The Hindu Business Line : ‘We are hopeful of becoming a 100-mt co’

Mr B. Muthuraman, Managing Director of Tata Steel, feels ‘honoured” to be at the helm of affairs of the company when it is celebrating its 100th year of existence. The acquisition of Anglo-Dutch steel maker Corus in its 100th year holds special significance for the company, for it catapulted Tata Steel to the position of the 6th largest steel producer in the world. With its ever-expanding global footprint, Tata Steel’s capacity from its global operations now stands at around 28 million tonnes. The company is hopeful of realising its dreams of becoming a 100-million-tonne company in the future. World Steel Dynamics has ranked Tata Steel as the No 1 steel company in the world for three consecutive years. The company was declared as the lowest cost producer of steel in the world in 2001. It also continues to be an EVA positive company.

In an interview with Ambar Singh Roy, Mr Muthuraman speaks of the company’s aspirations, focus on employee engagement, ongoing projects, manpower challenges facing the steel industry, the imperatives for co-operation between i ndustry and academic and research institutions and the need for adopting new technologies in the steel industry.

Excerpts from the interview:

How does it feel to be at the helm of affairs of an institution called Tata Steel when the company is completing a hundred years of its existence?

Our journey through the last 100 years has been a story of corporate governance; customer delight, creation of wealth and sustaining the well being of our society and nation. Tata Steel, India’s first integrated steel company has achieved numerous landmarks and accomplishments following the principles laid down by the founder and will strive towards reaching greater heights in the years to come. To constantly grow and evolve was the dream of our founding fathers when they started their journey of steel making for the first time in India. I feel honoured as we celebrate 100 years of following the enduring values propounded by Jamsetji Nusserwanji Tata.

How would you describe the company’s existence in the last 100 years, and what vision do you have of the company in the global steel firmament in the next 50 years or so?

More than a chronology of events, the Centenary of Tata Steel is a celebration of enduring values as propounded by our founder, Jamsetji Nusserwanji Tata. It is a story of a global citizen, committed to embracing common cultures based on sustainability. In 1907, Tata Steel undertook a groundbreaking journey into unknown and uncharted territory. It succeeded beyond all expectations, due to the all-encompassing vision and philosophy of our founder and those who followed him. As Tata Steel was the first steel company to be set up in India, everything from manufacturing to the process of steel making had to be learnt and developed from scratch. Spurring this pioneering effort was Jamsetji’s dream of building modern India through industrialisation and putting it firmly on the road to development. As a mark of its unprecedented efforts to excel in steel making, World Steel Dynamics has ranked Tata Steel as ‘No. 1’ steel company in the world, for three consecutive years. The company has also achieved the EVA positive status in 2003 and since then, has continued to be an EVA positive company. The company was declared the ‘Lowest cost producer of steel in the world in 2001. Today, Tata Steel has completed 100 glorious years of its existence; this is a momentous occasion and we take pride on our performance and take stock of the challenges that lay ahead of us. As Tata Steel, sets off on another 100 year journey, it is well placed to reap the benefits of the domestic as well as the global steel sector with its gigantic spread across the globe from European countries to South East Asian countries. With a substantial hold on high technology Long products in South East Asia to a considerable hold on the high quality Flat products in Europe, Tata Steel is in a favourable position to take up the challenges arising in the next 100 years. We are currently ranked the 6th largest producer of steel in the world with a capacity of over 28 mt. By 2015, Tata Steel will have over 50 mt annual capacity. At the same time, we will simultaneously draw out the road map with key milestones to realise our dream of becoming a 100 million tonnes company in the near future.

Much of the growth of Indian industry has happened in the last 15 years, after the liberalisation process was initiated. Do you think things would have been better for Indian industry -- as also for Tata Steel -- if the shackles of regulati ons were removed earlier?

Yes. Definitely, the scenario would have been different. With the shackles of regulation, our decisions were always restricted and our focus was also limited. The industry suffered from severe controls that stifled its growth during this period. From control on capacity to prices, there was hardly anything that the steel companies could have done. Post- liberalisation, Tata Steel has unfolded its growth aspirations to take on the world as now our boundaries have become unlimited and scope of growth and expansion has also increased manifold.

What is your view of the operating philosophy of Tata Steel? Now that the company has established a global footprint, can the company’s operating philosophy as it exists now be applicable and replicated in other geographies as well? T his, especially in view of the different socio-cultural ethos that exists in other parts of the world?

Our prime focus currently is to execute smoothly the successful integration between the acquired companies so that it benefits all of us. Tata Steel, NatSteel, Millennium Steel and now Corus, all share very similar work ethic and culture which is fundamental to the success of any post-acquisition integration process. It is perhaps the most important thing in an integration process between two large companies.

Tata Steel’s integration process lays stress on constant and seamless communication between not only the top management of both the companies but also between the operating units, to inculcate respect for each other’s culture. This will help in developing appropriate ‘Performance Culture’ and ‘Operating Model’ of the enlarged entity. We have retained the management structure in all our companies.

For Tata Steel, how important is employee engagement and what initiatives has the company taken in this regard?

The concept of employee engagement is not new to Tata Steel. The first labour association in India came into being in 1920 in Tata Steel. The Tata Workers Union was born in 1937. We firmly believe that a strong and responsible trade union is fundamental to industrial peace. Four years ago, we celebrated 75 years of uninterrupted industrial harmony. Tata Steel’s employee welfare initiatives reach out to communities around its operations with income generation activities and linkage to government activities to prevent the poor and disadvantaged from falling into debt traps. Our micro-credit schemes and self-help groups have created opportunities for and mobilised rural and urban poor to gain economic independence.

Post-acquisitions, Tata Steel has retained the local work force and management in the acquired companies. It has placed its faith in the people of the geography where it has set foot and that I believe is a unique trait of the Tata Group. In yet another unique initiative called Tejaswini, Tata Steel re-skills women employed as tea ladies, office clerks and messengers to become crane operators, pay loader, dumper and locomotive drivers to prevent them from becoming surplus due to automation.

Tata Steel’s Vision-2007 was co-created with some 8000 employees, of which 6000 were workers. Our workers participate actively in knowledge management, quality circles, small group activities, TQM and many when continuous improvement activities. After all, innovation and creativity have nothing to do with education!

For over 50 years, Tata Steel has had a unique system of participative management through a 3-tier consultative system-Joint Departmental Council, Joint Works Council and Joint Council of Consultative management. In each of these, a worker representative and a management representative are Chairman every alternate year. More recently, we have started MD Online, which is a forum where the MD addresses issues raised by employees across the company on a monthly basis.

Some of the other employee involvement initiatives include maintenance of corporate governance and ethics in the company through the ‘Whistle Blower Policy’ wherein every employee has the right to point out unethical practices which are immediately addressed. ‘Aspire’, a vehicle for improvements in Tata Steel. The programme encompasses improvement initiatives like DMAIC based improvement projects, TPM / Small Group Activities and Suggestion Management. It is for aligning individual’s aspirations towards the organization’s aspiration. In addition to this, there is Theory of ‘Constrains’ (TOC), Retail Value Management (RVM) and Customer Value Management (CVM) to name a few more initiatives.

What is the status of the various greenfield and brownfield projects that have been announced? Do you have any other acquisitions in mind?

Tata Steel is the 6th largest steel producing company in the world. In addition to the acquisitions that have taken place in the last few years, we also have planned a 12 mt p.a. steel plant in Jharkhand, 6 mt in Orissa and 5 mt in Chhattisgarh. Work on the greenfield projects is moving steadily and progressing well. Work has also started on expansion of the Jamshedpur site which is currently producing 5 mt. This is not all, we will also simultaneously draw out the road map with key milestones to realise our dream of becoming a 100 million tonne company. As a company, we are always on the lookout for strategic fits. In the global steel scenario, Tata Steel is, today, one of the fastest growing steel companies. Keeping this in mind, we are looking at expanding our global footprint and foraying into countries where markets are growing and promising and where raw material is available. We have recently signed an MoU with Vietnam Steel Corporation for a 4.5 mt steel complex in the Ha Tinh province. Raw material security is a rising concern across the world, and in order to protect our interests, we have also inked an agreement with Riverdale Mining Ltd. of Australia for a strategic stake in their Mozambique Coal Project. Our future moves can be anywhere in the world where there need and opportunity. As of now, there are no concrete plans for any overseas acquisitions.

Huge capacities are being set up in the domestic steel sector. How will this impact the viability of the industry in the medium and long terms?

The Government has the vision of establishing India as a developed nation by 2020. The Indian steel industry will be required and is willing to play a critical role in achieving this target. The Indian steel industry currently has a capacity of over 40 mt per annum. By 2020, this capacity is said to rise to 220 mt. If access to raw material is expedited, the capacity in the year 2020 could be still higher. With abundant iron ore resources and well-established base for steel production in the country, steel is poised for growth in the coming decades. Steel will continue to have a stronghold in traditional sectors such as construction, housing, ground transportation, special steels will be increasingly used in hi-tech engineering industries such as power generation, petrochemicals, fertilisers etc. Steel and it will continue to be the most popular, versatile and dominant material for wide ranging applications. India is poised to soon become a strong force in the global steel market.

Generating and retaining quality manpower has emerged as a huge challenge for the domestic steel industry. How will companies ensure that they are able to not only hire but also retain quality manpower?

The most critical issue that needs to be addressed urgently is attracting and retaining the talent that will be required to keep the steel industry competitive, productive and technically competent. The recent consolidation wave and technology improvements have changed the steel industry, presenting a greater need for technically trained employees and engineers.

Due to the existing scenario, a decade ago, metallurgical and manufacturing sector of the industry had lost out on skilled manpower. However, the realisation that it is the manufacturing unit that can create wealth and revenue, the skilled manpower is steadily moving back to the units responsible for a significant amount of the growth of the company. It is essential to attract the relevant and required man power and retain them. At the officer’s level, this can be done by giving the younger generation bigger challenges and responsibilities. This is not all, not only do we need to engage officers but also involve the supervisors and make them feel a part of the company. Foreseeing these impending issues, Tata Steel has tied up with BIT, Mesra for a diploma course in technical training for its supervisors.

What kind of co-operation do you think is required between industry on the one hand, and academia and research institutions on the other, to help generate appropriate manpower for the steel industry in adequate numbers?

One of the key concerns that need to be addressed is that of manpower retention. It is essential for steel industries to make provisions to attract and retain trained technicians in order to meet the requirements. For this, co-operation from academic institutions is essential. Tata Steel had foreseen this inevitable issue that would arise and hence has a series of academic courses for its employees to train them further in technical skills.

It has a post-graduate programme for its employees with acclaimed institutes like XLRI, Jamshedpur, Indian School of Mining, Dhanbad and IIT, Kharagpur. Other courses include INSDAG and Indian Institute of Mining. Through its CEDEP Programme for its officers, Tata Steel has tied up with numerous management institutes in Paris for course 6 two week programmes in managerial skills. These tie-ups and associations with educational institutes has always worked both ways and benefited not only Tata Steel but also the institutes.

What in your opinion needs to be done to increase the specific consumption of steel in the country?

It is essential for the steel industries to focus on increasing the specific consumption of steel. Focus on producing good quality steel that is suitable to be used in infra structure like in building malls, apartments and shopping complexes. With the retail sector growing at an unprecedented rate, it is an appropriate sector for steel producers to target. Companies should develop specific steel that will cater to specific needs focusing on the fact that it is better in quality and lower in cost.

An increase in the range of steel goods which has been developed keeping in mind specific needs will definitely gain popularity. With every industry striving to become eco-friendly, it is essential to address this impending calamity that can strike in future if not tackled judiciously today. Replacing plastic products with specially made steel is another alternative that can be explored. One of the most important areas to focus on is increasing the consumption of steel in rural areas.

What role can corporate India play in facilitating the process of inclusive growth that our Prime Minister, Dr Manmohan Singh, has been talking about?

With liberalisation, Indian corporates are focusing on expansion and globalisation, which can threaten the livelihood and well-being of poor, unskilled labour in developing countries. We are seeing this today and it will further increase demand for skilled labour outstripping their availability and at the same time it could adversely affect skilled labour in developed nations, as more and more jobs move towards developing countries. Keeping this in mind, “Inclusive Growth” needs to include labour, in a situation of high speed globalisation. If we don’t do this, the positive side of globalisation will not be felt by a large section of the population and globalisation itself will not progress. With globalisation being the key word, it is essential to corporate India to incorporate and meet the expectations of its existing resources and ensure a smooth amalgamation of cultures post-globalisation.

Trust that an organisation will work in the best interest of society is the key to Inclusive Growth. As mentioned earlier, the various initiatives for employee and labour involvement that have been initiated by Tata Steel way back in 1920s, manifests the fact that Tata Steel has strongly believed in and promoted ‘Inclusive Growth’.

As Inclusive Growth involves the society in total, one of the means of ensuring it is growth of industrialisation as it creates more jobs and service opportunities. It provides better social and economic structure which is neutral and much more sustainable and accommodative of variety of socio – eco-religious segments.

Finally, what is the global steel scenario likely to be in the next 10-15 years? What is India’s standing likely to be in the global steel arena at that point of time?

India and China are among the fastest growing steel markets in the world today. It is therefore, no surprise that international biggies of the steel industry will be closely looking at investments in India. In the next few years to come, with emerging economies such as India and China finally joining the global economic systems, they will soon join the ranks of major greenhouse gas-discharging nations. Intensified efforts would be required to run the operations in eco-friendly manner, which would mean that the industry needs new technology as a means of relieving environmental concerns, flexibility in use of raw materials and production process, use of low grade raw materials, producing high quality metallic products and lowering the capital expenditure and cost base of steel production. India, with its rich mineral deposits, will be the key focus of all domestic and international players.

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