Steel power

Published : Aug 15, 2008 00:00 IST

SAIL, the largest steel producer in India, is preparing to modernise and expand its facilities in its golden jubilee year.

AT a time of great global uncertainty in the commodity markets one company has stood firm and delivered unprecedented profits in the volatile steel industry. It is Indias largest steel maker, boasts an annual turnover of over Rs.45,000 crore, and ranks among the top five profit-earning corporates in the country. The company: the Steel Authority of India Limited (SAIL), a Navratna public sector undertaking (PSU) that is a market leader and innovator par excellence.

SAIL produces steel at five integrated plants at Bhilai in Chhattisgarh, Rourkela in Orissa, Bokaro in Jharkhand, Durgapur in West Bengal, and the IISCO Steel Plant (ISP) in Burnpur (also in West Bengal). It also operates three special steel plants at Durgapur, Salem in Tamil Nadu, and Bhadravati in Karnataka.

The steel sector in the country has taken a decisive step towards a stronger, more profitable future. Rated the fifth largest producer of steel in the world in 2006, up from the eighth position in 2003, the steel sector in India is on the rise. By 2015, the country is expected to become the second largest producer of steel in the world. Industry sources as well as estimates from the Ministry of Steel suggest that the country could achieve an annual steel capacity of nearly 124 million tonnes by 2011-2012, which would be a fourfold increase over the 2002-03 level. It is much higher than the level targeted in the National Steel Policy (NSP) announced in November 2005 as a blueprint for the growth of a globally competitive and self-sustained steel sector. The policy seeks to enhance domestic steel production to 110 million tonnes per annum by 2019-2020 at an annual compound growth rate of 7.3 per cent. The long-term vision is to create a modern industry that can cater to the diverse demands of a global and increasingly sophisticated domestic market through improvements in efficiency and productivity.

Perhaps the best advertisement for the sectors growth has been the phenomenal expansion of SAIL, which is celebrating its golden jubilee, marking its 50th year of production, this year. Indias steel story began with Hindustan Steel Limited (HSL), set up in January 1954. HSL was initially designed to manage only one plant. However, in April 1957, it was entrusted with the supervision and control of the steel plants at Bhilai and Durgapur, besides the one it managed at Rourkela.

On December 2, 1972, a policy statement drafted by the Ministry of Steel and Mines, and aimed at evolving a new model for managing the industry, was tabled in Parliament. From this emerged the concept of creating a holding company to manage inputs and outputs, leading to the formation of SAIL. The company was incorporated on January 24, 1973, and was restructured as an operating company in 1978.

SAIL has been instrumental in laying a sound infrastructure for the industrial development of the country and has contributed immensely to the development of technical and managerial expertise. Incidentally, SAIL was the first domestic steel company to decommoditise steel by branding it way back in the 1980s. The brand name SAILMA, for its micro-alloyed steel, continues to be popular even today. In late 1993, SAIL decided to brand some more products and finalised and registered their brand names. It also decided to take the SAIL brand name to every household through an advertisement campaign, There is a little bit of SAIL in everybodys life. This was groundbreaking because, until then, no one in the domestic industry had thought of branding steel. Steel was seen more as a commodity than as a brand.

With more than 70 per cent of the nations steel requirement met by SAIL until the early 1990s, SAIL Steel became an established brand that only needed to be positioned in the consumers mind. The well conceived and executed advertising campaign achieved this early. Subsequent to the generic branding, product branding was taken up as the second part of SAILs branding strategy. As a result, SAILs thermo mechanically treated (TMT) bars were branded in the mid-1990s.

As the companys website points out, SAIL is a fully integrated iron and steel maker, producing both basic and special steels for the domestic construction industry, the power sector, railways, automotive and defence industries and the export market. Its products include hot and cold rolled sheets and coils, galvanised sheets, electrical sheets, structurals, railway products, plates, bars and rods, stainless steel and other alloy steels. It has the countrys second largest mines network with captive availability of iron ore, limestone and dolomite essential inputs for the manufacture of steel.

A well-equipped Research and Development Centre for Iron and Steel in Ranchi, Jharkhand, helps SAIL to improve its operating processes and products and achieve world standards in steel-making.

SAILs countrywide marketing network, one of its greatest strengths, was expanded to every district of the country in financial year 2007-08 in an attempt to take steel closer to the doorsteps of consumers.

The ISO 9001:2000-certified Central Marketing Organisation of SAIL is Indias largest industrial marketing set-up. It transacts business through its network of 37 branch sales offices, 24 consignment agents, 56 warehouses, and over 1,500 authorised dealers covering all the districts in the country.

Through Metaljunction, its joint venture company with Tata Steel, SAIL has simplified the procedure to buy steel by providing an online e-store, which delivers products at the doorstep to small builders in Delhi and the National Capital Region and Kolkata.

SAILs International Trade Division based in New Delhi markets its products in China, Korea, the United States, Canada, the Philippines, Indonesia, Saudi Arabia, Iran, the United Arab Emirates, Japan, Thailand, South-East Asia, Myanmar, Bangladesh and several European countries. It recently added the Netherlands, Belgium, Italy and Singapore to its list of export markets.

In recent months, SAIL has taken initiatives to consolidate its position with regard to sourcing of inputs and expansion of business. Some of them are: the signing of a memorandum of understanding (MoU) with Tata Steel for the development of coal mines, the setting up of a special economic zone in Salem, the signing of an MoU with the Railways for the laying of a 235-kilometre track on the Dalli-Rajhara route in Chhattisgarh, the formation of a joint venture company to set up cement plants at Bhilai and Bokaro and the starting of steel processing units in different States.

An examination of the companys performance in 2007-08 illustrates a record turnover of Rs.15,530 crore in the years final quarter alongside a 25 per cent increase in Q4 profit before tax. The company also registered a record annual turnover of Rs.45,555 crore a 16 per cent improvement year on year.

The SAIL board recommended its highest-ever dividend at 37 per cent on paid-up equity, amounting to over Rs.1,500 crore, for the year 2007-08. This includes the 19 per cent interim dividend paid in February 2008. The previous highest dividend payout was 33 per cent for the year 2004-05.

The company developed over 30 new products for special applications, including high corrosion/earthquake-resistant TMT rebars for construction, high-tensile plates for hydel power projects and high-yield strength spring steel for the automobile sector, environment-friendly C-5 coated cold-rolled non-oriented (CRNO) sheets, armour steel plates for the defence sector, boron-treated aluminium-killed low-carbon steel, and vanadium micro-alloyed rails that can withstand a high axle load at high speed.

In 2007-08, SAIL recorded significant growth in the production of a variety of products. The production of electrode-quality wire rods grew by 22 per cent; of LPG-grade HR coils by 11 per cent; of SAILCOR plates/coils by 44 per cent, of wire rods and rounds by 23 per cent; and of plates by 8 per cent. It also achieved its highest ever rails production of 9.2 lakh tonnes, with long rail production exceeding the one-lakh-tonne mark, an increase of 58 per cent.

SAIL recorded its best-ever sales of value-added and strategic products such as long rails of 130 and 260 metres (56 per cent growth), plates (8 per cent growth), HR coils (7 per cent growth), and medium structurals (20 per cent growth). New R&D projects were taken up to improve operational aspects of plants mainly relating to improving yield; TE parameters; productivity; cost competitiveness; and product quality, including product development. Individuals/organisations were honoured with awards in recognition of their efforts during the year. They included nine Golden Peacock Innovative Product/Service awards and two Metallurgist of the Year awards.

Projects taken up for reduction in energy consumption were: Introduction of Curtain Flame Ignition System in Sinter Plant II at BSP (Bhilai Steel Plant), Modified Duplex Burner for Rotary Kiln of RMP-II at BSP, and Improving the Performance of Annealing Furnace of Steel Foundry at BSL.

The companys phenomenal performance must be seen in the light of the ambitious plans being implemented simultaneously at all its plants, at an indicative cost of Rs.54,000 crore, to expand hot metal capacity to 26.2 million tonnes from the existing 14.6 million tonnes; orders have been finalised for projects with an investment of over Rs.20,000 crore. The SAIL board has accorded in-principle approval for the remaining projects to meet the growing requirements of steel consumption in the country and to maintain its pre-eminent position in the sector.

Over the past four years, production in SAIL plants has improved by nearly two million tonnes and steel capacity utilisation has also shown improvement. At a time of record energy prices and the ever-looming threat of carbon dioxide emissions and climate change, SAIL has focussed on improving operational efficiency, and has brought down specific energy consumption per tonne of crude steel to 6.95 Gcal/tcs a reduction of 5 per cent over 2003-04.

Apart from improving its capital assets, the company has focussed attention on its human resources, improving labour productivity from below 200 tonnes per man per year to 214 tonnes per man per year. The company has also sought out the Indian Institute of Management, Indore, and the Indian School of Mines, Dhanbad, to enable employees access to new managerial, technical and commercial know-how.

In line with the best practices across the globe, the company is working hard on its corporate social responsibility (CSR) programme with a CSR policy that emphasises SAILs underlying philosophy to make a meaningful difference in peoples lives. Till date, SAIL has established 40 primary health centres, 11 reproductive and child health centres, 31 hospitals and eight superspeciality hospitals.

It has opened almost 140 schools in its steel townships to educate about 81,000 children. The company has also adopted and provided free education and facilities to tribal children and has assisted over 1,407 schools with more than 1,64,000 students in the 435 villages that surround its units.

It has also worked on water and sanitation, providing potable water to about 1.1 lakh people every year. It has been constructing and repairing approximately 33 km of pucca roads every year. In 2007-08, the company built about 61 km of pucca road, created 423 new water resources and installed 402 solar lights. It also adopted 79 villages across eight States as Model Steel Villages, of which 13 were completed in the last financial year.

A recent press release states that the company spent Rs.120 crore on its CSR programme in the last financial year. A portion of this money was used to set up five free medical health centres at Bhilai, Bokaro, Rourkela and Burnpur and five free schools for underprivileged children. The latter project was part of the companys initiative to achieve 100 per cent literacy in its steel townships.

Further, in 2007-08, as part of its environment management programme, the company reduced specific water consumption by 29.8 per cent over its performance in 2004-05. It also continued its ambitious afforestation programme which has resulted in about 16 million trees being planted at SAIL plants and mines since the projects inception.

In 2007-08, the company restored over 200 acres (1 acre is 0.4 hectare) of degraded mining area at Purnapani, Barsua and Kalta under the Delhi University-SAIL agreement. Further, pisciculture has been taken up in the abandoned mining areas at Purnapani; over two lakh fish are reportedly flourishing in 100 acres of quarry water voids.

The company has won several awards for its environmental efforts starting from the Greentech Gold Award in the Metal Sector and the Indira Gandhi Memorial National Award for the BSP in 2004-05.

The BSP also won the 2005-06 Sustainability Prize in the independent unit category. That year, the RSP won the Golden Peacock Environment Excellence Award in the Metal Sector and the Jawaharlal Nehru Memorial Pollution Control Excellence Award. In 2007-08, the BSP won the Golden Peacock Total Quality Award, while the RSP won the Golden Peacock Innovative Product/Service Award.

It is clear that the growth of the steel industry in India is not just multifaceted but also multisectoral. The health of the steel industry could be seen as an indicator of the health of the economy as a whole. When the economy does well, the demand for steel and other construction material rises, stimulating growth and adding to profits. The National Steel Policy, the ambitious expansion plans, the significant investments in R&D and the import of best practices from around the world have all played their part in the growth and development of the sector.

Strong fundamentals and increasing competitiveness may see the delinking of the fortunes of the steel industry and the domestic market. While domestic steel makers have played a crucial role in the India growth story, they believe it is time to make their mark abroad.

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