DEPARTMENT OF BUSINESS ADMINISTRATION UNIVERSITY OF LUCKNOW

CASE STUDY ON

RASHTRIYA ISPAT NIGAM LIMITED: STEELY CHALLENGES

Submitted to-

DR. RITU NARANG

Submitted by- KAMLESH KUMAR ROLL-29 MBA SEM-II SECTION-B

Acknowledgement

I take this opportunity to convey our sincere thanks and gratitude to all those who have directly or indirectly helped and contributed towards the completion of this project. First and foremost, I would like to thank Dr. RITU NARANG for his constant guidance and support throughout this project. During the project, I realized that the degree of relevance of the learning being imparted in the class is very high. The learning enabled us to get a better understanding of the nitty-gritty of the subject which I studied. I would also like to thank our batch mates for the discussions that I had with them. All these have resulted in the enrichment of our knowledge and their inputs have helped us to incorporate relevant issues into our project.

RASHTR `YA ISPAT NIGAM LIMITED: STEELY CHALLENGES It was 6: oo pm on 8 July 1996, and a frown crossed and settled on his otherwise pleasant countenance. Fifty-seven-year old Jatinder Mehra, chairman of the public sector steel giant Rashtriya Ispat Nigam Limited, had just returned after a week to Vizag from Delhi. As was his wont on such occasion, he had asked his director to come in and see him. The news was not at all good. Thirty –seven months ago he had taken over sinking ship , only to see it go from strength to strength . From losses to operational profits, cash profits, and higher cash profits and towards net profits; from morale that had touched its nadir to a point where employees’ enthusiasm was matched only by their CMD’s optimism; he had seen it all, participated in it, led from the front. The discussion with his directors lasted for only thirty minutes, but underlined one important problem. the first quarter production report was on his table , and as he thumbed through it purposefully , he couldn’t lay his fingers on just what had caused the dip in that quarter ‘s performance . True, the months of April and May Ire never the best as March was always the most stressful month. By June, production had always picked up. But not this time. Various thoughts came to his Mind , Vignettes from an eventful career . ‘You can never tell what would work this time ‘, he almost said aloud.’You need to reinvent solutions ‘, he thought, ‘to problem that manifest themselves in new forms

This case was written by Sudeep Mitra and Himanshu Tambe, COSMODE, with the help of R.P. Shrivastava, RINL , and under the overall supervision of Dr Dharni P. Sinha ,COSMODE (consortium for strategic management and organization development). The authors are grateful to Rashtriya Ispat Nigam Limited for their help and support.

BACKGROUND AND HISTORY

Visakha ukku , andhralu hakku – ‘A steel plant at Vizag is Andhra’s right’-was the slogan adopted by those clamouring for a steel plant to be put up in Visakhapatnam . speaking on the resolutions put forth by the state legislative assembly that demanded an integrated steel plant (ISP) to be set up a Vizag, the then chief minister of Andhra Pradesh Brahmananda Reddy said ,’I would not be surprised if the circar districts of Visakhapatnam , Srikakulam and East Godavari districts , with the police opening fire , killing seventeen and wounding sixty-four in the process .

Replying to a questions arising out of the statement made by steel minister on 4 November 1967 , prime minister Indira Gandhi said, ‘I do not have resources for a fifth steel plant anywhere now,. However, later she did volte face, and on 17 April 1970, she announced the government’s decision to set up an integrated steel plant. A site near Balacheruvu creek was chosen in view of its topography, greater land availability and proximity to the port. The site was formally inaugurated by Indira Gandhi on 20 January 1971 (see Appendix 1) for chronology of major events).

Why then, did it take twenty years for the first ‘HEAT’ of steel to be produced at RINL? The plant started operating over four year after its scheduled commissioning date band cost Rs 46.52bn more than its original estimate .However, the Vizag Steel plant is not the only large Integrated Steel plant (ISP) Where project managements plans have gone awry. Expansion projected at SAIL’s Bhilai and Bokaro plants Ire delayed by seventy-three and 131 months respectively ; their costs also surpassed their original estimates by over Rs 10bn . M.N. Dastur & company (Dasturco) had prepared the feasibility report for the project, based on capacity of 2 million metric tonnes (MMT) of ingot steel as early as February 1972. However , based on cost – capacity economics , it emerged that a plant produced 3 MMT Of liquid steel would be best placed to optimize investments and costs .Dastur was then asked to prepare a detailed project report (DPR) , which it submitted in October 1977. An understanding between India and USSR on economic and technical cooperation was signed between the two governments on 12 June 1979. With this, Vizag was to become the third ISP after Bhilai and Bokaro that was built with soviet assistance, and Steel authority of India’s fifth ISP. Dasturco engineering worked together with GIPROMEZ, the USSR state institute that designed steel plants, to prepare a comprehensive revised detailed project report (CRDPR); this was submitted on 30 November 1980. At this stage , the plants was designed to produce 3.4 MMT of hot metal ,3.4 MMT of liquid steel ,2.983 MMT of saleable steel , projected to cost Rs 22.56bn and take an estimated six years to commission , with the first stage of 1MMT estimated to take four years.

‘Inadequate and inconsistent flow of funds ‘, according to B.N. Rath, the then directors (construction), ‘delayed the project’. The funds , which came in bits and pieces ,Ire inadequate even to acquire the land , leaves alone go in for construction. By then the cost of the project had spiralled upwards to Rs 38.97 bn and SAIL, Which was seeking funds for expansion and modernization of its existing plants, decided to abandon this project. this paved the way for the formation on 18 February 1982 of a new corporate entity , Rashtriya Ispat Nigam(RINL) , That would own the Vizag steel plant (VSP) , India’s latest ISP in the public sector .the ISP concepts involved substantial backward integration –into mining of coal , iron ore (RINL doesn’t have these mines),limestone , dolomite , etc .,coke production , running of power plant , oxygen making plants , operating workshops, laboratories for quality control, and more . With the release of funds finally coming through, construction work began for the project in April1982.Even after this, there was no steady flow of funds (see Appendix 2).Presently RINL have Jaggayyapeta Limestone Mine, Madharam Dolomite Mine, Nelimarla Sand Mine,Karajada Sand Mine,http://www.vizagsteel.com/images/vspannualreport.pdf

During 1982 through, RINL had at the helm as many as three managing directors: V Subramanian, K.V.B. Pantula and K.R. Sangameshvaram. ‘Faced with what seemed to be another white elephant at its hands, the government seriously considered the option Of abandoning the project and cutting its losses’, said R.J. Darjee .this meant the cancellation or holding in abeyance orders for equipment that had already been placed. Not only this slow down the process made on construction, it also attracted penal provisions and escalation clauses as part of contractual obligations.The fourth MD, who was designed chairman-cum-managing director (CMD), D.R. Ahuja, served between 1984 and 1990. After a three- year stint as managing director of the Indian Iron & Steel company(IISCO), he served as managing director of SAIL’s Bokaro plant, and there after assumed office as CMD of RINL on 10 0ctober 1984 . He decided not to let RINL run the way other steel plants did- with bloated (direct) manpower; instead, he engaged a substantial number of contract labour. While a hospital was put in Vizag, external parties Ire invited to set up schools, transportation was subcontracted out and later dropped; food supplies for guest houses too were outsourced. His handling of rehabilitation of displaced persons ensured that the plant, unlike other steel plants in India, was unencumbered with excessive manpower. He also believed that a team of young , first generation industrial workers who had no prior experience in the steel industry would be more adaptive to the new technology , and, therefore , be more productive in delivering the goods.

By December 1987 the project cost had spiraled upwards to Rs. 8.50 bn. It was at this stage that Ahuja suggested to the government the ‘rationalized plant concept’ which would reduce time and cost overruns and take the project to its logical conclusion. This involved reduction of liquid steelmaking capacity from 3.4 million tonnes by setting up of one instead of the two residual SMS. Convinced that it made more sense to go ahead than to abandon the project, the government retracted its earlier stand and decided to give the go-ahead to RINL. The uprating of capacities coupled with the reduction of project costs by Rs. 15.00 bn. Breathed life into the project. This, however, also meant achieving a labour productivity of 231 tonnes per man year—twice the existing Indian productivity standard and closer to Brazil (204), Canada (272) and Japan (323) by 1988, fund flow had stabilized. Within a period of three years, the first heat of steel was poured on 6 September 1990 with the commissioning of Convertor-A.

By 1991, momentous changes swept across the global political and economic landscape. The cold war had come to an end and socialism had come to be regarded as a quirk in economic theory, something that impractical. Things had come to such a pass in India that foreign exchange reserves Ire available to cover barely two weeks’ imports. It is under such circumstances that India approached the World Bank for exceptional financing. The World Bank responded with its standard Structural Adjustment Programme, which made economic liberalization a sine qua non.

Thus it is by a quirk of fate that this steel plant whose seeds Ire sown in the pre-liberalized economic era was left to survive and grow in the liberalized environment. As budgetary support to PSUs was of low priority, RINL never received the kind of state protection that SAIL plant received in the past. The financial charges, viz, interest and depreciations, added an additional burden of about Rs. 3,600 per tonne of steel at 100 percent capacity utilization. The market pric0e of saleable steel ranged between Rs. 8000to 10000 per tonne in 1992-93, whereas RINL’s average cost inclusive of financial changes for the year worked out over Rs. 13,000 per tonne. This meant that every tonne of steel produced by the organization had a negative contribution to its profitability! The organization approached the government in 1989 with a plan to restructure its finances, but the proposal gathered dust.

By 1990, B.N. Rath had taken over as CMD. To avoid being saddled with surplus construction manpower at end of the project and in view of the resource constraints, RINL decided to forgo the ‘turnkey’ concept of implementation. The entire project was managed by a core group of 180-odd construction engineers, who even stationed themselves at various factories in the erstwhile-USSR to expedite imports and monitor their dispatches to meet constructions schedules. It is during Rath’s tenure in June 1992 that Stage II commissioning was undertaken, after which plant was rated to produce 3 million tonnes (See Appendix 3). In June 1993, J. Mehra, director (operations), took over as CMD.

At the latest count, the project is estimated to have cost Rs. 85.29 bn, i.e., a cost overrun of Rs. 46.32 bn and a time overrun of fifty-four months. Of the total overrun, only Rs. 3.13 bn was due to an increase in the scope of the project concept; the balance Rs. 43.19 bn was caused due to an uneven flow of funds.According to Darjee, ‘I have had to repay the Russians at the exchange rate of Rs. 35 to a rouble because of the agreement, whereas the dollar rate of the rouble in abysmally low.’ Escalation clauses contributed to Rs 17.22 bn, exchange rate variations to Rs. 8.12 bn, added duties/taxes to Rs. 2.97 bn, and financial charges including interest to Rs 14.88 bn.

Strategy for survival

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‘When I assumed office as CMD’, said Mehra, ‘there Ire three areas that needed most of top management’s time and attentions…. The need for changing the mindset of employees (which was rooted in the past), restructuring the company’s finances (to offset the adverse impact of heavy financial charges), and the need to achieve rated capacities quickly and reduce costs.’

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Time was of the essence, so these Ire initiatives Ire taken up simultaneously.

Mindset Change

He inordinate delay in commissioning the project, the massive cost overrun, the government’s near decision to abandon the project, all taken together had lowered the morale of RINLs 17,000-odd executives and workmen. Incredulity over the plant’s viability began with executives, percolated down to workmen and began to permeate the public at large. Would the plant be commissioned? On completion, would it operate at full capacity? Would it ever make profits? Doubts such as these assailed workmen and executives alike.

An organization survey commissioned by RINL in 1993 revealed the following perceptions among the workforce:

RINL can never achieve its rated capacity: According to several executives, ‘a similar converter shop having three converters of 133 cubic meters (at Bhilai) was rated at 1.5 MMT, and it was therefore considered unrealistic and perhaps, unfair, that this plant was rated at 3 MMT’.

Uprating of the BF and SMS capacities may have saved the project and the organizations, but was considered impractical and, therefore, unachievable.

RINL has unusually low manpower: other steel plants in the country with comparable capacity, whether in the public sector or private, had over 40,000 and in some cases 60,000 employees, while Vizag Steel had only 13,500 employs at the works. As realization dawned that the uprated capacities Ire to be achieved by a comparatively slim workforce, the productivity gap between the Indian average of under 100 tonnes per man year and targeted 231 tonnes per man year appeared to be daunting and insurmountable.

RINL can never make profit: Merchant bankers who Ire called in to financially restructure RINL, in their report submitted in 1992, commented, ‘based on 1991 fourth-quarter steel prices, RINL can achieve cash breakeven at 170 percent utilization of capacity.’

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‘After all, how does a mindset get hardened?’ asked Mehra. The mindset is a function of the environment is which you operate. On realizing this, I started sending teams of executives and workmen abroad to study technological processes and work practices I world class steel plants in Korea, Japan and the USA, so that they would understand just how world class productivity standards could be achieved. The Idea was to imbibe best practices from these organizations and transfer learning back home. I deliberately prevented them from visiting Indian steel plants so that they could learn to uphold international norms and benchmarks, undeterred by what was the best in the country.’

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The learning process was followed by presentations made by these teams to their colleagues back home groups, followed by questions- answer sessions and intense discussions. It took RINL about a year to internalize these learning and remove mental blocks regarding the rated capacity of plants. According to T. Ramamurthy, director (personnel), the process of mindset change was reinforced by systems change in the form of an innovative incentive and reward package that was designed to boost productivity levels’. Incentives schemes Ire linked to both production and techno-economic factors. Non-executives as well as executives were eligible for incentives, though the schemes differed. The group-based reward scheme was linked to shift production in the SMS and not to daily production, to bolster production in all shifts. They were made operative only if production rose for three consecutive days and not just one day for one day, so that production could be hiked on an ongoing rather than an ad hoc basis. This emphasized teamwork and improved employee morale, while fostering healthy inter-brigade competition. All this was achieved while keeping manpower costs to below 10 percent revenue.

Cost Management and Financial Restructuring

The financial charges of about Rs 7 bn on depreciation and Rs 4.5 bn interest, detracted Rs 11.50 bn per annum from the bottom line. These translated to about Rs 3,600 per tonne, to be recovered at full capacity utilization. They also called for sustained operations at 100 percent capacity, so as to achieve net profits by 1996-97.

To address this issue, the company adopted a two-prolonged approach: cost reduction combined with revenue maximization on the hand, and financial restructuring on the other. According to P. Doki, director (commercial), ‘these two considerations required us to pare own operating costs to the bone while improving realizations to achieve profits at realistic levels of capacity utilization. I achieved this by institutionalizing budgeting, controlling inventory levels, eliminating wasteful practices, and by monitoring costs on a daily basis.’

A series of workshops were conducted to improve cost awareness across the company and build a culture of cost consciousness. Within a short time at its commissioning in July 1992, the plant had achieved several landmarks in steel production techno-economics in the country. For instance, productivity levels improved from 117 tonnes per man year in 1993-94, to 156 in 1994-95, and 183 in 1995-96. As a result, its conversion processing cost of liquid steel was the lowest in the country and competitive with global majors.

After liberalization, in 1992, the government agreed in principal to restructure RINL’s asset-liability structure. This came into effect in August 1993. As a result, 50 percent of the outstanding government loans of Rs 23.69 bn as on 31 March 1992 Ire converted to equity capital, and the balance 50 percent was converted into 7 percent on-cumulative redeemable preference shares, to be redeemed after 10 years. Further, the Rs 7.91 bn interest liability was converted into an interest –free loan for seven years. All loans drawn after 1 August 1993 Ire to be converted in 7 percent non-redeemable preference shares payable after 10 years, and penal interest payable on defaults on payment of principal and interest up to 31 March 1992 Ire waived. Redemption was to be done over a five-year period beginning from 2005-06 in a phased manner. This was the largest relief ever given by the Indian government to a PSU.

The relief was granted on two conditions: that RINL would achieve the rated capacity of liquid steel of 3 MMT by 1996-97 and that it would make net profits by 1997-98. ‘Though the government agreed to convert into preference shares loans given after August 1993, only Rs 3.23 bn that it had given us in 1992-93 was treated as such’, said C. Shiva Prasad, joint general manager (corporate finance). ‘The balance Rs 5.43 bn given to us as non-plan funds between 1993 to 1996 was treated as loans, attracting interest of over Rs 800 mn per annum.’

The company had massive share massive share capital of Rs 64.94bn, including Rs 48.90 bn of equity and Rs 16.04 bn of preference shares. The massive capital base made it difficult to finance expansions through issue of fresh capital. ‘Had it managed to convert the outstanding loans into interest-free loans instead of equity, it might have been a different picture altogether’, opined a merchant banker. With its net loss of Rs 1.8 bn for the year 1995-96, the accumulated losses up to 31 March 1996 were as much Rs 31.70bn.

Though the government did not agree to all the suggestions made by RINL, this gave the company much needed breathing space, in the process to bringing down the interest burden to about Rs 2.75bn and helping RINL to improve its liquidity position(See Appendices 4 and 5). Consequent to restructuring, the company’s financial charges were less of a drain on the bottom line.

Comparative Costs

(Rs per tonne)

Year RINL SAIL TISCO

WC TC WC TC WC TC

1992-93 7731 13013 9404 11138 8498 10264

1993-94 7555 12185 10543 12105 9245 11105

1994-95 6552 10641 10122 13662 9640 11674

1995-96(Estimated) 7112 10671 12350 13947 11362 13625WC: Works cost. TC: Total cost (=WC+ financial charges).

According to R.C. Jha, directors (operations), ‘Reaching targeted productivity norms quickly was central to our strategy for achieving financial vitality.’ The work culture in RINL is quite unlike most other PSUs; there is a business and profits orientation, according to executives. Some of the measures adopted since inception like abolition of overtime for workmen, use of overlapping shifts to ensure continuity in operations during changeover, and the latest—a messengers office—Ire innovations in the Indian steel industry

In 1992-93, RINL made an operating loss of Rs 310 mn. One hundred percent continues casting in the SMS was introduced for the first time in India. Requirement of balancing facilities, time taken for technology absorption and lack of experienced manpower led to slow pick up in production from the SMS, which became a bottleneck. Construction in SMS output not only throttled production in downstream units; its offtake also imposed an upper limit on how much hot metal the BF could produce. The rationalized concept, which had acted as a life jacket for the sinking company, created such and other problems. Another vexations issue was the optimization of space and layouts which had been planned and partly implemented with the earlier DPR in mind, but actually used with the rationalized DPR concept.

The workshops on ‘changing mindset’ threw up the approach of demonstrating success in select areas by achieving production targets and reading operating costs. With reference to the SMS, one upstream unit (BF) and one downstream unit (WRM) were chosen to demonstrate success with a view to boost employee morale.

The two blast furnaces were designed to produce 3.4 MMT of hot metal, of which 2.815 MMT was to be utilized by the SMS and the balance 0.585 MMT was to be converted to pig iron for sale in the open market. Though the SMS offtake was lower than envisaged, it was decided that the BFs would be allowed to raise their output phasewise to achieve rated capacities, and the residual hot metal that was left after supplying the SMS would be converted into pig iron and sold in the open market. While the help of SAIL was taken in BF-I, in house engineering expertise was used to commission BF-II. This led to a soaring of confidence among executives and workmen, many of whom Ire new recruits. Quality improvement in cast house refractories, enhanced equipment availability and utilization, particularly in the pig casting machines, skill development among employees by arranging for plant visits abroad, and on -site skill transfer by reputed international agencies helped in production build up form below 1.4 MMT in 1991-92, to 2.37 MMT (1993-94) and to 3.21 MMT in (1995-96). The level of capacity utilization of 95 percent achieved in 1995-96 included a ‘last quarter’ level of 102 percent.

The WRM was chosen because wire rods Ire RINL’s premium products. The WRM has state-of-the art technology and high levels of automation. Mastering skills in operating these high-speed mills was the most challenging technological exercise undertaken at the plant. His was achieved through focusing on operations and maintenance of automated devices on a continuous basis, and by evolving and rigorously implementing standard operating practices (SOPs) and standard maintenance practices (SMPs) in critical areas. Besides, deputing employees on plant visits abroad and transferring skills back home helped to broaden perspectives, and providing on-site assistance by international agencies helped to master intricate skills. In November 1994, the WRM received to the ISO 9002 certification.

The SMS requires the highest levels of managerial co-ordination between the converters and the continuous casting machines, and also takes a comparatively longer time to provide stabilized output. The output. The poor performance of this shop not only affected RINL’s operations and profitability, it also affected employee morale. The increase in heats per day, the parameter that measures the overall productivity of SMS limped from an average of 21 per day (1992-93) to 25 (1993-94). This was variously attributed to deliberate bypassing of automated controls during commissioning, structural inadequacy that resulted in poor co-ordination, and an in conducive work environment.

It is against this background that Mehra decided to invite, in 1994, Voest Alpine, an Austrian company specializing in steel technology which also operated its own steel plants, to review RINL’s operations and make recommendations that could be used to step up productivity at the SMS. Based on the recommendations and internal discussions that followed, several steps were taken, including re-engineering of work processes, provision of balancing facilities in select areas, and increasing the capacity of steel ladle to handle 20 tonnes more of liquid steel than its nameplate level. ‘Voest Alpine’s interventions has definitely contributed to improving production at the SMS’, acknowledged Dr J.K. Bagchi, secretary, Ministry of Steel.

Existing systems Ire also improved, e.g., refectory management systems to increase ladle and convert lining lives, and developing and implementing SOPs and SMPs in critical areas. Innovative incentive and reward schemes Ire adopted to improve productivity levels and achieve rated capacities. ‘we were the first in India to try 100 percent argon rinsing from the bottom and to use gunnited tundishes rather than bricks. It took us two years from 1993 to streamline productivity and to achieve 10 percent reduction in costs’, said H.S. Sethi, general manager (operations), who as DGM (SMS) had spearheaded the change at the SMS. By March 1995, productivity had increased to an annual average of 33 heats per day, and by March 1996, this had risen to an average of 41 heats per day. Liquid steel production increased by 43 percent in 1994-95 and by 23 percent in 1995-96. The capacity utilization increased to 79 percent in 1995-96, with the last quarter recording 90 percent utilization. This demolished the myth that SMS capacities Ire overrated.

ProductivityParameter 1992-93 1993-94 1994-95 1995-96Liquid Steel (MMT) 1.05 1.36 1.94 2.38Heats(MT) 7603 9123 12207 14926Heats per day 20.8 25.0 33.4 40.8

Productivity (Tonnes/ 110 110 156 183Man year)

Strategy for Growth

By June 1993, Mehra was of the opinion that while his three-pronged consolidation strategy might make RINL viable, it would not make it a growing and vibrant company. ‘After all what has been the bane of this company?’ he asked. ‘The financial charges. This left us with two options to attack this issue. One was to swap our existing high-cost funds with low-cost funds. I thought this and even toyed with the idea of sourcing low-cost overseas funds. But these appeared impractical in the face of unfavorable (capital) market conditions.’

The only other way was to raise the productivity of capital, by adding to the existing capacity so that the plant could realize its full potential. The plant had the space and allied infrastructure that would allow it to expand up to 10 MMT. This investment per tonne for a Greenfield plant worked out to Rs 30,000 per tonne, but for an existing plant, it would have been far less. ‘It would cost us top line as Ill as bottom line growth.’

Bottom line growth was very much on Mehra’s mind in those days. He was aware that the company, strapped for cash as it was, would not be able to invest in expansion or diversification, either related or unrelated. He started toying with the idea of creating a portfolio of businesses that would supplement steelmaking. These businesses ‘should help in achieving faster growth, and throw up higher returns with relatively modest investments.’

Mehra also believed that RINL needed a structure that would help in putting the corporate strategy on ground. He decided to call in external consultants to reorganize the company in a way that would not only ensure current survival, but also pave the way for future growth. In RINL’s case the order of priorities was to first survive and then grow.

-------------------------------------------------------------------------- ‘I decided to grow. In order to survive too, one needs to grow’, said Mehra

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In a series of half-day meetings designed to understand the perceptions and perspectives of executives on their company and also to bounce ideas based on recent strategies of global steel majors, the consultants met over 350 executives across levels. ‘While speaking to them, we were faced with a mindset that believed that RINL could never make it’, recounted the leader of the consulting team. ‘But on probing further, were flooded with suggestions ---forestry and horticulture, slag-based cement, fly ash-based building materials, a port, international trading, power plant, auxiliary shops that are capable of building a steel mill every year . . . . . .Suddenly, the ideas came in thick and last.; RINL emerged as an entity that was much larger than the Visakhapatnam Steel Plant.

While reflecting on the operating structure, the consultants made a starting observation: ‘Even though they had the lowest manpower in Indian Steel Industry, there were too many levels of hierarchy’ (See Appendix 6). This caused diffused accountability, dilution of responsibility, overlapping roles and obsessive concern with hierarchy. Five reconfigured levels Ire arrived at by combining levels that performed similar nature of work. For example, E1, E2 and E3 Ire clubbed as E123 which was the level of a shift-in-charge responsible for operations in his shifts, achievement of targets, maintenance of machinery and adherence to technology parameters. The other levels Ire redesignated to E45, E67, E89 and D1. The recommendations highlighted the following:

1. Restructuring was based on activities and business processes, not functions.

2. Operations and maintenance Ire integrated at the shop floor (section) operating levels.

3. The shift manager became the center of performance accountability.

The consultants visualized RINL as a conglomerate which would consolidate the core business of steel making, divisionalise support business and diversify into new business. After generating a series of options, the structural choice emphasized sharpened multiple centers of accountability. The recommendations involved the creation of five Strategic

Business (SBGs)—Steel Division, Coke Ovens & Coal Chemicals Division (CCCD), project Engineering & Consultancy Services (PECS) Division, Marketing Division and New Business Division – each headed by an executive director (see Appendix 7). The corporate office would comprise only three functional directorates, viz., finance, human resources and commercial. It would be lean and be responsible for policy making, profit planning and monitoring and decentralization of all functions. It was also suggested that the CMD’s secretariat be entrusted with the responsibility for strategic planning, corporate communications and interface management. In 2006 Raw material security has become the prime concern and various strategies have been drawn to acquirecaptive mines both within the country as well as abroad through joint ventures and acquisitions. AnExclusive group is working in this direction and joint ventures with NMDC and MOIL are the results ofsuch efforts. Our continued efforts for captive mines has resulted in the allocation of Mahal Coking CoalBlock with an estimated reserve of 258 Million Tonnes.

In 2008 RINL is continuing its efforts to have Raw material security through the Joint Venture route and in this direction a separate Special Purpose Vehicle for overseas coal mines i.e International Coal Ventures Ltd (ICVL) has been formed. Further, JV for Ferro Alloys with M/s MOIL was entered into. Besides, various proposals for limestone and iron ore are under active consideration.Also, major equipment like Blast Furnaces and Converters has exceeded their normal life and are therefore\due for major repairs, revamp and modernization. The schedules for the same have been drawn up till 2011-12. http://www.vizagsteel.com/index.asp?sm=1&url=insiderinl/FinancialPerformance.asp

Consolidation of core BusinessIn words of a senior official representing its stakeholder, ‘The success factors that are critical to RINL’s survival and growth are operations, finance and managing people.’

Operations: Vizag Steel Plant was the most sophisticated ISP in India. It was also the first ISP to be sited at a port. ‘As with other modern plants, we decided to go in for what we had then considered a judicious mix of proven, i.e., state-of-the-art, and promising but as yet unproven technology’, said S.N. Saran, chief (quality assurance and technology development). ‘But, we were governed by technology transfer agreement that accompanied the 450 million long-term ruble agreement. This created problems for us. The SMS was held up because the Russians did not have billet casting technology; this had to be sourced from Skoda, a Czech firm.’

‘By the time the DPR was rationalized in 1986-87, construction has gone too far ahead till the BF stage to reverse anything, leaving only the SMS and the mills. Accordingly, I dropped one SMS and uprated the capacity of the residual SMS from 1.15 MMT to 3 MMT, the WRM from 0.6 MMT to 0.85 MMT, LMMM from 1.57 MMT to 1.875 MMT, and MMSM from 0.7 MMT to 0.875 MMT. The Russians Ire reuctant to uprate the capacity of the SMS to beyond 2.5 MMT, but we argued and debated and managed to uprate the plant in line with international productivity norms.’ Some of the problems that Ire faced in SMS and MMSM Ire because of the technological decisions that had to be made then. For instance, the layout of the continuous casting shop placed constraints on material flow and crane utilization on the other hand, and an unusually high burden on the gas cutting machines on the other. It was also widely believed that the level of automation in the SMS was inadequate.

Even with the levels of automation available, instances of operating practices being voted Ire plenty, leading to bypassing of automated controls in favour of manual ones. This was partly attributed to inadequate training and concern for meeting deadlines. Though productivity and production increased steadily, it was accompanied by an increased number of breakdowns, causing work slippages and increased downtime.

The major minerals required for steelmaking (see Appendix 8), viz., iron ore and coal, needed to be externally sourced because RINL did not have captive sources of supply. ‘The DPR suggested use of 80 per cent indigenous and 20 per cent imported coking coal, but I had to reverse the ratio as coking coal of suitable quality was not available indigenously’ , said C.D. Mathew, DGM (materials).Coking coal contributed as much as 33 per cent of materials cost. ‘We are planning to join hands with SAIL with a view to increasing out negotiating leverage on account of the substantial purchases made by both of us. This hopefully should drive down prices of coking coal.’

The organization was also trying to increase the size of the vessels used so that the coal could be transferred to smaller vessels which could be berthed in the port. This was expected to drive down prices by $2 per tonne on the staggering quantity of 3 million tones, resulting in savings of $6 million or about Rs 200 mn. However, using the Capsize vessels would involve almost trebling the load to be handled at an already overcrowded port. ‘At times, we have had to request SAIL to grant us preferential berthing to avoid demurrages’, explained a materials executive. Efforts were on to convince the port authority to increase berthing capacity on the one hand, and increase discharging capacity by modifying the layout of discharge area.

The advantage of being close to the port was a myth. Though the rail-head adjacent to the port was only 25 km away from the steel plant, the railway charged its minimum distance freight, i.e., for 75 km (100 km from 1996-97).The volumes Ire enormous, making it impossible to move them by road. RINL approached the Railway authorities to charges tariff related to actual distance. RINL also started encashing on its port based location by importing materials that Ire available locally, wherever imports were cheaper, e.g., aluminum.

‘The other material requirements were on account of spares and consumables’ said Mathew. ‘From an inventory level of Rs 6.5 bn in 1993, we have managed to contain inventories to only about Rs 4.5 bn in 1996, through a combination of methods including utilization, substitution, and exchange and disposal.’ The cost control strategy forced inventories to be slashed to lower levels. ‘we are also negotiating with suppliers of high value materials like ferro-silicon to convert material supplied by us on a preferential basis, and charge conversion costs.’ About 200 SSIs supplying various inputs required by RINL had been supported by the company of which about 100 Ire functional. The registered list of vendors was evaluated every year under a vendor evaluation system, based on criteria such as regularity of supply, quality, cost, after sales service, and business integrity.

RINL had managed to remain forex neutral by continually increasing exports against its various and growing imports. But with focus shifting to the domestic market, this could become difficult in future.

Marketing: RINL first embarked on an export trust and avoided a head-on confrontation with SAIL and TISCO, who had a wider product mix. ‘Though this was done at the cost of realizations’, said S.K. Dutta, the then executive director (commercial), ‘we wanted to command respect internationally for the quality of our products. Our port-based location helped us become the largest exporter of iron and steel products in India. We also wanted to communicate to our global customers that we were in for the long haul.’ The major products exported were pig iron to discerning markets such as Japan and wire rods to the USA. The high level of exports also had a positive impact on the morale of its employees. Within four years of commencing operations, the SMS and all the finishing mills along with the finished products were certified under ISO 9002.

VSP was first certified to ISO 14001: 1996 in May 2001 and recertified on 15.12.2004. However, the standard was upgraded to ISO 14001: 2004 and VSP took rapid strides to comply with the new standard. VSP was audited for its EMS from 6th to 8th February 2006 and having complied with all the new requirements, VSP has been certified by M/s BVQI forCertification to ISO 14001 : 2004. http://www.vizagsteel.com/index.asp?sm=1&url=insiderinl/FinancialPerformance.asp

Once Vizag Steel started receiving international, Indian consumers found it difficult to ignore them ‘Them policy environment had changed, making it uneconomical from them to set sell in the large North Indian market’, said Ashok Basu, former Jt. Secy, Ministry of Steel and ex-chairman of the joint plant committee.

‘The changing environment in the country and the perseverance of our sales and marketing team helped us gain a solid footing in the markets in which I operated,’ said Dutta. As did the slow responsiveness of its competitors, who were still learning what it took to retain customers. ‘The steel marketing mindset in those days was a hangover of the license raj. Consumers queued up outside our offices to pick up whatever quintiles could be allotted to them,’ said the sales manager of a competing steel company.

A variety of innovative measures including quarterly contracts for large customers, loyalty bonus for repeat purchasers, delivery at doorstep, etc, helped RINL make inrods into these markets. As it could not match discounts offered by SAIL and TISCO, RINL sought to compete not on price but on service. ‘By focusing on superior service through timey availability of products and their responsive delivery, we found that we were able to market our products ‘, said Dutta.

Customer counseling cells Ire set up to assist customers in working out detailed specifications; arrive at optimal tonnage needed, and to ensure just-in-time delivery schedules. With time, quarterly contracts Ire replaced by annual contracts, and memorandums of understanding were signed with large customers for sale of merchant pig iron and wire rods.Currently RINL using the E-Marketing for the auction for products. However, the views of smaller customers tell a different story: ‘though product quality of RINL is undoubtedly superior, service and documentation procedures are Unsystematic and bureaucratic. It takes a day for issuance of the DO; even thereafter the material is not available. The only reason we persist with them is that they believe in building relationships and help at times of crisis.’ Market segment of RINL i.e. Products sales, actual users, DLDs(District-location-dealership), Rural dealers retailers and exports were focus given for development and dynamic market mix was introduce in 2011.(http://www.vizagsteel.com/index.asp?sm=1&url=insiderinl/FinancialPerformance.asp)

Sales turnover grew by 19 percent in 1994-95 to Rs 22.66 bn. Domestic sales grew by 43 percent in volume and 62 percent in value terms, showing improved realization. RINL’s South India share grew to 42 percent and all-India share to 22 percent. ‘while we do not benchmark ourselves against RINL, we recognize their strengths in pig iron and wire rods, as well as their dominance in the southern markets’, said Arvind Pande, vice chairman of SAIL.

Rashtriya Ispat Nigam Limited’s Visakhapatnam Steel Plant achieved a record sales turnover of INR 11,372 crores during the period April 2011 to January 2012, which represents a growth of 24% over the corresponding period last year.

The sales turnover corresponds to 124% fulfillment of MoU target committed with the ministry of steel, government of India.

RINL has made yet another record of posting sales turnover of INR 1,428 crores, during January, 2012 which is the best ever January since inception. Further, during the month of January 2012, inventory of saleable steel has been reduced by 44,000 tonnes.

RINL has been registering sales turnover of more than INR 1,000 crores, month after month continuously from June, 2011 onwards..

It is worth mentioning that RINL could achieve this performance in spite of the difficult market conditions both in the domestic and international markets being subdued. Such consistently high performance in sluggish steel market is mainly due to dynamic market mix, strong team work and focus on customer service.

During the period RINL has expanded the Distribution Network by opening of two new consignment sales agency outlets at Bhopal and Jabalpur. The Hyderabad stockyard with the new railway siding inside the yard was opened in the month of January, 2012 to allow the railway wagons to come inside the stockyard facilitating faster unloading the materials and improving the customer service.

RINL has also added six new rural dealers during January 2012 taking the total number of rural dealers to 223 numbers.

http://www.steelguru.com/indian_news/RINL_VSP_sales_turn_over_touch_to_a_high_of_INR_11372_crores/248379.html

Appendix 9 shows the realisations earned by RINL over the years, and its relative market share vis-à-vis Indian companies. Appendix 10 shows RINL‘s profitability vis-à-vis global steel companies. ‘In future, RINL’s marketing decisions will take into consideration the trade-offs involved between four factors, viz., products, markets, price, and volume of offtake, with a view to maximizing profitability – whether for the domestic or the export markets’ , said Dutta.

A fair share of RINL’s marketing success and the reason for its positives public image was due to its high profile corporate communications campaign. A sustained campaign directed at both the external and internal public began with the environment friendly theme, emphasizing its superiority vis-a-vis competetitors from cradle to grave. They planned to spend as much as 10 percent of their multi-crore budget for 199697 on internal communication such as the in-house journal, safety campaigns, etc. Of the balance, about half was being spent on reinforcing the company’s image through television and national magazines, whereas the other half was being spent on emphasizing product strengths in national and South Indian dailies, technical magazines and financial magazines. RINL’s products were typically ‘longs’ and ‘structurals’ that found applications in the construction, railways and infrastructure sectors. However, it was, it was through manufacture and sale of flats that SAIL and TISCO had notched up high profits recently.

Finance: ‘Because of high cost of bank borrowings, profits made by the company have not eased the short-term financial situation’, said A. Chatterjee, director (finance). ‘The quality of current assets, however, is posing liquidity problem’. RINL offered a credit period of thirty days, as against SAIL and TISCO, who could afford to offer up to forty five to sixty days’ credit. However, he expected the liquidity position to improve soon. ‘With our focus now shifting from the export to the domestic market, we expect better contribution from our products as exports contribute an average of 10 percent gross on the margin vis-à-vis 20 percent on domestic sales. Moreover, by opting for a 75 percent spot marketing vs. a 25 percent credit marketing mix, we would be able to improve on our liquidity considerably’, he said.

RINL’s loan portfolio included Rs. 13.88 bn of secured loans, Rs 24.43 bn of unsecured loans and Rs 760 mn of deferred credit form suppliers. Non-government lenders included UTI, GIC and subsidiaries, PSUs and foreign banks. Chatterjee kept the cost of funds down by a careful mix of institutional and foreign bank financing. ‘we have selectively opted for rollover of some of our high-cost loans’, said Chatterjee. ‘While this will hike up interest costs, it will not have any impact on cash flows’, said Shiva Prasad.

The bottom line tells its own story rather vividly – from operating profits in 1993-94 to gross profits in 1994-95 and 1995-96. Moreover, the gross margins of RINL, SAIL and TISCO were all comparable at 17 per cent in 1994-95. In 195-96, RINL’s gross margins Ire 20 percent as against TISCO’s 19 percent.

RINL’s Top Line and Bottom Line

(Rupees crore)*Parameter 1993-94 1994-95 1995-96Income 1747 2458 3206Operating profit 115 419 644Gross profit (213) 53 238Net profit (559) (348) (181)*1 crore= 10 million.

Despite the improvement in bottom line performance, concern for cost permeated the company across all levels. “Further downsizing would be required if RINL. Is to become cost competitive in the long run’, was the view of senior officials of the Ministry of Finance, ‘Perhaps the only was RINL can emerge out of its debt is trough a comprehensive restructuring of its finances – one that looks not only at present costs, but also takes into account projects in the pipeline. This calls for portfolio planning’, said another official.During the year 2003-04, RINL’s position amongst World’s Steel majors has bettered to 67th position and became a debt free Company in September, 2003 it was a great achievement for the RINL was facing operating losses. for the past years. http://www.vizagsteel.com/index.asp?sm=1&url=insiderinl/FinancialPerformance.asp

Organizational Processes: ‘The development of a strong union leadership is considered a prerequisite to RINL’s successes, said Panchanan Chaudhuri, addl. GM (industrial relations), who was also handling the corporate communications portfolio. Workshops for union leaders were conducted to widen their horizons. Initiatives on ‘quality of work and quality of life’ were carried out. Suggestion schemes carrying cash incentives Ire instituted. All these interventions enthused executives and workmen and motivated them to deliver their best. The labour productivity at RINL was the highest in the Indian steel industry.

Day-today issues were discussed and sorted out through shop floor cooperation committees. The plant level cooperation committee sorted out workmen related issues on a monthly basis. As many sixty participative committees were functioning, which provided for a from workers; participation in management. The most notable of these was the corporate business information forum, a multi-lateral forum in which the organization’s monthly performance was shared and the logic of various strategic initiatives was discussed. The directors of in charge of operations and personnel, general managers, general secretaries of the officers’ association and employee unions Ire in attendance in this forum, which was used for generating ideas as well.

The annual performance planning (APP) process was streamlined by abandoning the previous system that involved joint budget preparation by the divisional head and the finance department, and introducing a system that required every division to make presentations on their annual budget in a forum where Divisional heads (DGMs), general managers, executive directors, directors and the CMD Ire present. This clarified the plans by bringing in an activity focus and then translating in into financials. ‘Though we dreamed it initially, it brought in tremendous discipline and led to focused effort on part of everyone. No one wanted to do a less than excellent job.’ This not only provided a forum for sharing information; it made divisional managers sensitive to other divisions’ activities. The planning process for the financial year beginning in April commenced in January that year. The results for quarter were reviewed by the same executives, and steps were taken to monitor to implementation.The last two years had seen the departure of several of its best and brightest at levels ranging from deputy general manager to executive director; executive who Ire clearly identified for assuming higher responsibilities. ’While I are not adverse to losing manpower, it is the kind of manpower that we are losing that is posing problems’, said Ramamurthy. ‘Retaining major challenge’, said Mehra, ‘but given the kind of salaries being offered in the private sector, it is rather difficult.’ Recently, an external consultant was commissioned to develop a systematic career development and succession planning method which provided a framework for identifying and carefully grooming a successor in a ‘drop-dead’ and ‘back-stop’ situation. In a novel Endeavour, role profiles for sixty-seven middle and senior management positions Ire developed; simultaneously psychological testing was used to understand the personality attributes of close to 100 executives. This had been put into a computerized database to generate options from decision making.

In an effort to understand employee perceptions, the HR department conducted employee satisfaction surveys on a regular basis. ‘The first survey was conducted by a consultant in 193 in as part of the restructuring process. ‘Since then, I have been doing similar surveys on a regular basis. They have resulted in various initiatives like team- building across all middle levels, the corporate business information forum, and even a top management retreat’, opined Y. Manohar, assistant general manager (HRD). Organization research was also systematically used by senior executives to gain an understanding of a specific shop floor situation. Recently, the department conducted a series of workshops on ‘Reaching Rated Capacity’ for the blast furnace, steel melt shop, LMMM and MMSM. The findings were later used as the basis for designing workshops by the same title. HRD climate surveys in various production shops were a regular fixture.Employees Satisfaction Survey was conducted during 6-17 November, 2003 in Works and Non-Works division covering nearly 2000 employees with internal facilitators from HRD and Training Departments.

The company maintained a computerized database on personal aspects of all employees. An executive information system (EIS) was developed in collaboration with a South Korean firm and implemented for the corporate office. This was a user-friendly, highly intensive system that placed information on all important areas of the company’s status on a real-time basis at the fingertips of the corporate management.

In 2005 a web based knowledge Management Program was developed in house, to harness the tacit knowledge of employees and establish a culture of knowledge sharing to bridge the vital knowledge gap to draw competitive advantage across the organization. (http://www.vizagsteel.com/index.asp?sm=1&url=insiderinl/FinancialPerformance.asp)

IT-services for internal and external customers of RINL-VSP include Software Development, Support to Servers and other IT infrastructure and Support to Process Control. Business systems have been developed for different functional areas. RINL-VSP is the first Indian steel plant to get CMMI -level 3 certification for implementation of IT systems in VSP. In addition to the ongoing activities a number of initiatives have been taken in the year 2010-11.VSP is maintaining departmental portals and web applications over intranet and internet. Tenders and related information are being published on the website for easy access and are downloaded by interested vendors for wider advertisement and increased competition. With transparency in negotiation and purchasing at best available market price, E-auction engines were developed for Project Contracts Department. E-auctions are being conducted using this engine for tenders of Project Contracts. Auto bidding was accomplished for marketing e-auctions system. Reverse e-auction for awarding Stores Transport Contracts and Reverse e-auction for purchase cases in Mixed Currency were implemented. Web tendering system for internet was developed.http://steel.nic.in/Annual%20Report%20%282010-11%29/English/Annual%20Report%20%282010-11%29.pdf

Faced with resistance from within, Mehra decided to implement the restructuring recommendations in a gradual and phased manner. ‘Creation of all five SBGs simultaneously, it was felt might lead to excess manpower requirement in the functional areas within the SBGs’, he said. ‘Further, we would have had to establish transfer prices for common services, and set procedures governing interactions between two SBGs, SBG-Corporate, etc. It was a bureaucratic maze. ‘Out of the five SBGs, it was decided to create two of them at the first instance. ‘The success-demonstration, effect in non-core areas would help managers appreciate the difference caused and cause to actually seek similar interventions in the core area of steel making.’

Divisionlisation of Support Businesses

Project and Engineering Consultancy Services (PECS) SBG; the SBG had its origins in the projects and design and engineering department of steel plant. This group of 273 engineers who were instrumental in the eraction and commission of steel plant were now faced with a tapering work load. The birth of SBG could not have come at a more appropriate time.

The PECS SBG was formed with the objectives of providing project technology, design and engineering, construction and project management services, both to the steel plant and to the outside market which saw liberalization. The opening up of infrastructure sectors like steel, power, hydrocarbons, petroleum, roads, ports, etc., saw a host of private and foreign players entering India. In Visakhapatnam itself, APIIC projected Rs 170 bn worth of investment, including the Jindal Refinery, Essar Gujrat’s pelletisation plant and the port-based thermal power plant. PECS, it was felt, was well placed to capitalize on this growing opportunity. It would operate as an independent profit centered unit of RINL, providing services to the steel plant on a first charge basis.

The structure was based on the work flow, from basic design to commissioning, focusing on accountable socio-technical units while keeping in mind distinct areas of continuity of operations. The role of the corporate office in the changed scenario was quite different—limited to policy formulation, review and appraisal; leaving day-to-day functioning of the SBG in the hands of SBG chief and his unit board . The SBG now focused on business rather than on functions, and managed all its business affairs relating to the business development, procurement, finance and personnel. By focusing on profits rather than the product or project alone, the SBG was like a ‘company’ within the company.

The consultants recommended the adoption of a business plan and a document of delegation of powers as integrative mechanisms that would help the SBG understand its operating boundaries. The business plan included a project-wise, month-wise activity plan, a revenue plan, a manpower utilization plan as also a project- wise profit plan, cash flow plan, investment plan, proforma profit and loss statements and balance sheet. As part of the SBG-level business planning, transfer prices for various services offered Ire also determined in consolation with internal customer. Accounting for project-wise profitability helped to balance internal and external priorities.

The SBG had booked orders worth over Rs 300 mn in 1995-96. However, all transactions Ire being controlled by corporate finance and financial autonomy remained largely on paper. ‘We are using advances paid by external clients to mobilize for the various projects at hand. About eighty people are placed in the field’, said a senior manager. ‘We are hamstrung by the lack of seed money for working on projects. Another disadvantage is the relatively high age-mix – the

SBG is top heavy’. Fortunately, this translated into a competitive advantage in the marketplace. ‘We are able to place DGMs as project managers in all our projects, whereas our competitors are represented by relatively junior executives.’

Coke and Coal Chemicals Division (CCCD) SBG: Coke oven gas is a valuable by product produced in the process of manufacturing metallurgical coke. When processed further, it provides a wide variety of chemicals including coal tar, benzol and sulphets, which are inputs to the dyestuff, explosive and chemicals industry. Spinning it off as a separate SBG made eminent sense in view of the restructuring criteria, since it had an external interface and enhanced profitability at relatively low incremental investment. Prior on restructuring, the consultants Ire told, ‘this SBG had the potential of generating profits worth Rs 200 mn on a turnover of Rs 120 mn, as against the steel plant which made losses on an Rs 25 bn turnover.’ Further, it was capable of spawning off units that provided for value addition.

The SBG saw the light of day as late as November 1995, almost a year after its conceptualization. Intricate linkages for raw materials and pooled services with other production units needed to be resolved. Understand transfer pricing formulate, stemming from inadequate systems for measuring and metering consumption of common service, were pretend as the ostensible reason for delays.

When the change management team `met and brainstormed for hours along with the consulting team, solutions to these vexatious issues emerged. It was decide to ensure uninterrupted supply of coke to the steel plant on a first charge basis, at a transfer price that reflected actual raw material cost in addition to the operating costs and allocatable overheads. Further, MOUs with internal supplies and customer departments were entered into, assuring timely response at a mutually decided transfer price. It was decided that marketing would transfer the erstwhile team looking after by product marketing, while materials, finance and personnel would identify executives to join the unit board team of the CCCD SBG.

The role of the corporate vis-à-vis the SBG was another thorny issue to be resolved. After much debate, it was concluded that procurement of coking coal would continue to be a corporate materials subject, while the SBG would play a role in deciding delivery schedules and supplier selection. Executive establishment, matters and cash management continued with corporate personnel. All internal transactions between the corporate and the SBG Ire considered as book entries, while external sale realization and materials purchases (except coal) Ire being managed by SBG finance. ‘Yet appraisal of functional executives such as us who Ire transferred to the SBG continued with their departments, with who they only had a dotted line relationship’, bemoaned a CCCD executive.

CCCD achieved the focus that it was expected to usher in. ‘The SBG head spends more time in meeting customers and bringing in new business’, said Mehra. The SBG was concentrating on technical selling that was required to be done, as opposed to the selling of steel. As long as it had remained within corporate marketing, this focus was missing. Operations also received more focus. The SBG doubled production of ammonium sulphate fertilizer and benzol products in the first quarter of 1996-97, ‘Realisation and collection efficiency has also increased’, said the GM of the SBG. Expansion and Related Diversification

The general plant layout had been developed to allow for smooth and uninterrupted operation of 10 MMT per annum. RINL had planned to raise its liquid steel capacity to 4 MMT by 2000 AD. This would have been possible through the usage of 100 percent imported coal, adoption of new technology, and addition of new facilities – all of which would have entailed an investment of Rs 9.84 n at 1995-96 process. ‘We’re planning to meet 70 percent of this requirement through internal accruals and the balance from the market borrowings’, said Chatterjee. The thrust of this expansion would be on complementing the existing product mix by adding a thin slab caster that would manufacture flat products, which find application in the white goods industry. The project had an attractive IRR of 24 percent per se, and 12 percent if combined with the present plant.In respect of RINL, expansion plan for increasing liquid steel capacity from 3.0 million tonne to 6.3 milliontonne at an estimated cost of around ` 12,228 crore by 2011 is progressing as per schedule. Stage-I of theproject would be completed by March, 2011 and Stage-II by December, 2011 http://steel.nic.in/Annual%20Report%20%282010-11%29/English/Annual%20Report%20%282010-11%29.pdf

Diversification into New Businesses: In order to take advantage of the positive contribution made by every potential business opportunity, RINL was leveraging its resources and capitalizing on its port-based location. In order to circumvent the investment requirements, it was forming a host of alliances which required it to provide only facilities,

expertise or material resources. Some of these included the setting up a finger fetty as its captive beach at Gangavaram, a joint venture with SAIL and Kudremukh Iron Ore Co. Ltd to float a shipping venture, setting up of a 2 million tonne slag cement plant by a cement company in the private sector, and five mini cement plants, which would ensure continuous offtake of slag and limestone from its captive mines at Jaggayapetta. Besides, it was setting up units for conversion of billets into bar products, wire rods, and structurals up to 300,000 tonnes per annum capacity; entering into a strategic alliance with Essar Gujarat to source to iron ore fines in slurry form; expand power generation capacity through JVs with other Vizag-based companies like HPC, BHPV, HZL and Cormandel Fertilisers; alliances with housing financing companies like HDFC and HUDCO for housing construction; and exploiting tidal energy for power generation.The Ministry of Steel had to decided 10th September, 2009 Eastern Investments Ltd (EIL) to be made a subsidiaryof Rashtriya Ispat Nigam Limited (RINL) thus bringing EIL, OMDC and BSLC under the umbrella of RINL inOrder to make these companies economically viable and sustainable. http://steel.nic.in/Annual%20Report%20%282010-11%29/English/Annual%20Report%20%282010-11%29.pdf

On December 14 2011 at New Delhi RINL and Power Grid Corporation of India Ltd. had signed MoU to set a Joint venture company for manufacturing Transmission Line Towers and Towers parts including R&D of new high end products. http://www.steelguru.com/indian_news/RINL_and_PGCIL_inks_MoU_for_tower_manufacturing/240927.html

While some of these projects crystallized, others Ire still on the drawing board. These businesses were being championed by a department within the PECS SBG, and Mehra was closely monitoring their implementation. These businesses would be contributing to the bottom-line without entailing any substantial requirement of funds. For instance, the slag cement plant would ensure that RINL was compensated for its slag as Ill as the limestone. It would not only lead to disposal of three 300,000 tonnes of slag per annum (600,000 from the third operational year), it would translate into benefits of about Rs 70 mn per annum for the first two years and about Rs 150 mn from the third year onwards. Capital intensive projects such as the power plants Ire to be spun off into independent units, largely on the strength of the superior performance of the existing power plant.

Other strategic initiatives for diversification that were planned included the creation of an in-house travel agency which would cater to public on a commercial basis; a subsidiary to diversify into airline operations; and commercial plantations of teak, cashew, mango, jackfruit and neem. Additionally, plan was a foot to set up an advertising agency which would cater to in-house requirements and the needs of other organizations as well.

In continuation of earlier efforts, the following structural changes were planned:

1. Operating as a conglomerate of five SBGs—PECS, CCCD, steel, marketing, new business.

2. Implement, in steps, restructuring of the other three SBGs.

3. Reduction in number of levels from the (existing) eight to four, with a view to increasing role clarity and accountability at each level.

Leadership

‘He (Ahuja) never once raised his voice and yet commanded the respect of all his people’, commented a middle-level manger. ‘He was, however not quite accessible to people down the line and preferred to Retain his exclusivity’, said another. Ahuja’s vision of building a high performing PSU led him to build an organization unencumbered with bloated manpower. He streamlined operations through use of overlapping shifts. His efforts to make RINL competitive ensured that while peripheral development was taken up in earnest, demands for operating jobs from the local people Ire not accede to, beyond the stipulated norm. It is also due to his determination that RINL was alive and growing today. However, according to a senior executive, ‘Ahuja left the organization as a result of misunderstandings with officials in the steel ministry.’

Rath’s elevation to the top job was prompted by the need for the organization to quickly commission the project. Rath, the then director (construction), ‘was very much a team player who listened to everyone’s suggestion before deciding on important issues. He could carry people, and he had excellent boundary management skills --- especially where it concerned the steel ministry, the state government, and the local administration’, opined a middle manager.

Views about Mehra were also many and varied. ‘It is his vision that has given RINL its successes and the confidence to invest in the future, that too under adverse conditions’, said a senior bureaucrat in the steel ministry. The results speak for themselves. When Mehra joined, morale was low and no one knew whether production targets would ever be met. ‘We have not only set ambitious targets, but consistently surpassed them. In 1993, engineers in the SMS talked about achieving a maximum of 15 heats. By the year end, we had achieved an annual average of 20 heats! Next year, they talked of a maximum of 25 heats. Again, I achieved an annual average of 30 heats. we never thought that this plant would ever we achieve rated capacity. Now, we know that we will surpass it.’ Profit targets Ire set and achieved systematically. From achieving its first ever (Operating) profits in 1993-94, RINL achieved cash profits in 1994-95m and quadrupled cash profits in 1995-96. ‘Though I have committed to making net profits by 1997-98, we shall achieve these by 1996-97’, quipped an enthusiastic junior manager, on being asked when RINL would be in the black.

After taking over as CMD in 1993, Mehra first tried to strengthen the top management team by recruiting his directors in charge of operations, finance, personnel and commercial. He also brought in few committed and responsible executives at the DGM level with whom he had worked either at Rourkela or Durgapur. ‘We joined RINL because we had worked with Mehra at Rourkela’, said a deputy general meager. ‘We knew before joining that it meant giving up a relaxed job and taking on a challenge—that of building an organization from scratch. But Mehra’s dynamic leadership and his belief in not yielding to adversity, has succeeded in getting the best out of colleagues.’

Mehra was the quintessential workaholic –‘he works for an average of over sixteen hours in a day, and over 100 hours in a week’. ‘Whether on the shopfloor or during presentations in the corporate office, he is extremely demanding opined a director, ‘making life miserable if you don’t measure up to his exacting standards. He pushes relentlessly until you deliver.’ But what probably carries the day is that ’you realize that he harbours no grudge of bears no malice. He doesn’t have favorites either.’ But, his method of getting to the root of the problem, ‘his style of reaching directly to the ;level at which the information is available by circumventing formal hierarchy, makes it difficult for us’, said a middle manager.

Mehra spent lot of time in meeting and convincing people about operational matters. ‘His persuasive style is at times a deterrent’, opined a senior manager, ‘because you tend to agree with him as he sounds so commencing. But later, you’re not sure whether you could carry it through.’ The same went for those who didn’t open up at meetings. ‘Mehra convinces people who may not agree but don’t say so. As a result, they agree to do something, but not everybody implements it’, said he.

-----------------------------------------------------------------‘It is this constant setting of stretch goals that are higher than what may be achievable that motivated executives towards superior performance. His energetic demeanour permeates down the line, and this has created a performance-enhancing culture in RINL. History is replete with examples of how only leaders who are both driven and driving are able to make a difference in adverse situations under complex environments.’

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However, not everyone agreed with this point of view. ‘Are we giving our people an opportunity to develop, or are we breathing down their? It is perhaps time for us to consolidate our gains and institutionalize systems, so that we can ensure continuity along with change. Otherwise, I shall continue to depend on individuals for times to come.’

Having almost reached RINL’s nameplate capacity, and having launched two of the SBGs, Mehra decided that it was perhaps the right time to push for further growth. With this in mind, an external consultant was invited to facilitate the Vision for RINL in the 21st century, through three exploratory workshops conducted for the purpose. This was articulated as:

RINL shall be a self-supporting, growing company with continuous improvement in productivity, quality, and customer satisfaction.

The core values that supported the Vision were:

Commitment Customers satisfaction Continuous improvement Concern for the environment. Creativity and Innovation

(www.vizagsteel.com)

Future Concerns

‘This is the year of reckoning, the year in which the promise made to the Government of India would have to be kept . . . Liquid steel production of 3 MMT, labour productivity of 231 tonnes per man year, and above all generating net profit (latest) by 1997-98.’ Before calling it a day on 8 July Mehra went over the problems one by one. Institutionalizing maintenance practices, achieving higher productivity trough process re-engineering, retaining key executives, implementing automation and IT applications in key areas, etc. were all short-term concerns.

RINL’s Labour Productivity for the year 2003 was 252 tonnes/Man-year and increased by 4% on the year 2004 was 262Tonnes/Man –year in 2005 265 tonnes/man-year, 2006 282 t/man year

http://www.vizagsteel.com/images/vspannualreport.pdf

For one who had managed to balance long-term concerns with short-term ones with rare panache, Mehra, in the `Twilight of his career, wanted to be Ill placed to hand over a vibrant, growing and profitable organization to his successor. But some issues still troubled him. ‘The plan for expansion was contingent upon the union government’s willingness to defer repayments. How could RINL grow its steel making capacity from 4 MMT to 6 MMT and beyond to 10 MMT so as to achieve its potential? The core, support and new businesses have so much potential? He wished he had a way out.

CORPORATE PLAN OF RINL 2020

The Corporate Plan of RINL was cleared by the Board on 12.3.2004. The plan envisages expansion of the capacity of VSP to 10.2 Mt Liquid Steel by 2020 in three phases.

In the first phase, capacity enhancement to 5 Mt of hot metal, 5 Mt of liquid steel and 4.48 Mt of saleable steel has been planned. These units will be commissioned by December, 2007. The focus is on minimizing investment by maximizing utilization of facilities up to iron making stage. It is proposed to continue with longs production inthis phase. The estimated investment for this phase is around Rs. 2275 cr.

Expansion under phase-II envisages enhancing production of hot metal to 7.5 Mt, liquid steel to 6.8 Mt and saleable steel to 6.165 Mt. Commissioning of phase-II units will be completed by March 2012. Investment will be inthe order of Rs.6165 cr. It has been planned to produce longs in this phase also. However, production of flats may be considered as per the demand at that time.

Under phase-III expansion, diversification to flat products has been envisaged. On implementation of this phase, the production of hot metal will be enhanced to 10.5 Mt, liquid steel to 10.2 Mt and saleable steel to 9.162 Mt. Commissioning of phase-III units will be completed by March 2018. Total estimated investment under phase-III would be in the order of Rs.11400 cr.

http://www.vizagsteel.com/images/vspannualreport.pdf

In year 2010 RINL starts a new Axle plant. Its proposed cost of Rs 300-crore axle plant. The axle plant starts working on the second quarter of 2012-13. The project is to be located near Siliguri in Northern part of West Bengal, will cater to the Indian Railways. The Railways has handed over land for the project to RINL.

http://www.thehindubusinessline.com/companies/article2842563.ece?homepage=true&ref=wl_home

Presently RINL facing lot of competition by PSUs and private sector companies like JSPL, Aadhunik, Bhusan, Maithan, Shyam steel and Ispat etc. these are the new entrant in the Steel industry.

http://www.vizagsteel.com/images/vspannualreport.pdf

APPENDIX 1

Chronology of Major Events in History of RINL

DATE EVENT

October 1996 Steel plant agitation turns violent in Vizag, Vijayawada, and Hyderabad.April 1970 Union government announces plan to set up Vizag steel plant.January 1971 Prime Minister Indira Gandhi inaugurates site. February 1972 M.N. Dastur submits feasibility report for 2 MMT plant.October 1977 M.N.Dastur submits detailed project report (DPR) For 3 MMT plant.June 1979 India, USSR sign pact on technology- economic co-operation to set up VSP.November 1980 M.N. Dastur- Gipromez team submits revised DPR for 3.4 MMT plant.February 1982 RINL incorporated owing to SAIL’S withdrawal.April 1982 Construction commences’s at Vizag.1985-86 Union government’s plan to drop Vizag gains momentum.1987 Rationalized concept mooted; one SMS dropped.1989 Proposal for finance restructuring placed before union government.March 1991 Commissioning of stage I.July 1991 India launches economic liberalization.July 1992 Commissioning of stage II.August 1993 Union government agrees to RINL’s financial restructuring.October 1993 Flash strike at factory gate.March 1994 Maiden operating profits.November 1994 WRM receives ISO 9002 certification.March 1995 Maiden cash profits.April 1995 Project engineering and consultancy services (PECS) SBU launched.November 1995 Coke oven and coal chemicals (CCCD) SBU launched.2002-03 RINL was awarded for the first time Prime Minister Trophy

=====================================================================================

APPENDIX 2

Resource Position

1982-83

1982-84

1982-85

1982-86

1982-87

1982-88

1982-89

1982-90

1982-91

-1000

-500

0

500

1000

1500

2000

Fund RequiredFunds ReceivedDeficit

APPENDIX 3Major Equipment and CapacitiesUnit Facilities Under Stage I Facilities Under Stage II Products Capacity

(1.5 MMT) (3.0 MMT) (000 tonnes) Stage I Stage II

Coke oven 2 Batteries x67 ovens;7m 1 Battery x67 ovens Met Coke 1130 2261 Ht,4.16 cum vol. (25.70mm)

Sinter plant 1 m/c 312 sqm gr area 1 m/c 312 sqm gr area Gross sinter 2628 5256

Blast furnace 1 furnace of 3200 cum 1 furnace of 3200 cum Hot metal 1700 3400(Bf) vol. vol.

Steel melt 2 LD converters of 133 cum 1 LD converter of 133 c Liquid steel 1500 3000shop2 (SMS) vol; cum vol;

3x4-strand con casting m/c 3 4-strand con casting m/c Blooms 1410 2820

Light and 7 strand breakdown mill; Billets 1367 1857Medium 8 strand roughing mill;Merchant mill 5 strand intermediate mill; Bars and 710 710(LMMM) 4 strand finishing mill; structurals

Wire rod mill 7 strand roughing mill; Wire rods 600 850(WRM) 6 strand intermediate mill;

4x2 strand pre-finishing mil

Medium 8 strand roughing mill; Bars andMerchant & structurals -- 850 Structural mill 6 strand intermediate(MMSM) mill;

6 strand finishing millSaleable steel 1326 2656

APPENDIX 4

Balance Sheet (as on 31 March)

(Rupees crore)*

1990-91 1991-92 1992-93 1993-94 1994-95 1995-96

Sources of funds

Shareholders’ funds 3505.84 3505.84 6170.57 6527.54 6527.53 6527.54

Loan fund 3924.44 5476.28 3494.61 3473.68 3734.56 3830.60

Deferred capital 119.74 158.14 168.74 139.71 107.37 76.64

Total 7550.3 9140.28 9833.92 10140.93 10369.47 10434.78

Application of funds

Fixed assets (net) 3472.22 4326.85 5130.73 5961.07 6541.91 6214.22

Capital w-i-p 3545.17 3058.62 2101.90 1081.28 178.87 218.04

C A loans, advances 671.01 967.94 1219.84 1121.44 1478.95 1686.91

Less: C L and provisions641.62 725.13 691.86 659.57 837.92 893.44

Net current assets 29.38 242.80 527.98 461.88 650.03 793.47

Misc. expenses 24.70 47.51 40.52 31.27 28.94 39.39

P&L account 477.55 1464.48 2032.43 2605.43 2969.71 3169.66

Total 7550.3 9140.28 9833.92 10140.93 10369.47 10434.78

*1 crore = 10 million

Latest Balance Sheet of RINL

Balance Sheet (as on 31 March)

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Sources of funds

Shareholders’ funds 7827.32 7827.32 7827.32 7827.32 7827.32 7827.32 7827.32 7827.32 7827.32

Reserve Surplus - - - 346.38 1710.88 3653.72 4592.59 50257.68 5401.90

Loan fund 118.68 37.17 88.94 543.31 916.96 440.73 1007.76 1232.55 1136.76

Deferred capital - - 158.49 316.72 291.29 163.12 124.49 97.82 79.97

Total 9013.23 7865.02 8074.75 9033.73 10747.12 12084.89 13352.16 14215.37 14445.95

Application of funds

Fixed assets (net) 3827.57 3372.12 2441.30 2078.6 1384.64 1384.64 1256.25 1465.35 1529.84

Held for Disposal - - - - - .04 .05 .05 03

Capital w-i-p 11.82 25.4 61.07 180.73 597.19 2087.19 4617.81 7506.90 9536.71

C A loans, advances 1863.60 2726.68 6047.52 8252.00 10448.10 11804.54 11859.32 9550.66 7625.21

Less: C L and provisions 1231.07 1235.35 1424.15 1502.14 2104.30 3191.62 4181.32 4307.84 4607.49

Net current assets 632.53 1491.33 4623.36 6749.86 8343.80 8612.97 7678.00 5242.82 3017.72

Misc. expenses 80.02 61.45 43.01 24.87 14.95 - - - -

P&L account 4461.27 2914.08 905.93 - - - - - -

Total 90133.23 7865.02 8074.75 9033.73 10747.12 12084.89 13552.16 14215.37 14445.95

*1 crore = 10 million

Sources: http://www.vizagsteel.com/images/English%202007-08.PDF http://www.vizagsteel.com/images/vspannualreport.pdf

http://www.vizagsteel.com/index.asp?sm=1&url=insiderinl/FinancialPerformance.asp

APPENDIX 5

Income Expenditure Account

(Rupees crore)*

1990-91 1991-92 1992-93 1993-94 1994-95 1995-96

Income

Sales 245.15 772.44 118.84 1751.04 2208.57 3038.57

Internal consumption 30.71 9.75 108.20 106.23 10.11 1.26

Other income` 31.48 82.06 267.11 (-)110.81 239.78 165.81

Total 307.33 864.25 - 1746.86 2458.46 3205.64

Expenditure

Raw material 275.27 402.93 680.17 875.40 1083.46 1402.82

Consumption

Consumption of trial 0.93 42.53 68.00 4.60 -- --

Run production

Employees’ remuneration 29.13 53.76 76.52 102.50 128.46 154.66

Stores and spares 36.61 109.26 174.66 165.02 209.27 261.16

Power and fuel 41.92 61.49 97.13 83.85 66.82 82.33

Repairs 29.03 32.66 66.88 60.12 43.92 43.12

Contributions 13.05 44.65 20.32 23.91 33.22 0.39

Freight 28.77 85.59 121.69 101.01 120.57 138.64

Excise duty 20.80 58.18 96.95 95.50 212.88 256.15

Others 27.05 79.12 115.69 129.57 151.06 231.95

Interest 192.13 436.81 275.12 346.44 365.82 406.58

Depreciation 197.23 411.18 329.21 328.53 101.35 419.31

Total 791.93 1818.17 2122.63 2316.44 2816.85 3397.12

Less inter A/C adjust 7.04 9.42 7.70 10.46 10.62 10.64

Net Expenditure 784.89 1808.75 2114.93 2305.98 2806.23 3386.47

Loss for year 477.55 944.50 554.79 559.12 347.76 180.83

Prior period adjust - 42.43 13.50 13.53 16.52 19.11 -

477.55 986.93 568.29 572.66 364.28 199.94

Loss of the last year B/F - 477.55 1464.48 2032.78 2605.43 2969.71

Loss carried to B/S 477.55 1464.48 2032.78 2605.43 2969.71 3169.66

Latest Income expenditure of RINL

Income Expenditure Account

(Rupees crore)*

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Income

Sales 4464.63 5462.90 7359.84 7314.15 7932.66 9088.37 9128.38 9809.15 10471.18

Internal consumption 2.77 5.00 6.82 8.26 28.40 88.46 114.10 121.07 87.70

Other Income 228.28 204.23 279.5 439.18 632.57 815.91 862.23 615.74 437.86

Total 4695.68 5672.13 7646.16 7761.59 8593.63 9992.74 10104.71 10545.96 10996.74

EXPENDITURE Raw materials 1805.65 2050.43 3019.63 3584.62 3889.04 4280.22 5896.25 5535.11 7188.36consumed

Employees’ 405.99 481.15 490.24 572.34 740.94 1030.72 1156.68 1399.74 1272.95remuneration

Stores 322.82 347.73 313.45 338.95 357.27 364.66 501.25 466.48 471.22

Power & fuel 200.99 220.04 216.06 235.10 242.95 258.81 340.31 408.22 425.03

Repairs 77.98 84.47 93.41 97.24 109.70 125.79 149.81 142.13 145.18

Contributions .72 .68 .75 .73 .76 - - - -

Freight 271.99 255.65 299.53 306.71 315.26 306.96 286.53 312.65 300.72 Excise duty 593.61 706.18 821.49 1176.73 1217.91 1334.70 1282.25 825.48 1045.81

Others 205.35 220.47 301.05 255.03 322.67 509.93 377.12 313.91 397.02

Interest 185.83 48.89 11.11 31.06 48.42 31.57 88.14 77.55 164.55

Depreciation 437.34 457.27 424.19 415.57 351.60 471.55 240.46 277.17 265.94 Less: Inter A/C 18.25 21.12 24.22 24.48 28.49 39.15 38.06 43.26 49.10 adjust

Net expenditure - - - - - - - - -

Profit for the 518.18 1500.76 2811.2 1882.69 2219.23 2999.97 2022 1240.41 946.70 year

Prior period 2.56 46.42 1.44 6.82 3.11 0.39 4.59 7.24 34.96 Adjustments

Net Profit 520.68 1547.18 2253.71 1889.51 2222.34 2995.36 2026.59 1247.45 981.66

Loss of 4981.96 4461.27 2914.08 (905.99) 346.38 1709.81 3652.55 1653.83 2117.83last year B/F

Loss carried 4461.27 2914.08 905.99 346.38 1709.81 3652.55 1653.83 2117.83 2460.81 to B/S

*1 crore = 10 million

Sources: http://www.vizagsteel.com/images/English%202007-08.PDF

http://www.vizagsteel.com/images/vspannualreport.pdf http://www.vizagsteel.com/index.asp?sm=1&url=insiderinl/FinancialPerformance.asp

APPENDIX 6

Organization Structure Prior to Restructuring

CMD

ED (Comm) Addl (D & E) DGM DIR (P) Dir (O) DIR (F)

DCE (Civil)

DCE (ET & I)

DCE (GL &T)

DCE (UTIL)

DCE (MTE)

DCE (TECH)

DCE (ETD)

GM (MM)

Addl GM (mktg)

GM (Works)

AGM (Works costing)

Addl GM (Services)

ADVISOR (Safety)

Addl GM (Maintenance)

DGM (Mech)

DGM (PoIr & Utilities’

DGM (Elect)

DGM (Tel and Inst)

AGM (Milles)

Dy GM (BF)

LS (Central refractory making plant)

AGM (Scrap salvage dept.)

DGM (Steel

GM (F)

AGM (Audit)

GM (IP)

GM (IR)

AGM (HRD)

CS (Raw material and handling)

CS (Sinter Plant)

AGM (OP.V) AGM (Coke oven and coal chemicals)

APPENDIX 7

Recommended Macrostructure

APPENDIX 8

Major Raw Materials Source and Quantities

Raw Material Source Annual Requirement (MMT)

Iron ore

Lumps Bailadila (MP) 1.544Fines Kirandul 3.770

Limestone

BF Grade Jaggayyapeta (AP) 0.323SMS grade Imported from Dubai 0.633

Dolomite

CMD

Corporate Functions

Executive Director (Steel Division)

Executive Director (CO & CCP)

Executive Director (Project Consultancy)

Executive Director (Marketing)

Executive Director (New Business Divn)

Integrated raw materials

Sinter, BF & TPP and Retr.

Scrap salvage

Mills

Central maintenance services

Auxiliary Shops

System design

Coke ovens

Coal chemicals

Projects

Engineering services

Mines

International trade

(Later trading house)

Domestic market (Later

part of steel division)

Port

International trade

Cement (Mines added

later)

Prefab housing

BF grade Birmitrapur (Orissa) 0.524 SMS grade Matharam 0.138

Management ore Chirurupali (AP) 0.068

Coal

Medium coking coal Swang, Kargil, Gildi, Kathara 1.027Imported coking coal Imported from Australia2.669Boiler coal Singareni (AP) 1.610

APPENDIX 9

Realisations and Gross Margins

Parameter Year Volume (MMT) Turnover (Rs crore) Realisation (Rs/MT) Gross Margin(Rs crore)

Dom. Exp. Dom. Exp. Dom. Exp. Rs MT

1992-93 1.28 0.28 972 212 7586 7584 (31) -1993-94 1.31 1.00 1215 535 9287 5347 114 4941994-95 1.50 0.77 1755 453 11733 5918 416 18401995-96 1.79 1.02 2331 707 13004 6911 637 2261

MT: Metric tonne. MMT: Million metric tonne.

Market Shares of Major Players in India (Figures in %)

Product SAIL IISCO RINL TISCO Secondary Producers

Pig iron 18 (26) 18 (19) 12 (18) 0 (0) 52 (37)Semis 22 (18) 0 (1) 10 (10) 4 (7) 64 (64)Bars and rods 14 (15) 1 (1) 10 (7) 7 (6) 68 (70)Structurals 27 (32) 9 (9) 8 (4) 8 (7) 48 (48)Total steel 19 (19) 2 (2) 10 (8) 6 (7) 63 (64)Finished steel 18 (19) 3(3) 10 (7) 7 (7) 63 (65)

Note: Unbracketed figures are data for 1995-96; bracketed ones for 1994-95

APPENDIX 10

Profitability of Major Steel Companies in the World, 1994-95

Company Ebdit/Sales EBIT/sales ROI Net Profit/Capital Employed

India RINL 18 0.08 - 5 TISCO 17 11.5 - 4.5 SAIL 17 13.5 - 10.3Japan (Average) 13 10 13 - Nippon Steel 11 9 16 - Kawasaki Steel 14.5 12 15 -Europe (Average) 3 2 3 - Eregli Demir 20 14.5 24 - Hoogvens 9 0.5 0.3 - Ratutauuki 2 14 13.5 - Thyssen 4.5 (1) (3) - British Steel 3 (2) (2) -USA (Average) 8 9 9 - Bethlehem Steel 5 (1) (2) - Nucor 14 8 14 -

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