SAIL’s Corporate Plan - 2012
A blueprint of business activity over next few years

     SAIL has always believed in structured planning for achieving organization growth and, consequently, the culture of planning is well entrenched in the company’s work ethos. This has also contributed significantly to national interests, given the steel sector’s strong backward and forward linkages and SAIL’s position as the leader of the Indian steel industry.
     Changes in business environment call for periodical review of long-term plans and setting of new goals. The company had earlier drawn up two such plans, one in 1987 and the second in 1992. The perspective of the latter was the need for SAIL to enhance its competitiveness and global outlook in the backdrop of a liberalized steel business scenario in India. The steel industry, however, went through a prolonged recession starting around 1997. With buoyancy now having returned to the steel market, and with encouraging growth projections emerging for steel on a global level, re-formation of SAIL’s long-term outlook was a natural outcome.
     SAIL’s Corporate Plan-2012 gas been formulated with the objective of enhancing the company’s position in a growth market. The plan is the blueprint of the company’s business activities over the next few years.
     The company’s long-term strategic orientation is for building a robust organization with strong fundamentals. Corporate Plan-2012 aims to bring the company closer to this goal by building sustainable competencies based on growth by exploiting fully the potential of available assets, differentiation through quality and service, profitability by excellence in operations and cost reduction, and leveraging the skill and knowledge base of the company’s human resources.
     Corporate Plan – 2012 of SAIL has been presented below:
     The 21st century is widely perceived to be the century of Asia, and India is being looked upon as one of the economies with the most promising prospects. This poses a formidable challenge as well as opportunity to the Indian corporate sector. SAIL, as the leading steel maker, is well positioned to fulfill its role in the nation’s quest for higher growth and development in the new millennium.
     Though projections indicate persistence of marginal overcapacity in the international steel market, the domestic demand in the next few years is expected to remain robust at around 8%, with the supply position remaining somewhat tight. Also, there are expectations that India may become a manufacturing hub, providing the opportunity for indirect export of steel in large volumes. Long – term growth and development of the Indian steel industry, however, would continue to depend largely on its cost and quality competitiveness.      By 2012, the consumption of finished steel in India is expected to reach around 55-60 million tones (MT), nearly double the current level. Given its available infrastructure and skill base, SAIL has the comparative advantage to supply additional volumes at the most competitive cost to the nation. Besides, the Centre for Policy Research, in its November 2002 report dealing with perspectives up to 2025, indicates that the construction, cold-reducing and oil and gas transportation segments are poised for major growth in India. TMT bars and rods, structurals, HR/CR coils, plates and pipes have been identified as the key growth products for the domestic steel industry. For SAIL, which is an established and significant player in these product segments, the scenario holds a huge potential for growth.
     Analysis of competitors’ growth plans and activities indicate increasing competition from all existing domestic players. SAIL, which is the leader of the 30 MT Indian steel market with a share of around 26%, proposes to not only maintain its position but strengthen it in this challenging future scenario.
     The company has envisaged increasing its market share to about 27% by 2011-12, in tandem with the growth projection with respect to domestic consumption of finished steel. The goal is planned to be achieved through a mix of measures, including stepped-up production, further intensification of market-orientation, and improved cost and quality competitiveness, supported by national investment and multiple managerial inventories to optimize resource utilization.
     SAIL’s newly announced Corporate Plan – 2012 sets out the blueprint for this growth plan. According to an official of the company, a major factor that prompted formulation of Corporate Plan – 2012 was the continual improvement in operating efficiency achieved by the company. “As pointed out by the Chairman in many forums, exceeding rated shop capacity has become more of a norm rather than exception in the SAIL plants,” he says. Also, the culture of cost reduction and improvement in business processes has helped the company build up its internal resources which will contribute to achievement of the growth plan.
     For realistic accomplishment of targets set, the plan has been split into two stages – Stage I pertaining to the period up to 2006-07 and Stage – 2 up to 2011-12.
     The plan defines the following key strategic goals for SAIL:
• To continue in the business of steel and steel-related activities
• To enhance market share in growth segments
• To improve profits by cost reduction and high value added products
• To achieve excellence in quality across the value chain
• To secure availability of key raw materials, and alleviate infrastructure bottlenecks which may constrain long-term growth
• To build customer-centric processes, systems, structure and procedures A significant feature of the plan is that it covers the 11th Five-year Plan period.

Production
Corporate Plan – 2012 envisages production of hot metal from the integrated steel plants of SAIL reaching an aggregate level of about 20 MT per annum by 2011-12 against the current level of 13 MT. This would be achieved through optimal utilization of assets coupled with marginal capacity expansion. Plant-wise break-up of hot metal production would be as follows: The envisaged growth in volumes is to be achieved by:
• Realisation of full potential of existing assets
• Do-bottlenecking
• Linked facilities for value addition
• Capacity enhancement in growth segments
Based on the above, crude steel production by SAIL is planned to reach a level of 18.7 million tonnes per annum (MTPA) by 2012 from the current level of 11.83 MT, leading to saleable steel production of 17.38 MTPA against the level of 10.73 MT achieved in 2003-04.
     In view of emerging market requirements, SAIL has also planned to raise its output of finished steel to 16.6 MTPA by 2011-12 from the current level of 8.6 MT, and reduce generation of semi-finished steel from 20% of saleable steel to 5%. This will enable inclusion of more value-added products in the company’s product basket.
    Broadly, this would enable SAIL to achieve 30% market share in flat products and 23% in longs by 2011-12.

Investment
     SAIL has estimated that the measures to be taken to achieve the targeted levels of growth and sustain higher levels of cost and quality competitiveness will require investment in the region of Rs.25,000 crore by 2011-12. The immediate priority schemes, to be taken/completed by 2006-07, have been estimated to be around Rs.4,300 crore.
     The capital expenditure envisaged will be financed mainly through internal accruals, and will be supplemented by market borrowing if the need arises. Care will be taken to ensure that the company’s debt-equity ratio attains, and is maintained at, a level of 1:1. The plan for capital expenditure covers upgradation/modernization of some existing assets as well as installation of some new facilities. The areas broadly identified for investment pertain to:
• Development of iron ore mines
• Rebuilding Coke Oven Batteries as BSP, DSP and RSP
• Revamping of iron & steel making facilities at BSP, DSP and BSL
• Installation of one blasé furnace at RSP
• Installation of auxiliary fuel injection systems in all blast furnaces in a phased manner
• Installation of new finished mills Among new finished mills planned to be set up are: BSP: Thin slab casting/inline Hot Strip Mill (1.1 MT), Bar & Rod Mill (1MT), Pipe Plant (0.2 MT) DSP: Bar & Rod Mill (1.4 MT), Structural Mill (0.4 MT) RSP: Plate Mill (0.7 MT), CRNO Mill (0.075 MT) BSL: Hot Strip Mill (2.5 MT), CRM Line (0.6 MT)
     While the Corporate Plan identifies the specific areas for development, it is entirely directional in nature, and implementation will depend on the results of detailed feasibility studies, rigorous techno-economic evaluation and merit of each case in the context of the business environment prevailing at the time.

Raw materials
The growth plan and achievement of quality/cost competitiveness of SAIL to a significant extent will hinge on the availability, quality and cost of key inputs like coal and iron ore.
Higher quantities of iron ore will be required for the planned increase in hot metal production. For this, new mines have to be developed and supplies from existing mines augmented. Development of the Chiria mines of IISCO and Rowghat mines will be of strategic importance in this context. Corporate Plan – 2012 states that, wherever required, strategic alliances will be considered for the process of development of the mines. Improvement in iron ore quality and installation of two pellet plants (one to feed DSP, RSP and BSL and another to supply to BSP) will also be necessary interventions.
Augmenting the availability of key raw materials, especially metallurgical coal and high-grade iron ore, to achieve and sustain enhanced level of production envisaged under the Plan would be an area deserving highest priority. For ensuring long-term availability of imported coal in required quantity, strategic tie-ups, including equity participation in coal mines abroad, will be considered on priority. For iron ore, international joint venture participation will be invited for mines development to infuse world-class competence in mining operations.
SAIL has the largest iron ore mining operations in India. “To enable production of around 20 MT of hot metal by 2012, substantial development of mines to increase the iron ore production to a level of around 33 MT, including 6-7 MT of lump ore, will have to be taken up”, sources said. To meet the requirement, SAIL has planned to adopt following strategies:
• Development new blocks/mines
• Increased production from existing mines to their potential
• Improving the quality of iron ore by suitable beneficiation
• Achieving operating efficiencies by economic scale of operations
     Improvement in the existing mines will be effected by full utilization of existing facilities and installation of beneficiation technologies like jigging, magnetic separation, etc. One of the focus areas will be reduction in alumina and silica content in BF burden to less than 2% each. The new mines areas will have state-of-art technology. Further, to utilize micro-fines and reduce dependence on lump, use of pellets in blast furnaces will be introduced in a big way. For this, two pelletisation plants one at BSP and another at a suitable location like Manoharpur, are planned.
     The investment plan for development of new mines as well as for augmenting the production facilities from the existing mines has been drawn out. According to a company source, around Rs.2200 crore would need to be spent in this area. Further, for the development of new mines as well as for increased production from the existing mines, adequate infrastructure needs to be developed. Necessary support from state/central government would be obtained to address the issues of power, road and rail network.

Implementation
Corporate Plan – 2012 has considered the following major risk factors in achievement of the targeted growth have been identified as –
• Declining global steel demand and prices
• Constraints in availability, and cost of critical raw material – like coking coal, iron ore, etc.
• Infrastructure constraints, viz. ports, railways, etc.
     These factors will be reviewed proactively and timely interventions will be ensured. Steel being a universal intermediary, its demand is driven by economic growth and the expansion trajectory of the industrial sector. The growth trajectory (reflected in terms of percentage of GDP growth) is essentially a range based on macro-economic parameters, government policies and global economic trends. While drawing up Corporate Plan – 2012, conservative market growth projections have been considered. However, while the growth trends and macro indicator present opportunities for the company’s higher growth potential, major risk factors have also been taken into consideration like decline in global steel demand and prices, non-availability/cost of major input materials like coal, etc. Therefore, in any case, SAIL’s plans may have to be revised form time to time, depending on the market growth, competition, international situation, change in country’s policies, resources availability, etc. (This article is excerpted from SAIL news)