Corporate Plan - 2012
A blueprint of business activity over next few years
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.
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.
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
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.
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
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
• 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.
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.
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
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.
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)