Steel Authority of India Limited

SAIL was set up in 1954, on the 19th of January with head quarters in Kolkata. Born out of the Industrial Committee Report of 1951 led by Subimal Dutt, SAIL was to use public money to build capital where only a thin pool existed in India. India of the 1950’s was hungry, naked, ill and poor and only the government had the money to make capita expenditures. The idea was to lay down a broad industrial base producing basic goods upon which further investments using such basic and intermediate goods were to be hosted. Thus, was born the Steel Authority of India. Aligned with its power over capital, SAIL attracted the best of employees and since these employees were to run pioneering and new technology, these had to be the absolute best of professionals. SAIL paid very well, in tune with international standards, housing employees in plush bungalows, state of art hospitals, the very best schools with the best teachers, steel cities were islands of high living resembling self sufficient Greek city states, boundaries to cut it off from the land of indigenous tribes and enclosing within it, the best standards of urban dwelling.

Those who lived inside its premises, because of the high life they led and because at work they handled the best of machines, unknown to most of India, SAIL made the best steel in terms of quality, the most in terms of quantity and earned the highest in terms of profits. Like the cities the employees lived in, SAIL had its own coal, iron ore, limestone, and dolomite mines, it had its captive power plants and water supply system. SAIL survived in an island, wholly owned by it but which was a firm spot on which it stood to move the world. Those days were the days of SAIL. It was literally the sailboat to a bright future of India.

SAIL’s sail got a hole for the first time in 1964 when the Joint Plant Committee was constituted to orient the company to the market economics. It was as if Greece was being shadowed by Rome; the idyllic city states were now to be sewn together as an Empire. The Joint Plant Committee was born of the Raj Committee Report that sought to ‘decontrol’ the steel industry which meant that the surpluses those were earned by each company, namely Bhilai Steel Plant or Rourkela Steel Plant would be used by the respective plants to expand their capacities and produce more steel. The years starting with 1964 were bad years for the Indian economy yet steel demand seemed to increase on pressures of urbanization; some shifts were taking place as population was moving from the villages to cities and in increasing numbers. The JPC put its finger on the first step of decontrol, namely the price. It allowed companies to charge their own prices; and to prevent them from charging high prices which they could have because of the oligopolistic nature of steel production, the JPC devised the famous price formula. By this formula, parameters of efficiencies were demarcated and “fair costs” calculated with a mark-up. Therefore, only the efficient firms could make profits and expand. Clearly the Bhilai Steel Plant and Bokaro Steel Plant expanded while Durgapur and Rourkela did not. The pricing spread to semis as well as all mill products.

While expansions would be made from profits, yet one would have to be careful about the demand of the mill products. JPC started collecting end user data and forecasting demand based on such demand. Integrated mills do not have significant flexibility of product mix and thus the demand was first disaggregated and then divided up across all mills so that every mill had a fair chance to optimally use their plant and machinery. This exercise was done by the Economic Research Unit, or ERU that was set up in 1983. ERU ran a grand model of optimization based on the linear programming and its first recruits were not economists but operations research persons. Economics came in much later, to the best of my memory only after 1997, post the Asean meltdown. Before that cost accountants and technical persons had a far greater say in matters of the ERU.

Under the JPC system and more so under the ERU, SAIL was opened to the surgical lights of analysis in terms of stuff those threatened its exclusive ensconce within the walled cities. Much of its autonomy was compromised, not because someone took it away, but because every decision of it was to pass through the JPC system, into the Ministry and then if the company was lucky, these were approved without further loops once more into the ERU. Most of the JPC personnel were respectful of SAIL as many came to the JPC system through SAIL, but one could never rule out the rude cost accountant, the arrogant operations person and the disdainful technical guy, and one negative comment could sour SAIL’s confidence because the management stood upon sensitive humans under a sheltered environment. Few realized that SAIL was aristocratic, it could function only when its exclusiveness was assured. SAIL was not trained to face rough weather; if one wanted it to perform one had to give it the assurance that its superiority would not be challenged.

Unfortunately, in 1991, SAIL was completely punctured as was divested of its exclusivity as the economy opened to private capital. SAIL was construed as being inefficient, slow, and slothful only because it was in the public sector. Discourses in the media, in the mind of the people, among politicians and in the Ministry, SAIL was discredited because it was in the public sector. All of us systematically exercised to damage the confidence of the company, or literally to take the wind out of its sail. Despite the hostilities around it, it is only SAIL which has consistently performed in a steel industry given to unsold stocks, excess capacities, and mounting debts in the form of the NPAs. It is not a matter to set aside that the steel industry leads the economy in NPAs especially it is supposed to be an industry promised to grow by 300%!.

As the private sector mindlessly pursued capacity expansions, SAIL held on its own ground, adding less and less of gadgets and kept its nose on routine production. When the lockdown happened, SAIL was thus positioned to be the only company that survived the flight of the workers. When life limped back again, SAIL was the only company that could resume production for its integrated supply system and resident employees. Also, being within a city, it could keep itself protected from the pandemic. When the waters started to recede, it could fire furnaces in no time. That is the beauty of the company and that is the worth of the public sector. SAIL is founded on solid ground with solid staff; its workers live in the steel city, their needs are met by the steel city, they don’t leave the plant and can swing back to production where others have to fight the flight of workers. SAIL does not need to be flashy, nor flighty, nor showy in buying and selling of steel facilities across the globe, it does not need to straddle continents in search for strategic acquisitions of minerals; instead SAIL can just focus on its work and deliver astounding profits just like the one it has done right now. SAIL needs respect and give that to the company, it will flourish.

About secondsaturn

Independent Scholar. Polymath.
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