Chapter VII

TRANSFER OF SOVIET TECHNOLOGY TO STEEL INDUSTRY IN SELECT

DEVELOPING COUNTRIES: AN ESTIMATE

299

The critical questions in international transfer of

technology are integrally linked with the endogenous technologi-

cal capabilities of the recipients of technology. More specific-

ally, it is related to the role of actual transfer process in

promoting the capabilities of the recipient at the levels of

choice, acquisition, adaption and assimilation of technologies

as well as its innovation and development. Logically, any

discussion on transfer of technology invariably involves an

examination of the factors and conditions that shape the choice for

a particular technology, as well as the impact of the technologies

transferred on the recipient, in its general and specific

contexts. This study which has examined transfer of Soviet

technology to steel industry in India and Egypt, quite naturally

presupposes an assessment of the actual transfer process in this

regard, as also the speci fie context which shaped the recipients'

choice for Soviet technology.

7.1 RECIPIENTS' CHOICE FOR SOVIET TECHNOLOGY I

The choice of technology is generally influenced by, among

other factors, technological capabilities achieved by the

recipient, compatabili ty of the technology offered with domestic

socio-economic priorities as well the political nature of

the whole package. In a technological sense, certain amount of

endogenous capabilities are required to exercise the right choice

with regard to the best technology available in the market.

300

However, in view of the imperfect nature of technology market,

developing countries have found increasingly difficult to

exercise the technology options. The choice of technology has

been real problema tic in the case of countries at an early

stage of industrialization.

In the fifties, both India and Egypt experienced consider­

able constraints in the choice of technology primarily due to

the weak nature of domestic technology infrastructure. Besides,

scarcity of foreign exchange resources and commitment to domestic

socio-economic programmes had created additional constraints

in mobilising technological and capital resources.

It has been precisely for the cross political nature that

India and Egypt had to experience considerable difficulties in

mobilising technology and expertise from Western sources in the

development of indigenous iron and steel industries. The

experience of both India and Egypt in this regard stand testimony

to the neo-colonial manoeuvres of Western countries with a view

to penetrating into their domestic market in one form or another.

India's efforts towards setting up a steel industry

in the fifties were not only discouraged by West but the very

desirability of greenfield steel project itself was called into

question. The desirability of setting up a steel plant generally

being a policy question such advances am::mnted to direct

infringement on the freedom of decision making of the country.

301

During the fifties, Britain, West Germany and the United States

had expressed their

up a steel plant

1 unwillingness 1 to assist India in setting

in the public sector. It was under those

circumstances, India was compelled to enter into an agreement

with West German firms for setting up the first steel plant

with German equity participation.

The predicament of Egypt during the fifties has been

almost comparable to that of India. For reasons beyond techno­

logical and economic considerations, the United States and

her Western allies had withdrawn their commitment to assist

Egypt in the construction of Aswan Dam. In

circumstances, contrary to the government

Egypt was also compelled into an agreement

the then prevailing

policy objectives,

with the same West

German firms with la tter 1 s equity participation in the construc­

tion of Helwan steel project.

Conversely, the Soviet offer of assistance made to_ India and

Egypt during the fifties, unlike the Western offers, neither

insisted participation in the management of the project nor

advocated measures to control the project. Moreover, the

Soviet offer of economic and technological assistance was

consistent with the socio-economic priorities

of India and Egypt.

and policies

The substantial credit facilities attending the Soviet

offer as well as longer repayment periods and low interest rates

302

made the Soviet offer not only acceptable but quite sui table

for the recipients. In addition, the guarantee provided through

the inter-governmental agreements as well as the elaborate

measures to transfer skills through training of national

personnel were the best features, from the recipienis' view.

point and hence led to its outright acceptance. Thus the choice

of India and Egypt for Soviet technology in setting up steel

industries resulted primarily from the com1=atibili ty of the

features of the Sovi~t model on transfer of technology with the

policy objectives and technological and economic capabilities of

India and Egypt.

7.2 COMPARATIVE ESTIMATE

A comparison of the experience of India and Egypt i;I

setting up domestic steel industries reveals a high level

similarity in the pattern of transfer of Soviet technology. The

transfer process in both cases was preceded by an inter-govern­

mental agreement between the Soviet Union and the recipients

which provided the framework for bilateral cooperation.

The inter-governmental agreements laid out the general

principles for the supply of equipmen ts and rna terials, training

of personnel and deputation of Soviet experts.

the provisions for economic assistance,

It also contained

terms, conditions

and mode of

details as to

repayment of

the actual

the credits utilized. The specific

supplied, volume of equipments to be

303

personnel to be trained or deputed and responsibilities of the

Soviet side and the recipients were spel t out by separate

contracts entered into between the Soviet organisations and their

counterparts in the recipient countries.

The Soviet offer of assistance to India and Egypt was

accompanied by substantial credit facilities. Thus, the Soviet

Union extended liberal credits for the construction and ex­

pansion schemes of Bhilai, Bokaro and Visakhapatnam steel

plants in India. Similarly, such credit facilities were extended

to Egypt also for the construction and expansion of a major

metallurgy complex at Helwan.

nominal

The credits extended by

interest rate of 2 to

the Soviet

2. 5 per cent

Union

in the

carried a

case of

both India and Egypt. The provision pertaining to its repayment

were further liberal as the credits so utilized were to be repaid

by the recipients in their local currency through 12 equal

annual instalments (see Table 7.1). These features of the Soviet

assistance, which we consider as an integral component of

the Soviet model on transfer of technology were found highly

sui table to countries like India and Egypt in view of their

severe adverse balance of payment situation as well as critical

foreign exchange constraints. It is precisely the aspect

of transfer of Soviet technology which stimulated its growing

acceptability, as is evident from the extensive nature of Soviet

technological cooperation with developing countries.

304

Table 7.1

THE TERMS OF SOVIET CREDIT FOR PUBLIC SECTOR STEEL PLANTS IN INDIA AND EGYPT

Pl'oject Interest rate (%)

Repayment period

Durgapur

Bhilai

5.5 to 6.0 plus 0.25 management fee

2.5

11 years

12 years

Rourkela

Bokaro1

Visakhapatnam1

Helwan (Egypt) 2

6.3

2.5

2.5

2.5

3 years

12 years

17 years

12 years

Sources: 1. Government of India, Ministry of Finance, External Assistance, 1964, pp.36-40; Text of Agreements between the Government of India and the Government of the USSR for Cooperation in the Construction of an Iron and Steel Works at Bokaro as well as at Visakhapatnam, Ministry of S~eel and Mines, New Delhi.

2. Text of the Agreement on Economic and Technical Coopera­tion between the Union of Soviet Socialist Republics and the Republic of Egypt signed on 29 January 1958, Article 6, in Marshall !.Goldman, Soviet Foreign Aid (New York,· 1967), Appendix 5, pp.222-7.

The Soviet offer of assistance also played a major

role, as the experiences of India and Egypt suggest, in improv-

ing capabilities of these countries vis-a-vis transnational

corporations and Western sources of technology. The Soviet

willingness to assist India, as for instance, in setting up a

major steel plant at Bhilai enabled the country to reject

the Western offers of assistance with its harsh terms and

305

conditions. The Soviet offer compelled West German and British

firms to review their insistence for participation in the

proposed steel projects in India. This was true, to a consider­

able extent, in the case of Helwan steel project in the construc­

tion of which various West German terms had advocated more or

less similar terms and conditions. Under the circumstances, it

is logical to suggest that the Soviet offer of economic and

technological assistance enabled both India and Egypt to

establish steel plants and various other projects in the desired

manner. In other words, the Soviet model on transfer of techno­

logy played a creative role in safeguarding the independence

of decision making as well as right to choice of India and

Egypt with regard to various developmental projects.

7.3 TECHNO-ECONOMIC ESTIMATE

Indian steel industry had the unique experience of

setting up five major integra ted steel plants with technological

assistance from diverse sources. While three plants received

substantial Soviet assistance for its construction and expansion,

British and West German firms extended assistance to one steel

plant , each. These factors offer ample scope for a relative

estimate of the techno-economic performance of Soviet-aided

steel plants which will enable us to place transfer of Soviet

technology in a better perspective.

The operational parameters and production performances

of a project indicates, in a large measure, the technological

306

competence of the project. In other words, these parameters

offer considerable opportunity to assess the c:ompeti ti veness of

the project in a relative and absolute sense.

In the specific context of India, Bhilal. and Bokaro, the

two major Soviet-aided steel plants stand out among the integ-

rated steel plants in the country in several respects (Visakha-

pa tnam Steel Plant is under construction). Bhilai and Bokaro

togeth~r have the largest installed capacity and have recorded

the best capacity utilisation among public sector steel plants

in the country. The combined output of these plants account

for over 65 per cent of the steel produced annually in India.

The operational efficiency of Soviet aided steel plants, as

already discussed in the previous chapter, has been best in

the country and in certain cases comparable to international

standards. Reflecting on the contribution of Bhilai Steel Plant,

E. R. C. Sekhar, Managing Direc1or of the Bhilai Steel Plant and a

technocrat by profession observed: ,

Another significant impact of Bhilai on the country's evolving industrial potential, which actually transcends the steel produced by the plant, was in the new breed of engineers, techno­logists and technocrat which was emerging from the Womb of Bhilai, and confidently · taking charge of steel and allied industries across the country. . . Concepts of design which gave birth to what is today MECON, were born in the Constrtic­tion Design Cell of Bhilai.... Bhilai played a leadership role in the strengthening of the econo­mic sinews of the country, by producing· i>rogres­sively better and wider qua~ities of steel.

1. E. R. C. Sekhar, "The Historical Importance of Bhi lai", in Ministry of Steel and Mines, Metars- in India's Development: The Vision of Jawaharlal Nehru (New Delhi, 1989), pp.23-26.

307

The relatively better performance of Bhilai and Bokaro

compared to other public sector steel plants in India· results

from the effective manner in which technology has been transfer-

red by the Soviet Union. The essential pre-requisite for

the effective operation of an integrated steel pla'nt which is

the coordination of integra ted functions was realized at Bhilai

and Bokaro through effective training programmes and overall

supervision. The intergovernmental agreement on transfer of

Soviet technology as also the specific contracts which provided

the specific details of the responsibilities of participating

organisations promoted larger coordination at all levels of the

construction and operation of the Soviet aided steel plants.

Conversely, in the absence of such a mechanism, steel

plants at Rourkela and Durgapur became problem plants. In the

absence of any comparable central agency with the responsibility

of ensuring continued efficient operation at Durgapur and

Rourkela, production programmes suffered severe set backs. The

extent of the problem is evident from the Report of the Rourkela

team which visited West Germany for securing additional drawings,

equipments and training facilities for Rourkela steel plant which

observed:

Training of personnel as well of experts from foreign firms experience. This is evident General Manager ~ad with other companies ...

as the availability have been a bitter from the discussion

various German and

2. Report on the Visit of General Manager, Rourkela Steel Plant to UK, west Germany and Austria, October 11-21, 1972, Rourkela Steel Plant (Rourkela, 1973), p.41.

308

The Rourkela team visited M/ s Siemens and M/ Erlangen,

West German firms who had participated in the construction of

the first stage of Rourkela steel plant. In the course of

discussions with these firms on 10 October 1972, the visiting

Indian team was told that for the equipment supplied by them at

the one million tonne stage of Rourkela, they are finding very

great difficulty in· obtaining from their sub-suppliers. Even

after great persuasion, the sub-suppliers in accepting the

orders, are demanding exhorbitant prices. 3

On the other, Durgapur steel plant built with the assist­

ance of various British firms confronted severe problems arising

from lack of cooperation on the part of foreign terms. As for

instance, the HSL (Ranchi) team on a visit to Europe in 1972

with the objective of exploring avenues to obtain the services

of a few specialists on a short-term contract basis for the

construction of coke oven battery 5A at DSP found it extremely

painful to oblige the foreign firms which had participated in

the construction of the project earlier. After extensive

discussions, observed the· team in its report, it came to light

that due to various pressures M/s Copper have gone back on their

earlier promise of actively helping_ HSL in respect of providing

technical advice on the design already worked out by CEDB

(now MECON) on the basis of the design supplied by them for

coke oven battery No.4 at Durgapur. In fact, at one stage

3. Ibid, p.42.

309

M/s Cooper hinted that the question of patent rights which they

had transferred to other companies would be involved if HSL were

to use their design. 4 Perhaps, these experiences would serve as

a reference to the nature of participation offered by Western

terms in the transfer of technology.

Perhaps, these experiences from West German and British

firms at Rourkela and Durgapur, respectively, would serve as a

point of reference to the nature of participation offered

by Western sources in the transfer of steel technology to India.

On the other, training of national personnel has been an

important, perhaps the most distinct aspect of transfer of

Soviet technology as far as Indian experience has been concerned.

As a matter of fact Soviet experts at all levels have been

giving extensive training and advice to Indian personnel not

only in the construction but in the operation and maintenance

of steel plants.

Indian experience in the development of domestic iron and

steel industry during the post-War period reveals that transfer

of Soviet technology played a significant role in promoting

indigenous capabilities. This has been done gradually through

the transfer of skills and transfer of design and equipment

manufacturing capabilities to Indian organisations under the

4. Report of the HSL Team Deputed to UK; Belgi urn and France in January-February, 1973 in connection with the Recruitment of Coke Oven Specialists, HSL (Ranchi, 19~pp.4-5.

310

active support and close supervision of Soviet experts and

organisations.

A relative estimate of the project implementation of steel

plants at Bhilai and Bokaro reveals the progressive growth

played by Indian organisations from time to time. Indian

experience and capabilities in steel making having been

negligible during the fifties. The first stage of major steel

plants at Bhi lai, Rourkela and Durgapur was completed more or

less on a turn-key basis by the participating foreign organisa­

tions. Thus, preparation of the DPR, design and drawings, supply

of almost all equipments besides construction and operation

activities of the first stage of Bhilai steel plant were

performed by various Soviet organisations.

provided in the inter-governmental agreements

Gradually, as

and specific

contracts, Indian organisations began to play an increasingly

larger role during the first and second expansions of Bhilai

steel plant. This was manifest in the form of increasing

indigenous supply of equipments and materials, besides the

participation of MECON in design and consul tancy activities.

In the construction of the second Soviet-aided steel

plant at Bokaro, unlike at Bhilai first stage, 'a number of Indian

organisations participated at all levels, from the design to

supply of equipments and materials as well as ·construction and

erection activities. The expansion of Bokaro up to 4 million

tonne stage was characterised by the highest level of indigenous

311

participation. Thus, Indian consultants in the public sector,

MECON was the principal consultant at Bhilai and Bokaro during

the 4 million tonne expansion stage while indigenous organisa-

tions in the public sector such as HEC, MAMC, BHEL, JESSOP,

Braith-waite and Garden Reach Works were among major suppliers

of equipment and rna terials. Indigenous supply of equipments_,

structurals and refractories was almost total during the

4 million tonne expansion of both the Soviet-aided steel plants

where:fts corresponding figures during the first stage of Bhilai

was practically negligible.

Perhaps, the Report of the Task Force on Iron and Steel

(Fifth Plan, Group VI) presented to the Department of Steel,

Ministry of Steel and Mines during early seventies would provide

certain valuable "insights into the Soviet role in promoting

the indigenous technology capabilities mastered by Indian

steel industry. According to the Report, higher percentage of

indigenous supply achieved by the country was possible by

obtaining manufacturing drawings from the Soviet Union. Even

for units which were designed by Indian consultants, clear

indication and direction were provided by the Soviets through

design assignments. 5

Although Bokaro was designed and constructed as per

Soviet technology and know-how, for the expansion of the plant

5. Report of the Task Force on Iron and Steel (Fifth Plan), The Planning Group VI, on Design and Construction of Steel Plants, Ministry of Steel and Mines, Department of Steel (New Delhi, n.d.), p.l4.

312

up to 4 million tonnes stage, CEDB (now MECON) was entrusted with

the detailed engineering. The Report continued to observe:

At Bokaro, CEDB will be involved in a big way in the design of expansion of an integra ted steel plant as a whole, and they have got collaboration agreement with Gipromez for supply of know-how in specified aseas, extendable through supplementary agreements.

' For a country envisaging indigenous equipment manufacture

for steel plants, design and manufacturing drawings are the

biggest bottlenecks for production. This was quite true of India

during the fifties and larger part of the sixties. However,

HEC (Ranchi) which is almost fully committed to the manufacture

of steel plants has been provided the design documentation

for various units of the steel plant by the Soviet organisations.

As a part of transfering the skills, Soviet side also extended

best efforts to Indian organisations in the construction and

execution work of the expansion programmes of Bhilai and Bokaro

projects. Reflecting on the manner in which Soviet side extended

a helping hand to Indian organisation, the Report observed:

In the construction of both Bhilai and Bokaro where major construction and erection works, besides civil engineering i terns, were done departmentally, extensive help was taken from the Soviet experts in construction, erection and commissioning of the component units of the plant. Planning the construction, determination of erection , sequence, guiding and supervising the erection of mechanical and electrical equipment, and enforcing quality control in all construction activities and finally testing and commissioning the units, were done by these Soviet experts who have got long experience in the construction of different units of an inte­gra ted steel plant

1assisted by Indian engineers of

DSP (sic) and BSL.

6. Ibid, p.15. Emphasis added.

7. Ibid, pp~54-55.

313

By seventies, India had mobilised a vast reservoir of

technical manpower in steel sector besides developing indigenous

design, construction and equipment manufacture capabilities.

Major chunk of the required manpower resources came from either

Bhilai or Bokaro. Thus, the remarkable growth in indigenous

participation represents the impressive strides made by Indian

steel industry.

The growth in indigenous capabilities equipped the

country with the necessary skills and capability for undertaking

major tasks in the steel sector. These capabilities thus

enabled India in undertaking major portion of the expansion

schemes of both Bhilai and Bokaro, on its own. Besides, posses­

sion of these capabilities had significant influence in India's

decisi9n to proceed with the construction of a major advanced

integrated steel plant at Visakhapatnam; it also enabled the

country to choose appropriate technology for the project from

various international agencies and bargain effectively with such

sources for acquiring relevant technologies on terms acceptable

to the country; and to that extent it is illustrative of the

technological independence won by Indian steel industry.

However, the Soviet role in promoting indigenous techno­

logical capabilities became a controversial issue on the question

of association/disassociation of Mjs Dastur and Co., metallurgi­

cal consultants in the private sec~or, with Bokaro project. The

controversial issue gained currency in the light of the questions

314

posed by the Committee on Public Undertakings in its 68th report

presented to the Fourth Lok Sabha (1969-70) which observed:

The very purpose of getting the design consul tancy set up by Dastur and Co. with the Government initiative at the earlier stages was lost sight of and it was not put to good use in setting up the Bokaro steel plant for which8 purpose alone Dastur and Co. was brought to India.

However, the issues raised in this regard tend to be inflated

and slightly illogical in the light of the reply furnished

by the Ministry of Steel and Heavy Engineering and accepted by

the Committee which finds a place in the Fourteenth Report of

the Committee, as follows:

When no definite source of foreign aid was in sight after the withdrawal of the request for American aid, it was the intention of the governent to proceed with the project with Dastur and Co. as the principal consultants and with such foreign aid as might become available. This was considered as a sui table al terna ti ve under the conditions prevailing at that time, but not necessarily the only consul tancy arrangement for implementing the project. . • . Having accepted Soviet aid, to which there was no better alternative available and while a heavy investment was at stake, the government was naturally anxious to ensure that Soviets remain responsible for the technical soundness of the project. The important thing was to ensure that a technically sound plant was established by utilising the assistance offered by the Sovieb rather than to safeguard the posi tio~ of Dastur and Co. as the principal consultants.

8. India, Lok Sabha, Committee on Public Undertaking ( 1969-70), Fourth Lok Sabha, Sixty-Eighth Report, Bokaro Steel Ltd. (New Delhi, 1970), p.16.

9. India, Lok Sabha, Committee on Public Undertakings (1971-72), Fifth Lok Sabha, Fourteenth Report, Action taken by Government on the Recommendations contained in the Sixty-Eighth Report of the Committee on Public Undertakings (Fourth Lok Sabha) (New Delhi, 1972), p.28.

315

In India, stee~ plants have been built with the techno­

logical assistance from various countries and a large number of

international organisations. Howeve~ what makes transfer of

Soviet technology distinct from the realm of international

technology transfer has been the effectiveness of the Soviet

model in promoting endogenous technological capabilities:

Experts in Indian steel industry who have associated with various

steel plants in the country have confirmed time and again

the positive contribution made by the Soviet· side in promoting

technological capabilities of the country. In this context, it

is relevant to recall the observation made by T.V.S.Ratnam,

Director of M/s Dastur and Co. who maintained:

In fact today we are able to design and manufacture the bulk of the steel plant equipment and also our design and consul tancy organisation as well as the construction and erection agencies have achieved complete self-reliance. These achievements have been possible only because of the massive coopera­tion efforts in the transfer of technology by the Soviet £Bion over the past 30 years, at different plants.

The relative performance of the Soviet aided steel

plants Bhilai and Bokaro - in terms of important techno-

economic parameters such as labour productivity, cost of produc-

tion, specific energy consumption, blast furnace productivity,

consumption rates of other outputs, et.c. has been the best in the

country and in certain cases comparable to or better than

10. K.Krishna Moorthy, The Road Begins at Bhilai' (Madras, 1981), p. 101.

316

TISCO which is in the private sector.

The growth of Indian steel industry during the past four

decades, although impressive in many respects, has also been

marred by a host. of techno-economic constraints. Foremost among

them has been the persistent delay in the project execution of

the steel plants. The Soviet-aided steel plants - Bhilai, Bokaro

and VSL - have been no exception in this regard.

The inordinate delays in the completion of projects have

often led to revision of cost estimates culminating in consider­

able cost over-run. Besides, low productivity, high cost per

tonne output and excessive consumption of energy and other inputs

which characterise Indian steel plants ha·ve raised vi tal

questions on the financial viability and interna tiona! competi­

tiveness of the industry as such.

The first stage of Bhilai steel plant ( 1 MT stage) was

completed within the time-frame set for the project. A quanti­

fication of the time intervals suggests that BSP adhered to the

best time schedule compared to the first stage of RSP and DSP.

In addition, Bhilai was the first steel plant in the public •

sector to reach the rated capacity. However, expansion of BSP

up to 2. 5 million tonnes experienced delays, exceeding over

one-and-a-half years in the case of certain facilities. The

extent of such delays in the second expansion of the project is

evident from the fact that although the expansion programme up to

317

4 million .. tonne stage . was scheduled to oe completed by . early

eightiei, some of the facilities are yet to be . . d 11 comm1ss1one .

On the other hand, Bokaro, the second Soviet-aided steel

plant, unfolds a tale of inordinate delays from the first stage

itself. Controversy over US assistance had already delayed the

launching of the project by a decade. It was further delayed

during the first phase of 1. 7 million tonne construction while

the 4 million tonne expansion scheme was characterised by the

worst delays.

The construction schedule of BSL at one million tonne

stage had to be revised six times resulting in a total delay of

86 months before the completion of the project. The first

expansion ( 4 MT stage) of BSL which was to be completed by March

1978 as per the original Soviet detailed project report.

Paradoxically, the most important feature of expansion scheme

which is cold rolling mills are yet to be completed.12

Construction of Visakhapa tnam steel project, the third

steel plant being built with Soviet assistance (Soviet participa­

tion is considerably less at VSP compared to BSP and BSL), has

also been delayed considerably. The first stage of 1. 5 million

tonne liquid steel was intended to be commissioned by December

11. Ministry of St~el and Mines, New Delhi, Annual Reports for the Years 1981-82 to 1989-90.

12. Ministry of Steel and Min:es, Department of Steel, New Delhi, Annual Report 1989-90, p. 6; and N. R. Srinivasan, The History of Bokaro (Bokaro Steel City, 1988), p.32.

318

1977. However, delays were so critical that the first blast

furnace (Godavari) could be commissioned only in 1990.13

The delays have inevitably led to revision of estimates

and in turn considerable cost-escalation. For instance, capital

costs of all steel plants under SAIL increased substantially

during the first stage although it was relatively less for BSP.

However, the 4 million tonne expansion of both BSP and BSL was

affected by huge cost escalations. For instance, cost over-run

at Bhilai (4 MT stage) increased almost 297 per cent from the

original estimates whereas at Bokaro cost over-run so far

has been estimated to be around 227 per cent (see Table 7. 2).

With cold rolling mills not yet commissioned, actual cost of all

facilities of expansion of Bokaro up to 4 million · tonnes may

go up still further.

At VSP, according to the annual report of the Ministry of

Steel and Mines for 1989-90, cost of the project has been revised

to Rs. 7, 332.77 crores as against Rs. 3, 873. 28 crores approved

by the government during 1982.

A relative assessment of project implementation at Bhilai,

Bokaro and VSP suggests that except the first stage of BSP,

construction and expansion of all the steel projects have been

delayed considerably. It is also to be noted that indigenous

13. Ministry of Steel and Mines, Department of Steel, New Delhi, Annual Report 1989-90, pp.71-72.

319

Table 7.2

COST REVISION AT BHILAI AND BOKARO STEEL PROJECTS - 4 MT STAGE

Plant Rs. in crores

(1) Bhilai

Original Estimate (1975-76)

Revised Estimate (1982-83)

(2) Bokaro

Original sanction (1978)

First Revision (1983)

Second Revision (1987)

Further Revision (1988)

538.98

1,600.50

947.24

1,637.55

2,092.16

2,149.40

Sources: 1. K.Krishnamurthy, Transfer of Technology in India's Iron and Steel Industry since Independence, Working Paper No.15, Indian Council for Research on Interna­tional Economic Relations (New Delhi, 1985), p.93.

2. N.R. Srinivasan, The History of Bokaro (Bokaro Steel City, 1985), p.59.

participation was least at the first stage of BSP, whereas there

has been a progressive growth in indigenous participation in

design, consul tancy, equipment supply and construction during

the expansion programmes of both BSP and BSL.

The delay and cost over-run analysis reveals that there

has been a total lack of coordination in the execution of the

expansion programmes of both BSP and BSL. There has been

320

considerable delay in procuring supplies from indigenous and

international agencies. As far as Soviet supplies are concerned,

there was considerable delay in the finalisa tion of orders,

procedural delay and time lag in procuring supplies for the

4 million tonne expansion of BSP and BSL. The nature of delay

at Bokaro expansion is illustrated in Table 7. 3. The Ministry

of Steel and Mines, in its annual report for 1989-90, cites,

among other reasons, the incidence of delays in procuring certain

critical i terns of equipments required at Visakhapa tnam from the

Soviet Union.

However, it will be an over-simplification to hold

delays on the Soviet part as the exclusive factor responsible

for the overall delay at 4 million tonne expansion of BSP and

BSL. It must be pointed out that serious lapses have occurred

on the part of indigenous consultants and suppliers. The delay

and cost over-run analysis of Bokaro expansion reveals that

there were anomalies in the design work carried out by MECON, the

principal consultants for the 4 million tonne expansion, delay

in the supply of drawings, frequent modifications, improper

coordination between the consultants and suppliers. There were

severe delays in the indigenous supply of equipments and

rna terials by leading public sector firms. Besides, HSCL which

was the major executing agency vested with the task of completing

most of the civil, structural and erection work, could not cope

321

Table 7.3

BSL: CRANCE IN DELIVERY SCHEDULE OF USSR EQUIPMENT

S.No. Contract No.

A. 1.7 MT Stage

1. 7622-00

B. 4 .·0 MT Stage

2. 40090

3. Add, 1 to 40090

4. Add. 2 to 40090

5. Add.3 to 40090

6. Add. 4 to 40090

7. Add.5 to 40090

8. Add.6 to 40090

9. Add. 7 to 40090

10. Add.8 to 40090

11. Add.9 to 40090

12. Add.10 to 40090

13. Add.11 to 40090

14. Add.12 to 40090

15. Add.14 to 40090

16. Add.15 to 40090

17. Add.16 to 40090

18. Add.18 to 40090

19. Add.21 to 40090

20. Add.24 to 7527

21. Add.25 to 7527

22. Add.26 to 7527

23. Add.28 to 7527

24. Add.30 to 7527

Date

3.5.66

18.12.71

30.11.72

18.8.72

18.8.72

26.8.72

31.8.73

25.2.74

4.5.74

7.4.76

30.4.75

25.3.75

1.10.74

15.11.74

30.4.75

29.7.77

18.7.79

1. 2. 80

6.5.83

23.12.75

15.9.75

2.4.76

25.2.77

5.11.77

Note: Add. refers to Addendum.

Deliver as per contract

3.7.70

18.3.73

31.3.76

18.2.74

18.2.74

26.3.76

31.12.76

25.8.75

4.5.74

9.12.77

30.4.77

25. 1. 77

31.3.76

15.4.76

30.4.77

31.1. 80

18.6.82

1. 2. 82

5.11.83

23.12.76

15.9.76

18.6.77

19.4.78

20.6.79

Extended delivery

27.2.79

31.12.79

30.6.81

March 77

Dec. 77

31.12.81

March 76

31.3.79

31.12.80

25.4.78

31.10.77

6.3.83

31.12.83

31.3.77

~ource: Delay and Cost Over-run Analysis Bokaro, 4 MT Stage Unpublished Report, Network Planning Department, Projects Division, BSL (Bokaro Steel City, n.d.).

322

with the task. 14 The expansion scheme of Bhi lai project up to

4 million tonnes also was delayed for more or similar reasons.

Thus, lack of proper coordination and e':perience required

to execute projects at a scale envisaged at Bh i lai and Bokaro

held back the expansion programmes considerably. Perhaps, it

would be the in vi table outcome of the process of indigenisa tion

and development of indigenous technological capabilities.

A comparison of the techno-economic parameters of Indian

steel industry in terms of international standards reveals the

extent of constraints, particularly the cost and quality effec-

tiveness, of Indian steel plants. The consumption rates of major

inputs such as energy, iron ore, coking coal and lime stone

has been much hi'gher in India, and in certain cases almost

d bl f th t . J 15 ou e o a 1n apan.

Specific energy consumption of Indian steel plants has

been nearly twice that of advanced countries. While specific

energy consumption decreased from the level of 9-12 G cal jt to

5. 7 G cal/t in the developed countries during the past two to

three decades, it has been in the range of 9-16 G cal/t in

Indian steel plants, even in the early nineties. 16 The hot metal

14. Delay and Cost Over-run Analysis: Bokaro 4 MT Stage, Unpubli­shed Report, Network Planning Department, Projects Division, BSL (Bokaro Steel City, n.d.), no page number.

15. P.C.Gupta, Raw Materials for Steel Plants, paper presented at the Round Table Meet on Steel Industry for the Next Decade Organised by the Ministry of Steel, Mines and Coal, 18-19 February 1985 (New Delhi, 1985), p.182.

16. Report on Planning of Energy Conservation in SAIL Steel Plants, RDCIS, SAIL (Ranchi, 1983), p.77.

323

output (mol ten iron) per cubic metre of blast furnace capacity

per day and the 'tap to tap' time and 'heat size' of steel

melting shops would give a measure of the efficiency of blast

furnaces and steel melt shops, respectively. In terms of inter-

national standards in this regard, the performance of Indian

steel plants has been sub-optimal, although Bhilai 's record has

been comparable to that of TISCO. 17 The combined effect of high

consumption rates of inputs and low performanc'e of various shops

is such that cost of steel per tonne output has been much

higher in India and in certain cases twice tha·t of international

producers.

International comparison of manpower productivity

indicates the extremely low performance of Indian steel plants.

For instance, while advanced countries such as Japan and the

United States attained manpower productivity of 259 and 311 ingot

tonnes per man year in 1983, it was only 36 in the case of India

(see Table 7.4). Even a relatively new comer like Brazil

18 improved its performance in this regard in a short period.

The continuing sub-optional performance has been a ttri-

buted to, quite rightly, among other factors:

17. Arun Ghosh, "Efficiency and Productivity of Indian Manufactu­ring Industry: A Few Case Studies", Economic and Political Weekly (Bombay), vol.19, Annual Number (1984), pp.1401-9.

18. M.R.R.Nair, Manpower Productivity and Factors Leading to Motivation of Employees, paper presented at the Round Table Meet on Steel Industry for the Next Decade, Organised by the Ministry of Steel, Mines and Coal, 18-19 February 1985 at New Delhi, pp.180, 266.

324

Table 7.4

MANPOWER PRODUCTIVITY: INTERNATIONAL COMPARISON

Ingot Tonnes per man year

Country 1974 1980 1981 1982 1983

Japan 255 293 270 265 259

USA 258 255 278 234 311

UK 117 106 184 190 234

Brazil 64 105 101 90 105

India 35 39 39 36

Source: World Steel in Figures, I ISI 1979-84, Year Book of Labour Statistics IL0-1984, cited in M.R.R.Nair, Manpower, Productivity and Factors Leading to Motivation of Employees, Paper presented at the Round Table on Steel Industry for the Next Decade, organised by the Ministry of Steel, Mines and Coal, 18-19 February, 1985 (New Delhi, 1985), pp.268, 280.

(i) inferior quality of inputs;

(ii) large ma~ntenance backlogs;

(iii) Inadequate emphasis on maintenance, renovation and

replacement; and

(iv) mis-match in the capacity of various plants thereby

preventing steady integrated functions. 19

Besides, the process of indigenisa tion 'contributed to the

enormous delays in the completion of construction and expansion

programmes.

19. First Report of the Action Group of Investment Integrated Steel Plants of SAIL and IISCO, SAIL 1985), pp.4-6. -- ---- ---

Planning of (New Delhi,

325

At this point, the views expressed by A. F. Kouznetsov,

Chief of Soviet experts at Bokaro presently, about the opera-

tiona! constraints and problems experienced at Bokaro mer:;i t

attention. In an interview with him at Bokaro, Kouznetsov who

has the rich experience as Managing Director of a major Soviet

steel plant at Novo-Kuznetsk for over 10 years, observed:

Bokaro has good facilities, best technology and vast human resources; but lack of technology discipline, lack of mechanism to tap ideas at the grass-root level result from improper planning and coordination. Many works which could be sa tis­factorily completed within the plant itself are left to private con"iractors and their sub-contrac­tors, often leading to quality2&onstraints besides causing delays and high costs.

Another important explanation often cited for the rela-

ti vely poor performance of Indian steel industry has been the

pre.:;dominance of out-dated technology and lack of measures for

modernisation and'technology upgradation. 21 Modern developments

in steel making such as LD converter process and continuous

casting are yet to be employed by Indian steel industry in a

significant manner. As for instance, the open-hearth route which

is regarded as an obsolete and traditional method of steel making

accounts for 34 per cent of the steel output in the country,

20. Interview with A. F. Kouznetsov (General Supdt.), Soviet Experts at Bokaro Steel Plant, Bokaro Steel 15 February 1991.

Chief City,

of on

21. Ramprasad Sengupta, "Technological Diffusion , in Indian Steel Industry", in Yoginder K.Alagh, ed., Process of Industriali­sation and Technological Al terna ti ves, Lancer Interna tiona! in Association with the ICSSR (New Delhi, 1988), pp.60-62.

326

22 even today. The 2. 5 mi 11 ion stage of Bhi lai uses only the

open-hearth process while its expansion to 4 million tonne as

well as Bokaro since its inception have provided for LD Converters

. f . 1. . f t. t. 23 along w1th ac1 1t1es or con 1nuous cas 1ng.

Reviewing the constraints of Indian steel industry

V. Krishnamurthy, former Chairman of Steel Authority of India

and a technocrat by profession, observed:

In the first half of 1960s steel was produced in the country at 40 per cent lower than the cost of steel available anywhere in the world. There were no complaints about the quality of steel. After having started in that fashion, we see today a situation where we are neither known for producing quality steel nor are we able to meet the total requirement of steel. Nor are we cost effective in the production of steel. . . . As a result, what was once the most up to date techno­logy has lost its cutting edge with the passage of time ... we require moderni2~ tion not of technology and with respect to ideas.

Perhaps, these problems confronting Indian steel industry

partly correspond to the problems arising from lack of modernisa-

tion and technology upgrada tion in the Soviet iron and steel

industry. As a rna tter of fact, Soviet steel industry has

witnessed major technological innovations in certain respects

22. SAIL, Statistics for Iron and Steel Industry in India, 1990 (New Delhi, 1991), pp.307-402.

23. Ramprasad Sengupta, n.21, pp.60-62

24. V. Krishnamurthy, "The Dynamics of Technology Transfer", Iron and Steel Review (Calcutta), Annual 89 (1989), pp.9-11.

327

such as blast furnace technology. For instance, "the 3200 M3

blast furnace at Novo-Lipetsk has a productivity of 2. 5 T /M3

of

useful ·volume per day, which comes to interna tiona! standards

for such a big furnace"1 observes the SAIL team from Bhilai which

visited various Soviet steel plants, "high intensive working has

contributed to high production and technologies

II 25 continuously updated.

are being

However, there are evidences to suggest that the Soviet

iron and steel industry has been extremely slow in introducing

modern technological developments such as oxygen steel making

and continuous casting which would substantially economize the

cost of production and enhance quality of outputs. As for

instance, way back in 1956, Soviet Union was one of the first

countries in the world to introduce oxygen steel and continuous

casting into full scale production 26 (see Table 7.5). Moreover,

as early as 1951, the Soviet Union was one of the first countries

to introZ:duce industrial vertical sector - semicontinuous at

the "Krassny Oktyabr works11 as part of developing, the technology

of continous casting'.

While in the technologically advanced Japan and West

Germany, continuous casting accounted for 93 per cent and

25. Report on the Tour of SAIL, Bhi lai Steel Plant Team to the USSR from 4 February 1986 to 15 February 1986 (Bhilai, n.d.), pp.1-2.

26. Ronald Amman, "Technical Progress and Sov·iet Economic Deve­lopment: Setting the sc;ene", in Ronald Amman and Julian Cooper, eds., The Technical Progress and Soviet Economic Development (U.K., 1986), p.12.

328

Table 7.5

ADOPTION OF NEW TECHNOLOGIES: DATES OF FIRST PRODUCTION

Technology USSR USA Japan FRG

Oxygen Steel 1956 1954 1957 1955

Continuous casting 1955 1962 1960 1954

UK

1960

1958

Source: Compiled from R. Amann, J. M. Cooper and R. W. Davies, ed., The Technological Level of Soviet Industry ( 1977), cited in Ronald Amman, "Technical Progress and Economic Development; Setting the Scene", in Ronald Amman and Julian Cooper, eds., The Technical Progress and Soviet Economic Development (U.K., 1986), Table 1.1, p.12.

88.5 per cent of the steel output, respectively in 1988, corres-

ponding figures for the Soviet Union was a mere 16.5 per cent.

This was, it may be noted, much below the world average of

27 58.8 per cent for the same year (see Table 7. Ei). The result,

Soviet iron and steel. industry began to lo::Se its competitive

edge, in a relative sense, by early eighties.

Modernisation and technology upgrada tion in the Soviet

steel plants have proceeded at a snail~ pace. This is evident

from the fact that while Japan, West Germany and the United

Kingdom discarded totally the traditional open-hearth process by

27. International Iron and Steel Institute, sties, Steel Statistical Yearbook 1990 Table 5, p.9.

Committee on (Brussels,

Stati-1990),

Year

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

Table 7.6

CONTINUOUSLY CAST STEEL OUTPUT FOR SELECT COUNTRIES, 1975-88

Japan

31.1

35.0

40.8

40.2

52.0

59.5

70.7

78.7

86.3

89.1

91.1

92.7

93.3

93.0

USSR

6.9

8.1

8.3

9.5

10.3

10.7

12.2

12.6

12.4

12.3

12.5

14.5

14.9

16.5

USA

9.1

10.5

12.5

15.2

16.9

20.3

20.3

29.0

32.1

39.6

44.4

55.2

58.8

60.9

(Percentages of total crude steel output)

U.K

8.5

9.7

12.5

15.5

16.9

27.1

31.8

39.0

46.6

52.0

54.8

60.5

64.8

70.5

Brazil

5.7

12.1

17.4

24.7

27.6

33.4

36.4

41.1

44.3

41.3

47.7

46.1

45.5

49.0

West Germany World

24.3

28.3

34.0

38.0

39.0

46.6

53.6

61.9

71.8

76.9

79.5

84.6

87.9

88.5

14.2

16.5

19.5

22.3

25.2

30.0

33.7

39.7

43.1

46.61

49.6

52.3

54.8

58.8

Source: Compiled from Steel Statistical Yearbook, 1985 and 1989, International Iron and Steel Institute, Brussels.

330

early eighties, the process accounted for about 50 per cent of

the steel turned out by Soviet steel plants (see Table 7.7).

The Soviet Union could offer only what they possess by

way of transfer of Soviet technology. Consequently, countries

like India has found it difficult to acquire modern technologies

such as Oxygen steel making and continuous casting from the

Soviet Union during

that would explain

the sixties and

in some measure

seventies. And,

the correlation

perhaps

of steel

technology in use in India and the Soviet Union.

In the post-War period, as the Soviet Union began to

extend technological assistance to developing countries, a major

debate came to prominence regarding the technologies transferred

by the Soviet Union to developing countries. Quite a number of

studies have raised doubts about the Soviet technological

competence, as also on the nature of technologies transferred

in relation to what the Soviet Union could have offered. This

study, which has examined transfer of Soviet technology to steel

industry in India and Egypt tends to disagree with such proposi­

tions. On the other, there are evidences to suggest that

the technology offered by the Soviet Union has been the best

available in that country during the fifties and sixties so long

as wider considerations were compatible to each other. There

are instance of delays in the

technocratic and procedural

Soviet supplies - bureaucratic,

in nature. Indian experience

in this regard, as for instance, is evident from the Report of

Table 7.7

CRUDE STEEL PRODUCTION BY PROCESS

{Production in million tonnes2

Year Process JaEan USSR USA W.German India Prodn. % Prodn. % Prodn. % Prodn. % Prodn. %

1981 0 76.48 75.22 44.00 29.53 66.46 61.07 33.39 80.25 2.58 23.88 E 25.19 24.78 16.20 10.87 30.14 27.71 6.58 15.81 2.14 19.58

OH 88.00 59.06 12.20 11.22 1.64 3.94 5.88 54.65 Others 0.80 0.54 0.16 1. 50

1985 0 74.76 71.00 48.98 31.70 47.04 59.40 33.00 81.50 3.94 30.00 E 30.53 29.00 17.46 11.30 26.29 33.20 7.50 18.50 2.65 23.00

OH 87.76 56.80 5.86 7.40 4.91 42.70 Others 0.31 0.20 w

w r--

1987 0 69.14 70.20 53.0 32.8 50.03 62.3 29.9 82.5 4.8 37.2 E 29.36 29.8 23.0 14.3 30.2 37.7 6.36 17.5 3.6 27.6

OH 85.0 52.9 4.6 35.2 Others

1988 0 77.24 70.3 60.47 37.1 52.57 58.4 33.93 82.7 5.6 39.4 E 31.43 29.7 22.16 13.6 32.87 36.5 7.08 17.3 3.79 26.5

OH 80.35 49.3 4.64 5.20 4.87 34.1 Others

Source: Compiled from World Steel in Figuresz for various years, International Irori and Steel Institute, Brussels.

332

a high level delegation, comprising of representatives of BSL,

CEDB, HSCL, HEC and BHEL which visited the Soviet Union for

detailed discussions on the 4 million tonne expansion of Bokaro

steel plant; the Report observed: •

Initial problems disappeared when I (leader of Indian team) talked with Mr. Sergea v, Deputy Chairman of State Committee for foreign economic relations on 17 Apri 1 1973. Since then, Soviets were highly cooperaive and helpful.... It was stated that in case they had to divert their resources at the sacrifice of own requirement, then they would 1 ike to be sure that the equipment supplied by them would not remain idle for years as had happened in the first stage.. . . After the matter (procedural and technical objections) was taken up at a higher level (political) the Soviet side agreed to reconsider it... As a rna tter of fact, the Soviet agencies are finding it extremely difficult to meet their own requirements for carbon refractories.... In view of our insistence that our present requirements of carbon blocks and refractories must be met from the USSR as there was no time to establish an alternative source ~or i~me~ia te re~mirements, the Soviet side agreed 1n pr1nc1ple ....

In the light of the above considerations, as also in terms

of the observations made by various experts in steel industry,

it is logical to suggest that transfer of Soviet technology to

countries like India has been in line with the requirements and

needs of the recipient. This has been confirmed by Padma Desai

in a study on Bokaro steel plant who observed that the Soviet

28. Report on the Visit to the USSR .Qy the Delegation Headed by S.S.Sidhu, Joint .Secretary, Ministry of Steel and Mines (New Delhi, 1973), vol.II, pp.11, 17-18.

333

negotiators, for the -construction of Bokaro steel plant, were

not making an offer of the 'take it or leave it' variety.29

In sum, it could be stated that transfer of Soviet

technology to steel industry in India made a positive contribu-

tion to the progressive growth in indigenous technological

capabilities of the country. In turn, it has helped the country

in developing certain amount of endogenous capabilities in steel

sector. Hence it is not altogether unreasonable to suggest that

transfer of Soviet technology to steel industry in Egypt and in

other developing countries would have served more or less similar

techno-economic functions of course in varying degrees.

29. Padma Desai, The Bokaro Steel Economic Assistance (Amsterdam,

Plant: ! Study 1972), p.44.

of Soviet