The Hindu Business Line : Stories of India's steel industry

That the Tata group has been able to organise international finance of to back its offer — based on Corus' balance sheet — is proof of the faith among international financial circles' in India's capacity to turn around financially-stressed steel undertakings.

STATUE OF JAMSETJI TATA outside the Tata Steel plant in Jamshedpur. Jamsetji's pioneering venture into steel, braving unhelpful advice from Indian and foreign experts, is a historic and compelling saga.

With Tata Steel hovering on the brink of making a $8-billion acquisition of British steel giant Corus Steel and LNM's fait accompli in acquiring Arcelor, India's steel story is gaining strength. While both these ventures, or adventures, point mainly to the success of international finance M&A experts, they also testify to India's growing credibility and its management expertise.

The story of India's growth in steel industry rightly begins with Tata. The pioneering initiatives of Jamsetji Tata's venture into steel, braving unhelpful advice from both Indian and foreign experts, form a saga that deserves to be emblazoned in letters of gold. J.R.D.Tata and Ratan Tata heroically carried the torch forward, setting standards of excellence in management and innovation.

There was also the now-almost-forgotten Indian Iron and Steel Company (IISCO) established at Burnpur. Located near coal-mines, and not far from iron ore, it was an ideal location. But, notwithstanding doses of IBRD aid, or perhaps because of it, IISCO did not flourish in the same way as Tata Steel did.

Attempts at reviving IISCO with Japanese participation in the 1980s, led by the redoubtable V. Krishnamurthi, came to nought partly because of foot-dragging by the State Government as also the Centre. Burnpur is a story of what might have been, Tata Steel is a story of what was carved out against challenges boldly met and overcome.

While IISCO and Tata Steel were the two early pillars of the steel industry, with Panditji's Plans came the rise of Bhilai, Durgapur and Rourkela. Independent India's man of steel was the redoubtable and legendary TTK, who held for a time the twin portfolios of Steel and Finance. TTK was a man of vision. He brought in technology and aid from Germany for Rourkela, from Britain for Durgapur and from the erstwhile USSR for Bhilai.

It was a time when India could do no wrong. Panditji's vision was validated by the then masters of the universe in Britain, Russia and Germany, who blessed it with offers of foreign currency aid and technology. It goes without saying that each of the donors went out of its way to make its plant the best at the time. That some of the plants developed problems later is not to be attributed to them.

The donor countries took a lead in training India's steel men. Many were the young men who went to Russia, Germany and UK to learn steel-making. Some of them brought back not only knowledge but also suitable brides, who fitted in well into their new land of steel.

There was also an episode of India's steel men being trained in the US under the then current American plan of aid.

The Bokaro Story

In 1962, I had the fortunate privilege of working with the (late) Bharat Ratna C. Subramaniam as his Private Secretary when he became Minister of Steel and Heavy Industry. I had a glimpse of the goings-on in India's steel industry at a critical stage. CS shared with Pandit Nehru the vision of a resurgent India, which meant a robust industry, in particular Steel and Heavy Industry.

It was in his time that India took the decision to go ahead with Bokaro Steel — a controversial decision at the time. Doubts were expressed, even by well-known steel experts, about who would consume the steel products, particularly the flat products that Bokaro was to produce.

Flat products of steel were basically destined for the automobile industry and many could not foresee that India would become a global automobile manufacturing hub. C. Subramaniam faced this hard task of arranging for financial aid for Bokaro.

Aid for Bokaro was one of the US' string of failures wrung, literally, out of success. The then president, John F. Kennedy, persuaded by his Ambassador John Kenneth Galbraith into offering assistance to Bokaro, even sent a mission of experts from US Steel to explore the possibilities.

Predictably, the US steel industry, which feared that India's corporates would decline, was hell-bent on sabotaging the deal, as it did not want competition. While Galbraith was assuring Nehru and CS that the aid was almost through, he had reckoned without his Congressional foes. They virtually fought a battle royal to block Bokaro. The Professor was out of his political depth.

Talking of Bokaro, I cannot but mention the name of Dr Minoo Dastur, who trained in metallurgy at MIT and had come back to India, partly on TTK's invitation, to help build the steel industry. His idea was to set up an engineering consultancy, which would help design and construct India's steel plants. Unfortunately, he had to fight great odds. Even if the US offer of aid had come through, it was doubtful if the US Government would have taken up Minoo's consultancy offer.

The question was asked: "Had he built a steel plant before?" But, bravely, he went on and drew up a detailed project report for Bokaro, commissioned by CS. Unfortunately, the failure of the US aid offer put the lid on whatever hopes remained for Dastur. It must also be mentioned that CS had also to contend with TTK, who developed an unfortunate animus against Dastur, for entirely unknown personal reasons.

The failure of John F. Kennedy to persuade Congress to back the Bokaro Steel Plant was partly rooted in the US' prejudice against the public sector. The critics asked: "How can US tax-payers' funds be used for building India's public sector steel?" CS judged the situation as hopeless, notwithstanding Galbraith's optimism. He suggested, and Panditji agreed, that the best thing to do was to help Kennedy out of his misery by withdrawing India's request for aid for Bokaro.

There remained the question of who was to fill the breach. CS took the help of his Cabinet colleague V. K. Krishna Menon to sound out Russia on helping out with the blast furnace, at which Russians were experts. I recall how one morning Russia's Ambassador Benedictov came into CS' office and offered aid, not only for the blast furnace but for the whole flat product plant.

Historic transition

India has come a long way from the days of Bokaro, Rourkela, Bhilai and Durgapur. The latest Tata Steel episode in India's steel story is a testimony to the coming of age of India's steel men. It is also proof of India's credibility in international financial circles. That the Tata group has been able to organise international finance of to back its offer — based on the Corus' balance sheet — is proof of the faith among international financial circles' in India's capacity to turn around financially-stressed steel undertakings.

It is ironic but significant that British experts had once, long ago, tried to discourage Jamsetji from his greenfield venture. The grand old man must be having a sardonic laugh from his heavenly abode at what his successors have accomplished in making a daring bid to take over the crown jewel of Albian's steel industry, Corus itself. From holding out a begging bowl to undertaking a dominant takeover is indeed quite a historic transition for India and the world!