Corrosion within SAIL

ONE OF the navratnas of the public sector till recently, Steel Authority of India Ltd. (SAIL) has lost much of its shine with mounting losses and little light at the end of the tunnel. Can SAIL ever become viable as long as it bears the twin crosses of Indian Iron and Steel Co. (IISCO) at Burnpur in West Bengal and Mysore Iron & Steel Works (MISW) at Bhadravati in Karnataka? Given the none-too-buoyant but highly competitive market, the prospects are bleak indeed.

The Burnpur works of IISCO continues to be a huge liability to SAIL, producing barely a third of its plant-capacity of one million tonnes per annum and even when statutory price control was in force, it had to be rescued with special schemes. But IISCO remained deep in the red owing to poor management and work culture.

In the Eighties when modernisation and rationalisation became the key for survival and growth of steel plants, differences between the then SAIL Chairman, Mr. V. Krishnamurthy, and Dr. M. N. Dastur of Dastur and Co. who had become the steel consultant to the Union Steel Ministry, surfaced at a seminar in 1990 though both agreed on the urgency of modernisation to save the Burnpur plant. Interestingly, Dasturco was handling the implementation of SAIL's Rourkela Steel Plant.

For IISCO's modernisation, several plans had been chalked out, some commissioned by the Centre. The British consultants had done a study but it was the Japanese consultants of Nippon Steel who had prepared a Rs. 6,000-crore plan that stirred a needless controversy and virtually stalled the modernisation.

Dr. Dastur favoured optimum use of indigenous capability in designing the equipment (which meant delayed deliveries) while the SAIL chairman preferred a time-bound programme. Dr. Dastur wanted a ``step-by-step" programme without any interruption of the production and the profit-earning capacity of the plant.

Mr. Krishnamurthy, on the other hand, favoured a ``judiciously balanced'' participation of indigenous equipment manufacturers and overseas suppliers. That was a time when foreign manufacturers were in the doldrums owing to a slowdown in the creation of new steel making capacity in industrialised countries, including Japan.

IISCO was once a bluechip company in the private sector with its shares in sterling pounds quoted on the London Stock Exchange. Commissioned in 1922 as an iron making plant at Burnpur, it was later merged with the Kulti works of Bengal Iron to form the Indian Iron and Steel Co.

Under the Calcutta-based Martin Burn's managing agency, its capacity was expanded with a World Bank loan. As long as Sir Biren Mukherjee the chief of Martin Burn, was at the helm of its affairs and till its takeover in 1972 by the Government when Mohan Kumaramangalam was the Union Steel and Mines Minister, it was the only integrated steel plant other than Tata Iron and Steel Co. in the private sector.

The Chennai-based press baron Ramnath Goenka had set his eyes on IISCO and had made an unsuccessful bid to buy its shares before it was taken over by the Centre (Kumaramangalam was against the acquisition of IISCO by Goenka).

The company became a unit of SAIL in 1979. Several steps were taken to arrest the deterioration of the plant performance in the Seventies. But mere induction of funds without technological improvement was of no avail and IISCO became a sick unit before long.

Apart from the London-based Mr. Swaraj Paul, the chairman of Mukand Iron and Steel Works, Mr. Viren Shah, made a bid to acquire the Burnpur works. None of these proposals materialised as IISCO was trapped in the political quagmire of West Bengal politics.

Private entrepreneurs have shown interest IISCO as it has some of the best iron ore and coking coal mines and has huge real estate assets. With efficient management and modern technology it can still regain its position as a viable steel making unit in the eastern region.

Poor work culture has led to low productivity. Several factors were listed by one of its former chief executive officers - obsolete technology, high energy consumption, poor antipollution measures, low equipment availability, poor quality of workforce owing to low-level education and training were among them. But, ironically, in the problem ridden Burnpur industrial belt, IISCO has maintained fairly good industrial relations and the plant is well served by the railway system in the eastern region.

Had the Union Steel Ministry not stalled the Japanese plan for modernisation of IISCO, the steel scene at the Burnpur and Kulti works would have dramatically changed.

The Japanese Government had paid for the consultancy and a consortium was to implement the modernisation scheme on a turnkey basis. But the scheme was stalled by a vacillating Centre. In a depressed steel market, the finished products of IISCO are now facing stiff competition, especially in the eastern region.

The other cross borne by SAIL, the Bhadrawati alloy steel plant of Mysore Iron and Steel Works set up during Visveswaraya's period is also beyond redemption in the prevailing situation. But that is another story.

In any case, SAIL will continue to face difficult times if its sails - at Burnpur and Bhadrawati - are not trimmed to size. It has to go a long way to regain its Navratna status in a competitive environment with dumping of steel by overseas producers becoming more a norm than an exception owing to a glut in the global market.

After four decades of experience, now the public sector producers like SAIL are faced with the question of economic viability for their survival and growth - without budgetary support and price controls in a market-driven economy. Can the British experience help the Centre to turn around SAIL and its sick units?

M. Vinayak

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