Pollution Control Excellence Award for 2005 from International Greenland Society.

Workforce and Welfare of Society

TATA steel

Tata Steel has not lost focus of this philosophy and has adapted it in a broader and modern context in its Vision 2007: A lot is dependent on the individual spirit and enthusiasm of the employees to realise our vision. TATA Steel accelerates efforts to provide a work environment that will ensure a sense of purpose and personal growth for each individual. The wish of the company is to see the smile on every face everyday. A pioneer in employee welfare, Tata Steel has invested in the power of its people and enriched, empowered and enhanced their lives. Even in its nascent years, social scientists Sidney and Beatrice Webb were brought in to work on welfare schemes. In fact, some of the initiatives introduced by Tata Steel were the first of their kind in India and some even in the western countries at that time! Tata Steel’s Human Resource policy recognises its people as the primary source of its competitiveness. It focuses on constantly updating and challenging intellectual capabilities to enable them to excel in performance. Special efforts are made for enhancing strategic thinking skills and analytical abilities of its managers and workers. As a true ‘Learning Organisation’, Tata Steel has tapped the knowledge available with its people through Knowledge Management and sharing of best practices. In the year 2003, Tata Steel celebrated 75 years of industrial harmony and mutual co-operation, coordination and understanding between the Management and the Union. It has twice emerged as “Asia’s Most Admired Knowledge Enterprise” among many other prestigious awards and recognition. Tata Steel aims at ensuring transparency, fairness and equity in all its interactions with its employees to create an enthused and happy workforce. •

In 1916, Social Welfare Scheme was formed by Tata Steel to provide assistance in the fields of education, vocational training, self-employment and family welfare

•

Tata Steel has hosted the Lifeline Express, the world’s fi rst hospital on a train, 12 times. This facility provides on-the-spot diagnostic, medical and advanced surgical treatment for preventive and curative interventions to people in inaccessible rural areas.

•

Sir Dorab Tata personally financed four athletes and two wrestlers from India for the 1920 Antwerp Olympics!

•

The JRD Sports Complex, an international stadium with an 8-lane polyurethane track, was inaugurated in 1991. The complex also houses facilities for handball, tennis, volleyball, hockey, basketball, boxing, table tennis and a modern gymnasium.

•

The Tata Steel Family Initiatives Foundation is engaged in off ering health services for the betterment of the people in and around Jamshedpur.

•

At times of natural calamities, the company has rushe immediate relief and off ered long-term assistance to tsunami-hit Tamil Nadu, earthquake-torn Gujarat, fl ood ravaged Orissa and other such aff ected areas.

•

Horse-riding lessons, the Jubilee Amusement park, the zoological park, etc. off er a unique environment for the children of Jamshedpur to grow up in.

•

In a recent survey conducted on ‘Quality of Life’ by AC Nielsen ORG-MARG, Jamshedpur has emerged as the one of the best cities in India.

Steel Authority of India : The manpower strength as on 31st March, 2006 was 1,38,211 comprising 15,206 executives and 1,23,005 non-executives. The total reduction in manpower achieved during the year stood at 4,864, which included separation of 881 employees through voluntary retirement. The labour productivity improved by around 12% over previous year to 150 tonne crude steel/man/year. Some of the areas of assistance, which are available to the weaker sections, are the following: •

The company has provided land for construction of school buildings in some of the steel townships as well as in other places for spreading education among the masses.

•

The company has constructed roads in remote areas around the steel plants and also where the captive mines are located to improve communication and

also increase activities such as organisation of health camps, school facilities, drinking water etc., under the peripheral development schemes. •

Bhilai Steel Plant has adopted 36 tribal children of Chattisgarh region and Bokaro Steel Plant has adopted 12 Birhor tribe children. These plants are providing them with education, boarding and lodging facilities.

•

Construction of bridges, by-pass roads, metal-morum path, waterways, levelling/dressing area around township, pre-mixed roads. Installation of handpumps, tube wells and wells for villagers.

•

Construction of school buildings (including for mentally retarded, deaf and dumb children), madarsas, providing school furniture therein and construction of hostels, women’s college building etc.

•

Fourteen scholarships are awarded to deserving SC/ST undergraduate engineering students in various disciplines to encourage technical education among them

•

In many cases, tuition fee in company run schools is exempt for SC/ST students. Steps are taken to provide education to more and more tribal children in company schools.

•

The unemployed SC/ST youth are given specialized training in various technical trades to develop skill and knowledge. Such training is provided free of cost.

•

Adult literacy campaign is carried out in most of the steel townships. Every year more and more men and women are being covered in this campaign.

•

Development of fishery and cottage industry, providing sewing machines to village mahila mandals and promoting other self-employment generation schemes.

•

SAIL has established a hockey academy with stadium and hostel facilities at Rourkela to tap and nurture the talent scattered in surrounding tribal area. The academy was successful in spotting a number of young talented tribal players and grooms them under expertise of ex-Olympian.

Technology The biggest boost to efficiency in the steel industry has come from the increased use of continuous casting – an indicator of the modernity of the production process. Its share of Indian crude steel output has climbed from 38% in the mid-1990s to 66% now. India is thus well on its way to joining the ranks of the leading steelmakers among the industrial nations (share in EU-25: 96%). However, in India some 6% of crude steel is still made using the outdated open-hearth process (EU-25: 0.3%), which suggests there is restructuring potential. TATA Steel Tata Steel's stall at the International Trade Fair was adjudged the best, along with SAIL, amongst ninety national companies participating in the Trade Fair. Thirty international companies also took part in the exhibition. Participating companies from countries all over the world exhibited latest technologies and know-how. List of participating companies included Baosteel, SAIL, Heavy Engineering Corporation, Hindustan Copper, Jindal Steel & Power, M.N. Dastur & Co. MECON and other such companies of national and international repute. China was the partner country for the International Trade Fair this year. In the award winning exhibition, Tata Steel showcased its best coal mining practices, cutting-edge technology used in iron ore mining, pioneering human resource practices, 78 years of industrial harmony and various other aspects of the world's best steel company. The 6th International Trade Fair and Conference, an institutionalised global event, is considered to be one of the most prestigious forums for national as well international participants. It is a conclave of the finest minds concerned with the future direction and growth of these sectors. The forum provided the world's most eminent metallurgist's, manufacturers of metallurgical and mining machinery and related sector's professionals, analysts and experts with the opportunity to exchange views on emerging technologies, synergy and strengths and open up wider horizons for sectorial development. Tata Steel to adopt Corus technology:

Tata Steel plans to implement alternate technology used by the British steel maker Corus, which it acquired recently, in its greenfield steel plants to reduce cost of production, according to Mr B. Muthuraman, Managing Director, Tata Steel. “We are looking at alternate technology. Corus has developed an alternate technology, which could be implemented in our greenfield plants,” Mr Muthuraman told newspersons on the sidelines of the 34th National Management Convention organised by the All-India Management Association. However, he declined to give further details on the type of technology the Indian steel giant plans to implement.

Steel Authority of India : Modernisation holds the key to SAIL's fortunes in the near future. The objective of the Rs.15,000-crore modernisation drive is to upgrade steel-making technologies and productive capacity and, in the process, become more energy-efficient and improve quality. The key component of the ongoing modernisation drive - already completed at Rourkela and Bokaro - is the replacement of open hearth furnaces and ingot casting facilities with basic oxygen furnaces for steel-making and employing continuous casting techniques. A senior SAIL official says, "Continuous casting and basic oxygen furnaces ensure better quality steel through processes more easily monitored for quality control. The basic oxygen surfaces method is significantly faster, more automated and permits greater flexibility. Continuous casting is more efficient than the traditional ingot casting methods and gives increased yields while enabling better quality standards. SAIL is also modernising its finishing mills and is adding secondary refining facilities to improve quality.

Safety measures A unique feature of safety management in steel industry is that a bipartite forum named Joint Committee on Safety, Health and Environment in Steel Industry (JCSSI) was formed in 1973 at national level having representatives from steel plants in SAIL, RINL, TISCO and Ispat Group. All the Central Trade Unions are represented on this Committee. With a view to inculcate safety consciousness, JCSSI organises seminars, workshops, training programme, safety competitions for member organisations. JCSSI with the co-operation and support of Trade Union representatives formulates policies and guidelines for its member plants and monitors the implementation.

Tata Steel : Safety has always been a prime focus at Tata Steel. A Safety Committee, a Safety department and a Safety Trophy helped spread the message all across the company. TATA reaffirms its commitment to provide safe working place and clean environment to its employees and other stakeholders as an integral part of its business philosophy and values. We will continually enhance our Environmental, Occupational Health & Safety (EHS) performance in our activities, products and services

through a structured EHS management framework. Towards

this

commitment, we shall; •

Establish and achieve EHS objectives and targets.

•

Ensure compliance with applicable EHS legislation and other requirement and go beyond.

•

Conserve natural resources and energy by constantly seeking to reduce consumption and promoting waste avoidance and recycling measures.

•

Eliminate, minimize and/or control adverse environmental impacts and occupational health and safety risks by adopting appropriate "state-of-the-art" technology and best EHS management practices at all levels sand functions.

•

Enhance awareness, skill and competence of our employees and contractors so as to enable them to demonstrate their involvement, responsibility and accountability for sound EHS performance.

Steel Authority of India : SAIL has a separate corporate unit, called the SAIL Safety Organisation to monitor safety system & activities- SAIL also has a comprehensive safety policy: •

Annual Performance Plans (APP) for the areas of safety and fire services are formulated and review of implementation of APP is done during Heads of Safety meeting.

•

Internal and external safety audits of major departments particularly hazardous areas are conducted every year and points arising from these audits are liquidated. Safety aspects have been incorporated in standard operating practices (SOP) and standard maintenance practices (SMP).

•

All major capital repairs/shut downs are closely monitored round the clock. Periodic drives are conducted to inculcate safety awareness/culture up to grass-root level apart from regular inspections as per checklists to identify unsafe conditions/acts.

•

Safety training is imparted to target group employees at various levels. HRD intervention in the area of safety covers Heads of Departments, Line Managers & Departmental Safety Officers. Besides area specific workshops are conducted at different locations on important topics like gas safety, rail/road safety, safety in iron, steel & coke making etc.

Consistent efforts were made by SAIL Safety Organisation for improving safety standards in the company by taking measures like intensive safety drives in works area and conducting safety audits in hazardous departments of different plants and mines. In addition, specific workshops on safety aspects were organised in various SAIL steel plants. .

Measures taken by Indian government to improve the industry

Now let’s have a look over what government has done to make the industry competitive in world market. Government has taken several initiatives in last decade to improve the steel industry. The main steps taken for this are as follows1. In the new Industrial Policy announced in July, 1991 Iron and Steel industry, among others, was removed from the list of industries reserved for the public sector and also exempted from the provisions of compulsory licensing under the Industries (Development and Regulation) Act, 1951. 2. With effect from 24th May 1992, Iron and Steel industry has been included in the list of `high priority' industries for automatic approval for foreign equity investment up to 51%. This limit has been recently increased to 100%. 3. Price and distribution of steel were deregulated from January 1992. At the same time, it was ensured that priority continued to be accorded for meeting the requirements of small scale industries, exporters of engineering goods and North Eastern Region of the country, besides strategic sectors such as Defence and Railways. 4. The trade policy has been liberalised and import and export of iron and steel is freely allowed. There are no quantitative restrictions on import of iron and steel items, covered under Chapter No. 72 of the ITC(HS) Code. The only mechanism regulating the imports is the tariff mechanism. Tariffs on various items of iron and steel have drastically come down since 1991-92 levels and the government is committed to bring them down to the international levels. In Chapter 72 there are two items viz. 72042110 and 72042910, which fall in the restricted list of imports. 5. Iron & Steel are freely importable as per the Extant Policy. 6. Iron & Steel are freely exportable. 7. Advance Licensing Scheme allows duty free import of raw materials for exports. 8. The floor price for seconds and defectives continues till date. 9. Imports of seconds and defectives of steel are allowed only through three designated ports of Mumbai, Calcutta and Chennai. 10. Mandatory pre inspection certificate by a reputed international agency for every import consignment of seconds and defectives.

11. In budget 2004-05, the customs duty on nonalloy steel was reduced from 15 % to 10 per cent and on alloy steel from 20 per cent to 15 per cent. In August 2004, the customs duty on non-alloy steel was further reduced from 10 per cent to 5 per cent; on meltingscrap from 5 per cent to 'zero' and on ships for breaking from 15 per cent to 5 per cent. 12. Further, customs duty on several raw materials used by the steel sector like noncoking coal, metcoke and nickel has been reduced to 5 per cent and on coking coal to 'zero'. 13. To bring down the prices of steel, the excise duty on steel products was reduced from 16 per cent to 8 per cent with effect from February 28, 2004 with a caveat that the duty regime will be reviewed. Budget 2004-05 revised this partially by increasing the duty from 8 per cent to 12 per cent, as the intended impact of duty cut on moderating prices was not achieved. 14. The union Budget 2007-08 the import duty on seconds and defective has been further reduced from 20% to 10%.

Special assistance being provided by Ministry of Steel to Private Sector 1. Ministry of Steel is extending all possible support, as detailed below, for the development of Iron and Steel Sector in the country: 2. The Ministry is providing linkage for raw materials, rail movement clearance etc. for new plants and expansion of existing ones, wherever applied for. 3. To ensure an un-interrupted supply of raw materials to the producers. 4. The Ministry has been interacting with All India Financial institutions to expedite clearance of projects. 5. Regular interactions with Entrepreneurs, who are proposing to setup Iron and Steel Plants, are held at the level of Secretary. 6. Ministry of Steel identifies infra-structural and related facilities required by steel industry so that their absence does not lead to bottlenecks in the future growth of the Iron and Steel Sector, and takes up these issues with the concerned ministries. 7. The Ministry has encouraged the setting up of "Institute for Steel Development and Growth (INSDAG)" in Calcutta in August, 1996. The leading steel producers in the country are members of this Institute, which has been set up with the objective of promoting, developing and propagating the proper and effective use of steel.

8. In order to resolve the problems faced by existing & new steel plants & to assist major steel plants being implemented, Govt. has setup a Project Coordination Group under the Chairmanship of Steel Minister.

NATIONAL STEEL POLICY, 2005 The progress of the steel industry has a critical influence on the pace of India’s development and, as such, great importance is attached to capacity expansion in line with expected demand at cost and prices which make Indian steel internationally competitive. The existing regime of liberalization, decontrol and deregulation of industry in the country has opened up new opportunities for the expansion of the steel industry. With a view to accelerating the growth of the steel sector and attaining the vision of India becoming a developed economy by 2020, the Ministry of Steel formulated a National Steel Policy (NSP) in 2005. The following salient features can be derived after analysing the NSP 2005: •

The NSP sets out a broad roadmap for the Indian Steel Industry in its journey

towards reform, restructuring and globalisation. •

The long-term goal of the NSP is that India should have a modern and efficient

steel industry of world standards, catering to diversified steel demand. The focus of the policy is to achieve global competitiveness not only in terms of cost, quality and product-mix but also in terms of global benchmarks of efficiency and productivity. •

In order to achieve the goal of 110 million tones of steel production by 2019-20,

the NSP seeks to remove the supply-side constraints to the growth of this industry in an open, globally integrated and competitive environment. •

The NSP seeks to adopt a multi-pronged strategy to move towards the long-

term policy goal. On the demand side, the strategy would be to create incremental demand through promotional efforts, creation of awareness and strengthening the delivery chain, particularly in rural areas. On the supply side, the strategy would be to facilitate creation of additional capacity, remove procedural and policy bottlenecks in the availability of inputs such as iron ore and coal, make higher investments in R&D and encourage the creation of infrastructure such as roads, railways and ports.

•

The NSP acknowledges the low per capita consumption of steel in the country,

especially in the rural areas and the need to boost steel consumption to improve quality of life and help in meeting the growing aspirations of masses. •

In order to achieve the strategic goal of 110 MT of steel production by 2019-20,

the industry would need additional capital. In addition, funds would be required for technological upgrade of existing facilities. In order to mobilize such vast resources NSP seeks to encourage foreign direct investment. In addition, the policy also seeks to make the fiscal incentives, available to infrastructure projects, accessible to the steel industry. •

The NSP seeks to support developing of risk-hedging instruments like futures

and derivatives to contain price volatility in the steel market. •

The NSP seeks to strengthen the existing training and research facilities

available to the domestic steel industry so as to provide suitable training programmes especially for the secondary small-scale units and also to collect and analyse data on important parameters of the industry. •

The NSP seeks to mount aggressive R&D efforts to create manufacturing

capability for special types of steel, substitute coking coal, use iron ore fines, develop new products suited to rural needs, enhance material and energy efficiency, utilize waste, and arrest environmental degradation. •

The NSP acknowledges the important role played by the secondary steel sector

in providing employment, meeting local demand of steel in rural and semi-urban areas, and meeting the country’s demand of some special products and seeks to endeavour to provide the necessary feedstock to these units at reasonable prices from major plants through the existing mechanism of State Small Industries Corporations. •

The NSP recognizes the fact that integration of the Indian steel industry with

the global economy requires that the industry should be protected from unfair trade practices. The NSP, therefore, envisages institution of mechanisms for import surveillance, and monitoring export subsidies in other countries. The present per capita consumption of steel in the country is very low compared to the world average. As mentioned above, one of the objectives of the NSP is to augment the demand and consumption of steel in the country by conscious promotion of steel usage. With a view to create a mass awareness campaign on conscious promotion of

steel usage a ‘Steel Promotion Coordination Committee’ has been formed under the Chairmanship of Secretary, Ministry of Steel, consisting of major steel producers. The Committee is being serviced by Institute for Steel Development and Growth (INSDAG). The objective of the Committee is to promote steel usage in the country by way of an awareness campaign with particular emphasis on rural sectors. The Committee also aims at educating the designers, architects, builders and planners regarding the qualitative and cost effective applications of steel in various structures including buildings, bridges, flyovers and airports.

FUTURE OF INDIAN STEEL INDUSTRY India is amongst a few countries in the world having the dual advantage of fast growing domestic demand coupled with access to raw materials. Further, the trend that is already discernible is that the axis of global steel production / consumption is shifting towards Asia. With their large populations, China and India already account for 35 % of the total world steel production - more than double of Europe. Asia is expected to outpace other regions of the world to an even greater extent in the coming years. Amongst the Asian nations, China has established a huge, unbridgeable lead. It is accepted that China will continue to be the leader. However, India is slated to emerge as the second Asian giant in the next eight years. Figuratively speaking, while the "Dragon" has reached maturity; the "Lotus" is about to bloom in resplendent splendour. In 2005 Chinese steel consumption was around 320 million tonnes; i.e China swallowed almost 32% of global steel. It is unlikely that future production and consumption would continue to flourish at growth rates of 8% and 18% respectively as has been the case over the last few years. On the other hand, it is sun-rise time for India where the demand has increased by 7-8% in the last couple of years. In the long run, Indian steel is likely to be more cost-effective since unlike China, India has relatively large reserves of iron ore (14 billion tonnes), which if strategically exploited, can sustain domestic production of 120-130 million tonnes for at least 25-30 years. However, the position with coal is not so favourable. Though thermal coal reserves of over 92 billion tonnes can fuel industry, large-scale iron making using the traditional blast furnace route would require coking coal. India does not have adequate reserves of coking coal; nor is the meagre amount available of appropriate quality. Thus, the steel industry always had to contend with the dual problems of inadequate availability and poor quality of Indian coking coal. This has been partly addressed by adopting alternative iron making processes that are not dependent on coking coal; it can not be denied that coal is the biggest cause for concern for bulk steel production in India. Because of the shortage of indigenous coal, attempts have been made by steel producers to ensure long-term supplies by tying up with global majors or by acquiring

mines in other countries. This is the only long-term solution, but with a global shortage of coal it may not remain cost-effective in the long run. India is the seventh largest producer of steel and may further improve its position going by the current trends. A series of investment decisions by major domestic players and international steel giants such as Steel Authority of India Ltd, Tata Steel, POSCO, the LN Mittal Group etc. clearly establish that such hopes are well founded. The keen interest shown by various prospective investors is not only due to expectations of strong growth in domestic demand but also due to indigenous availability of key resources like iron ore and skilled workforce. After deregulation (from 1991-92 to 2004-05) domestic consumption of finished steel has grown at a CAGR of 6.7 per cent. In absolute terms the consumption of finished steel expanded from 14.8 million tonnes in 1991-92 to 34.4 million tonnes in 2004-05. During the recent upturn (from 2002-03 to 2005-06) the growth in consumption has accelerated to 9.1 per cent. With the likely growth of Indian economy at around 7 per cent per annum, demand for steel is expected to remain strong and is projected to reach a level of 90 million tonnes by 2019-20 as envisaged in the National Steel Policy. This growth in demand is sustainable considering the fact that India's per capita consumption of steel is still very low at 31 kgs per head compared to the world average of 145 kgs. The very low level of per capita consumption of steel in India is highlighted further when compared with the consumption levels of its peer group consisting of countries like China, Brazil, Mexico and Republic of Korea as also with selected developed countries. Though there are realistic constraints in India to achieving as rapid a growth as in China, there seems to be consensus among analysts that India is likely to witness a growth rate in steel consumption higher than the historically observed rate of 6 to 7 percent. If the growth rate (9 per cent) of last three years is maintained then we will achieve the 110 million tonnes landmark even by 2018. Though some analysts are more conservative due to cyclicity of steel business, it may be mentioned that in a country like India cyclicity is more in terms of prices rather than volumes of production.

Exports Similar optimism prevails with regard to export of iron and steel. Export of steel starting from a negligible amount in 1991-92 has increased to 5.5 million tonnes in 2003-04. Exports in 2004-05 were lower at 4.6 million tonnes, primarily because of rising domestic demand and low capacity additions. Exports now constitute around 17 per cent of total production and India's presence in the developing and developed world is being increasingly felt. Indian steel producers have recently been able to supply specialized grades and products used for sophisticated applications like automobiles. On the cost front, some of our producers are counted amongst the least cost producers of the world. For an average reference plant, India is competitively placed in the middle of the hierarchy of steel producing nations. However, we have a long way to go to catch up with the leading exporters of the world such as Japan, the CIS countries, Brazil etc. It is, however, expected that by 2019-20 India will be able to export around 26 million tonnes of steel representing 24 per cent of total projected production. The projected export ratio compares well with the current worldwide export ratio of 27 per cent (excluding intra-regional trade). The projected production of steel by 2019-20, to meet the domestic and export demand will be around 110 million tonnes. Management of resources and infrastructural growth is going to be critical in achievement of the production level envisaged. The broad requirements of various resources will increase manifold from the current level. The bottlenecks in availability of critical inputs and various facilities need to be removed through concerted efforts of Government and industry. The broad strategy to overcome these constraints as well as meet the strategic goals of the steel sector has been discussed in the National Steel Policy, which has been recently approved by the Government. As stated earlier, the long-term goal of the National Steel Policy is that India should have a modern and efficient steel industry of world standards, catering to a diversified steel demand. The focus of the policy is to achieve global competitiveness not only in terms of cost, quality and product mix but also in terms of global benchmarks of efficiency and productivity. The policy envisages adopting a multipronged strategy to achieve these goals. On the demand side, the strategy would be

to create incremental demand through promotional efforts, creation of awareness and strengthening the delivery chain, particularly in rural areas. On the supply side, the strategy would be to facilitate creation of additional capacity, remove procedural and policy bottlenecks in the availability of inputs such as iron ore and coal, make higher investments in R&D and HRD and encourage the creation of infrastructure such as roads, railways, and ports. The production figures, exports and imports of finished carbon steel and pig iron, and apparent consumption patterns of finished carbon steel as indicated by TATA Steel and SAIL attest to the continuing growth for both the sectors.

FINDINGS The Indian steel industry responded enthusiastically to the liberalization and large capacities were created in the private sector. The plants which came up post 1991, like Vizag Steel (RINL) in the public sector and Essar Steels, Ispat Steels, Jindal Vijayanagar etc. in the private sector used the modern state-of-the-art technologies. However, because of decontrol, removal of duty protection, free import, dumping from China and CIS, and, above all, a global economic melt-down in the latter half of 90s, the industry went through a major crisis. The period from 1997-2001 marked the worst for the industry with price decline, poor capacity utilization, inventory pile up, dumping through unofficial channels and high interest burden. Meanwhile, the industry is already into an expansion mode with all steel majors like SAIL, Tata Steels, RINL, Ispat, Jindals and Essar hiking their capacities. States like Orissa and Jharkhand, rich in iron ore, are attracting major investment interest both from domestic and international majors. There is, however, some concern regarding the differential treatment meted out to overseas players to attract investment, mainly in respect of export of iron ore. In the final analysis, the industry scenario is expected to radically alter in the coming years.

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However, the public sector is expanding its capacities but, it has more potential lies within to perform more than that.

•

Utilization of capacities in public sector is more than that of private sector but the performance still has to be improved.

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Public sector has increased its profit over the year particularly in 2006-07.

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Both the companies are planning to adopt modern technology which is going to help them to compete in world market but they need to be less dependent on state of art technology and coal for long term prospects.

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Public sector has undergone retrenchment for the employees and improved has its lobour productivity but it is still lacking behind as compared to private sector.

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SAIL has reduced the no. of accidents due to improper handling of machinery still no of accidents are more than that of TATA Steel.

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Most of the plans to achieve the significant position in world market will remain on paper unless adequate attention is given to augmentation of infrastructure i.e. roads, ports, railways, power, etc.

These areas are of prime concern and the policy envisages a High Level Monitoring Group which will not only prepare action plans in consultation with the concerned Ministries but also coordinate development of the required facilities. There are tremendous challenges ahead of us but these have to be met comprehensively if we are to take our legitimate place in the world as a developed nation by 2020.

BIBLIOGRAPHY  Annual report (2006-07) published by ministry of steel.  Annual report (2006-07) published by TATA Steel.  Presentation on ‘PERFORMANCE HIGHLIGHTS 2006-07’ and ‘DIRECTORS REPORT’ posted by SAIL on its website.  ‘Background Note’ prepared after ‘ECONOMIC EDITORS’ CONFERENCE’ held on 07 Nov. 2006.  Article published in magazine ‘FRONTLINE’ in December 2006 edition.  www.steel.nic.in (Official website of ministry of industry).  www.tatasteel.com (Official website of TATA Steel).  www.sail.co.in (Official website of Steel Authority of India).  www.worldsteel.org (official website of International Iron & Steel Institute).  www.jpcindiansteel.nic.in (Website of joint planning committee).