Meeting the need
IndiaÔÇÖs need for steel is growing. To meet the demand, Tata Steel is making a multi-billion dollar investment in a new plant in the state of Orissa. Ruari McCallion spoke to Binay Kumar Singh about it.
There may be economic and commercial turmoil across the rest of the world but the performance of India could be an indication of how the balance is shifting. Once upon a time, we looked to the US or Germany and the EU to pull the world out of the doldrums; this time around, itÔÇÖs the Indian economy that is leading, in terms of growth and demand for manufactured goods. While established Western economies have been shrinking, IndiaÔÇÖs GDP (gross domestic product) is expected to show growth of around seven per cent in 2009. At the forefront of that growth is demand for steel.
ÔÇ£The auto manufacturing sector in India is one of the fastest-growing in the world. Those companies need steel and the Government is spending on roads, ports and telephone and electricity networks,ÔÇØ says Binay Kumar Singh, vice-president, Orissa Project, Tata Steel. ÔÇ£Our sales in November 2009 were 35 per cent up on the same month last year. Production of hot metal, crude steel and saleable steel also showed increases over 2008ÔÇöin the case of saleable steel, by 16 per cent, to 525,000 tonnes.ÔÇØ But that still isnÔÇÖt enough, either for the countryÔÇÖs flourishing manufacturing enterprises or for demand from overseas.
Tata Steel is the world's sixth largest steel manufacturer and operates in more than 20 countries across the world. Established in Jamshedpur, India, in 1907, it has recently invested in acquiring outright ownership or significant shareholdings in Corus in the UK, Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings in Singapore, to create a manufacturing and marketing network in Europe, South East Asia and the Pacific Rim countries. In total, it has the capacity to produce over 30 million tonnes of crude steel a year. It is recognised as one of the most efficient producers of steel in the world, with the lowest cost per tonne; and its solution for the needs of India and South East Asia is to build new capacity, which it is doing at Orissa, in the east of the country.
ÔÇ£The Orissa Project at Kalinganagar will come online in two phases, each producing three million tonnes annually,ÔÇØ says Singh. ÔÇ£Construction work is scheduled to begin in December 2009 and the whole plant will be online by the end of 2012.ÔÇØ The total investment in the project is Rp21,000 crore, or $3 billion. By the time all the work is complete, Orissa will have one of the most technologically advanced steel production plants in the world and it will not be labour-intensive by Indian standards.
ÔÇ£We anticipate creating only around 6,000 direct jobs at the new plant but supply and support activities, as well as services to the plant itself and to the workforce will create a lot of employment in the area,ÔÇØ says Singh. The standard calculation is that each direct job will generate at least five more in the value chain and in ancillary activities, which can range from taxis and selling sandwiches to IT support. Altogether, the project is very important, to Tata Steel itself and to Orissa state. And it doesnÔÇÖt end thereÔÇöat the same time as the production plant is being built, the company is investing in a joint venture with L&T to build an all-weather deep water port north of the mouth of the river Dhamra, between Haldia and Paradeep, for handling bulk cargo. With a maximum capacity of 25 million tonnes, Dhamra Port will be the deepest port in India, with a draught of 18 metres, which will enable it to accommodate super cape-size vessels of up to 180,000 deadweight tonnage. It will have 13 berths, a material storage yard and associated mechanised material handling facilities and a new 62-kilometre private rail line, which will link the port with the national rail network at Bhadrak.
Construction of the plant is being overseen by technical consultants from Nippon Steel and the company is investing over $500 million in specialist steel manufacturing equipment from a selection of European firms.
Tata SteelÔÇÖs association with Orissa goes back a long way, to the earliest days of the company. It was awarded rights to mine ore and to develop metal processing in the early 20th century, following a survey in 1904 that identified massive iron ore deposits in the Gorumahisani, Badampahar and Sulaipath regions of what was then the princely state of Mayurbhanj. That discovery led to the establishment of IndiaÔÇÖs first integrated steel plant, at Sakchi, which was the original name of Tata SteelÔÇÖs birthplace in Jamshedpur. Railway lines from the mines to Jamshedpur, roads and power connections opened up communications to what was then a predominantly tribal area, and economic conditions improved dramatically. The deposits were worked from 1911 to 1967, when they were closed because of depletion of the reserves, although a number of small mines continued in operation.
But that wasnÔÇÖt the end of either mining or steel production in Orissa; far from it. The state has an estimated 3,567 million tonnes of iron ore reservesÔÇömore than a quarter of the total in India. The state-owned mining corporation exports millions of tonnes each year and other major steel companies, as well as Tata, are building plants in the state. However, the path to building new facilities on greenfield sites is not always smooth and a number of issues have occurred along the way. The sheer size of the project makes that almost inevitable.
ÔÇ£We have been allocated approximately 3,000 acres for the new plant and have taken occupation of more than 2,000 acres,ÔÇØ says Singh. While the site is greenfield, that doesnÔÇÖt mean it wasnÔÇÖt occupied; a lot of farmers were making a living in the area. The relocation and compensation programme, including the construction of a new village, has achieved resettlement of more than 80 per cent of the former occupants.
Tata SteelÔÇÖs history includes not just steel production but a strong involvement in the local community; according to the companyÔÇÖs founder, J N Tata, in a free enterprise, the community is not just another stakeholder in the business, but is in fact, the very purpose of its existence. Among the projects the company is involved with are the Jyoti Fellowship and Moodie Endowment. Initiated in 1990, the Jyoti Fellowship is a financial assistance programme for meritorious scheduled caste/scheduled tribe (SC/ST) students and is intended to enable students who would otherwise have no option to continue studies because of their financial background to progress in their education. The Moodie Endowment has similar objectives but is focused on students pursuing pure science subjects. In 2008, the two awards helped 456 students in the Singhbhum (East and West) and SeraikellaÔÇôKharsawan districts of Jharkhand.
Raising educational standards in Orissa gained a further boost when Tata Steel established the J N Tata Technical Education Centre at Gopalpur in 2005. This particular project is aimed at improving the employability of the young people of Orissa and is intended to help in preparing them for the opportunities that will arise as the state and surrounding areas undergo a new phase of industrialisation. Set up in collaboration with the Nettur Technical Training Foundation, the Centre is aimed at producing world-class technical professionals.
Steelmaking is, historically, a process that is demanding and often damaging to the environment. Production of a single tonne of steel requires 100,000 cubic litres of water per day, 800 units of power, 1.6 tonnes of coal, 600 kilograms of coke and 1.6 tonnes of iron ore, not to mention the infrastructure to move the raw material inwards and finished product out. Orissa is fortunate in having abundant water resources, surplus availability of power and a reasonably good road and rail network.
TataÔÇÖs commitment to environmental responsibility has been recognised by the award of the Deming Application Prize 2008, for excellence in Total Quality Management. It is the first integrated steel company outside Japan to get this award and is also the first steel company anywhere to receive social accountability (SA) 8000 certification from Social Accountability International (SAI) in the US. Its Corporate Sustainability Report was described as the strongest received from any corporate house from an emerging economy by the United NationsÔÇÖ Environment Programme and Standard & Poors, and it also won the Award for Corporate Social Responsibility in Public Health by the US-Indian Business Council (USIBC), Population Services International (PSI) and the Center for Strategic and International Studies (CSIS) in 2007.
Tata SteelÔÇÖs Orissa Project brings advanced technology, improved education and social opportunities, as well as more employment and wealth to the state. ÔÇ£Every tonne of steelmaking is estimated to contribute Rp2.5 billion annually to the state exchequer,ÔÇØ says Singh. ÔÇ£ThatÔÇÖs in addition to the direct taxes to the state from sales taxes, entry taxes and so on. We believe this is a great project for India and for the people of Orissa.ÔÇØ
