The Hindu Business Line : `There is always a new peak to be scaled'

SOMETIME back, the Steel Authority of India Limited had an outstanding debt of more than Rs 14,000 crore. Today, the company is more or less a zero-debt outfit. This in itself is a major contribution to the economic well-being of the country's public sector, and the man under whose stewardship this financial performance has been achieved is Mr V. S. Jain, the Chairman of SAIL. In Kolkata recently, Mr Jain spent some time with Business Line, speaking about his company as it is today and where it is headed.

Excerpts from the interview:

Mr Jain, you have today put SAIL in a position where it has never been before. How have you accomplished this and how do you see the future?

Generally speaking, there are two things which are required to make your organisation strong in a competitive market. One is the quality of the product, services; the second is the cost of production. If these two issues are addressed adequately, then, possibly, there will be no cause for concern.

How do you relate these issues to SAIL's performance?

First, we need to analyse what exactly has happened and then consider whether what has happened is a one-time development or whether it can be sustained.

To start with, our plants are working at an average capacity utilisation of 104 per cent. And I believe that another 4-5 per cent can be got out of the existing facilities.

Two or three years ago, we were operating at around 92-93 per cent. What this means is that the potential of the existing assets is being utilised much more efficiently than before.

Yes, but what about the jobs front because SAIL has always been an employment-heavy organisation?

Yes, this is the second point I want to make. In March 1998, there were about 176,000 employees on the rolls of the company (earlier, the figure was much higher).

Today, we have been able to bring the figure down to around 127,000 employees, that is, there has been a separation of nearly 50,000 employees.

So what you are basically saying is that while the number of employees has declined by nearly 28 per cent, production has increased from 93 per cent to 104 per cent.

Yes. In simple terms, this means a benefit on two counts. One, higher production volumes and, two, a relatively smaller workforce leading to a lower wage bill and higher labour productivity. This brings me to the third point, namely, developments on the financial side.

As late as 2000-2001, we had debts of around of Rs 14,000 crore. Today, that figure has been brought down to around Rs 5,500 crore, and we have cash deposits of the same amount.

So can we say that SAIL today is a debt-free company and does not have to carry an interest burden?

Absolutely. We are presently free of interest payments which were around Rs 1,800 crore a year.

What about your cost of production?

That is the fourth point I want to focus on. Since 1998-99, our cost of production has remained virtually static. It has gone up only in the last year (2004-2005) and that was because of the rising coal price.

Otherwise, it has been constant. Even so, we did an internal exercise recently to find track the movement of only the variable cost of production.

We took the average rate of inflation as the benchmark and found that we had made a saving of between Rs 5,000 crore and Rs 6,000 crore.

How did you accomplish this?

We never used to consume soft coking coal in our system. Today, about seven per cent of hard coking coal has been replaced by soft coking coal.

Earlier, our plants used indigenous and imported coal in the ratio of 60 to 40. Today, it is the other way round. There is lot of difference in the quality between the two types of coal and we have made a saving there.

Our energy consumption cost is going down and blast furnace productivity is going up. Labour productivity is also climbing.

But has not the price of imported coking coal increased?

You are right. The price trend of the imported coal has gone up. But it will come down now. See, the annual accounts are finalised sometime in February-March for the next year.

Since February-March, the price has gone up by almost 100 per cent, but now the price is at the peak and it is expected to decline.

To return to capacity-utilisation, when you say you have a 4-5 per cent potential to increase capacity utilisation without additional investment, what exactly do you mean?

I will give you an example. Some years back, we had a recession. After capital repairs, we asked the plants, particularly Bokaro, not to restart the blast furnaces concerned because inventory was very high.

What this resulted in was that after six months, plant managers (in Bokaro) reported to me that the total volume of hot metal production had increased without restarting the fifth repaired blast furnace.

From this I want to give you an indication of the potential SAIL has. Basically, we do not know the limits of our own strength. When we reach a peak, we now know that there is another peak to scale. The only thing is that we need to go on exploiting the existing potential instead of just investing more and more money.

Therefore, can we then say that the steps you have taken are more in the nature of a long-term strengthening of SAIL?

All the steps — like interest saving, manpower reduction, better capacity utilisation — we have taken have given the company a permanent advantage.

How do you look at the future?

SAIL's fundamentals are good. What next? As I see it, we have an advantage over our competitors on three counts. One is infrastructure.

What I mean is that Bokaro is today producing 4.5 million tonnes and can produce 10 million tonnes without expansion in available infrastructure. The same is the case with Bhilai, Rourkela or Durgapur.

In other words, if I want to double the production capacity in my plants, the investment will be far less than anybody else's. The second advantage is human beings.

Although SAIL has reduced its employee-strength, we still have a large number of people with which to double production. And, third, when we are virtually debt-free, we have available financial resources also.

But is the road ahead for SAIL obstacle-free?

No. In our case, the problem area is coking coal. Coal India does not have the quality or the volume we require. Today, we depend on 60 per cent imports. But, in future, this figure will go up to 70-75 per cent.

Tatas have coking coal mines. So, by and large, they may not be much affected, comparatively speaking. The coking coal market is also highly volatile. This is an area of tension because control over input in future is important.

The second problem area is the decision-making process which is arduous and time-consuming, particularly when compared to the private sector. Further, in the public sector environment, the power to reward performance is practically non-existent.

Have a control mechanism, but people should be encouraged to take faster decisions without worrying about CBI, CAG, etc. To motivate people to take prompt decisions will be a big managerial challenge.

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