Public sector Steel Authority of India Ltd (SAIL) is looking to further rationalise its work-force of 1.2 lakh by around 15 per cent – that would mean 20,000 workers less on its rolls.
The headcount reduction will be staggered as the country’s largest steel maker increases its capacity to 26 million tonnes per annum by 2011. The giant plans no retrenchments, though, but will do so by not replacing retiring employees.
"Manpower rationalisation is an on going process in our plants as we are looking to match global standards of productivity," said S K Roongta, Chairman, SAIL. "Last year we reduced our workforce by 6,000 to 7,000 and this year too, our workforce should be down by around 6,000.”
Globally, it takes 1,000 workers to produce one million tonnes of steel, but Indian firms have low productivity levels.
SAIL produces 14 million tonnes with 1.2 lakh workers while Tata Steel produces 5 million tonnes with 34,000. In sharp contrast, 19,000 workers at Korea's steel giant POSCO produce 28 million tonnes.
With the commodity cycle reversing and prices of key raw materials like iron ore and coking coal falling, the economic downturn has only benefited SAIL. Not only is it close to capturing a 2-billion tonne iron ore reserve in Chiria in the Jharkhand belt, it also has been able to complete the long term coking coal contract for 2009-10 at around $ 122 per tonne, almost 60 per cent lower than last year.
Coal and ore are critical inputs in managing steel costs.
"For commodities, last year was abnormal and that kind of boom has never happened before," Roongta said.
In 2008-09, SAIL had finalised the coking coal contracts at as much as $ 300 per tonne, a 300 per cent jump over the previous year. SAIL imports more than 70 per cent of its coal needs.
But the downturn has helped expansion. "The slowdown also helps in bringing cost of expansion down, closer to the original target of Rs 54,000 crore,” Roongta said.