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Case Study of Rourkela Steel Plant Kishore Kumar Das1 and Aftab Ara*2

Case Study of Rourkela Steel Plant Kishore Kumar Das1 and Aftab Ara*2

British Journal of Research

www.britishjr.org

Case Report Role of Greenfield Project on Growth and Prosperity: Case Study of Plant Kishore Kumar Das1 and Aftab Ara*2

1Head, Department of Commerce and Management, , , , 2Research Scholar in Management, Ravenshaw University, Cuttack, Odisha, India

*Corresponding author e-mail: [email protected]

A B S T R A C T Green field projects are the present requirement of the economy and are sustainable in the long run. Thus the project commissioned with present requirements not only feasible for the economy but also brings growth and prosperity in the economy of a country. An increment to manufacturing production creates more economic activity both within and outside the sector than does a similar increment in any other major sector because of manufacturing’s high multiplier effect and its extensive linkages to other parts of the economy. Incremental growth in the sector is likely to increase R&D activity which leads to increase the intensity of innovation in manufacturing, boosts overall productivity growth and improve standard-of-living. is the perfect example in the management of green field project for prosperity and growth. It’s continuous up gradation, innovation and modernization brings the sustainable development and growth. Greenfield in many disciplines is a project that is lacking the constraints imposed by previous work. The construction on Greenfield land does not need to remodel or demolish any pre-existing structure. This Project can be undertaken in a cellular network, computer networking or Greenfield investment opportunity in a marketplace that is completely untapped. In the present study of Rourkela Steel Plant, which is the first integrated steel plant in the public sector in India which was set up with German collaboration is the result of Greenfield Project .The purpose of our study is to find the problems faced by the Steel industry, the steps taken for by Greenfield Project and the contribution it has made to Orissa by its growth and prosperity. The methodology of study is purely qualitative and the results points out the problems, its implications, steps taken to revive the industry and its further contribution to Greenfield Project recently to the region, society and the nation as a whole.

Keywords: Greenfield project, Growth and prosperity, Rourkela steel plant.

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BACKGROUND OF STUDY Greenfield land is undeveloped land publicly owned integrated steel plant, which in a city or rural area either used was sited at Rourkela, in the state of Orissa, for agriculture, landscape design, or left to to make use of mined at Barsua and naturally evolve. These areas of land are Kalta. Greenfield Project venture was usually agricultural or amenity properties undertaken by the Republic of Germany being considered for urban development. It which used this Greenfield land of Rourkela can be unfenced open fields, urban lots or by provided technical knowhow for the restricted closed properties kept off limits to construction of the steel plant. German the general public by a private or metallurgical firms Mannesmann, , government entity. Rather than build upon Demag, Siemens and provided Greenfield land a developer may choose to machinery and consultancy to the plant. re develop Brownfield or Greenfield, areas Further after facing many hurdles during its that have been developed but left abandoned modernization it faced many obstacles and is or underused. now well equipped to start its own Steel is the key to the development Greenfield Project venture afresh. of any country as well as in India. It is considered to be the mainstay of the human Objective of the study civilization. In the pre-liberalization era, 1. To study the initiative of RSP towards besides TISCO (Tata Iron and Steel Greenfield Project Company presently known as ) 2. To find the requirements of Greenfield and secondary steel producers, SAIL was Projects for Steel Industry. then the only major steel producer in India. 3. To study the impact of Greenfield Project But after post liberalization and of RSP for growth and prosperity. globalization, the private players like Essar, Jindal, Ispat etc. set up steel plants in India. Statement of the problem Since 1947, India became Rourkela Steel Plant is thus an independent as the biggest, but not the only, integrated steel plant located at Rourkela in successor state to the , there were the state of Orissa was a Greenfield Project three major iron and steel companies had a venture by the German collaboration. Since total capacity of only 2.5 million tons. A 12 years RSP has been facing a lot of great deal of their plant was already more problems. In 2001 there was stagnation in than three decades old, and badly in need of steel consumption with overcapacity fierce repair and replacement, while demand for competition and export restrictions, 20-25% iron and steel was growing. drop in Net Sales, net loss of around Rs. 3 In 1948 new government's Industrial Crores per day, heavy interest and Policy Statement, confirmed in the depreciation burden of the order of Rs.800 Industries Development and Regulation Act Crores against a turnover of Rs. 2400 Crores, three years later, new ventures in the iron unsold finished inventories of almost one and and steel industry were to be undertaken half month’s production, Substantial pay out only by the federal government, but existing for wage revision and voluntary retirement ventures would be allowed to stay in the scheme, rise in costs of vital inputs and private sector for the first ten years. As for freight. new projects, in 1953 the government signed an agreement with the German steelmakers Krupp and Demag on creating a

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Research methodology 2. Some of the employees were reluctant to For this case study I took Rourkela disclose confidential date about their Steel Plant as my Sample and my research company. methodology is purely qualitative. I collected my data from newspapers, articles, journals, RSP: An overview publications, opinions of RSP employees and Rourkela Steel Plant (RSP)-SAIL is internet. located in Rourkela, Odisha. RSP is the first integrated steel plant in the public sector in Literature review India. It was set up with German According to definition a Greenfield collaboration with an installed capacity of 1 Project is “A form of foreign direct million tons in 60s. Then its capacity was investment where a parent company starts a enhanced to 2 million tons. The RSP is the new venture in a foreign country by first plant in Asia to adopt the energy-efficient constructing new operational facilities from LD process of steel making and the first the ground up. In addition to building new integrated steel plant of SAIL which adopted facilities, most parent companies also create the cost effective and quality centered new long-term jobs in the foreign country by continuous casting route to process 100% of hiring new employees. This is opposite to a steel produced. It is for the first time in India, brown field investment. SAIL had adopted external desulphurization In the present scenario a host of steel of hot metal by calcium carbide injection companies have lined up major investment process. RSP is one of the unique steel units proposals. We see that with an expanding under the SAIL umbrella with a wide variety consumer market, the Indian steel industry of special purpose . has probability of receiving huge domestic Rourkela Steel Plant also possesses a and foreign investments. The development of Fertilizer Plant that produces nitrogenous Greenfield steel projects in India has virtually fertilizers using ammonia feedstock (from its come to a standstill now. The reason for this coke oven plant). On February 3, 1959, then stagnation is due to issues like land President Rajendra Prasad had inaugurated acquisition, rehabilitation and political RSP's first blast furnace named '' when interference. India’s plan is to have an the company was known as Hindustan Steel annual steel production capacity of 124 Limited (HSL). The RSP became a unit of the million tonnes (MT) by end of 2011-2012. Ltd (SAIL). But other than the already planned steel plant RSP ‘s present capacity to produce 2 projects, most of the proposed steel plant million tons of hot metal, 1.9 million tons of projects in the country continue to remain in crude steel and 1.67 million tons of saleable standstill. These Greenfield projects are steel. It is SAIL’s only plant that produces unable to gain momentum due to political, silicon steels for the power sector, high local, and rehabilitation issues. Some of these quality pipes for the oil & gas sector and tin projects like the Archelor Mittal’s Steel plates for the packaging industry. Its wide and Project at Khumti, JSW’s Steel Ltd at Khumti sophisticated product range includes various at and POSCO Steel Plant, Odisha. flat, tubular and coated products. Rourkela Steel Plant is all set to double its annual Limitations of the study capacity to 4.5 million tons expansion work, 1. Due to time constraints it was difficult to according to a top company official. It probe deeper. completed 50 years in 3 February 2009.

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RSP is in the final stage of Initiative of RSP towards Greenfield implementing a massive modernization and project expansion project with capital investment of RSP was a Greenfield Project which around of Rs 12,000 crores that will more was set up with the help of German than double its present capacity. collaboration. It was in the year 1950s, in the jungles Post expansion production plan (In Million of Orissa which was about 270 miles west of Tons per annum). Calcutta, a small village of Rourkela was selected to become one of the new large steel Post Item Existing capacity plants of modern India. From the year 1957 Expansion to1962 in this rural area of northern Orissa, Hot Metal 2.00 4.5 among the wooded hills and a prevalent tribal Crude Steel 1.90 4.2 population, a large numbers of Indian and German engineers and technicians engaged Saleable Steel 1.67 3.9 together for the erection of the 1-milliontons steel plant of Rourkela. Product mix The years from 1957 to 1961 were the SAIL's Rourkela Steel Plant under the main years of construction of the Rourkela SAIL umbrella produces a with a wide variety plant. The majority of personnel held 18- of products .To name a few are the products months contracts; some stayed for a longer mentioned below are- span of time even in the present. some  Plate Mill Plates (usually specialists in a narrow technical field  HR Plates who were needed only for particular tasks)  HR Coils came out for a few months stay only .During  ERW Pipes this period of their stay they faced severe  SW Pipes cultural difference with the Indians .This  CR Sheets & Coils intersections of societies came up to be a new  Galvanized Sheets development known as ONE WORLD and  Electrolytic Tin-Plates Silicon Steel this complex pattern is the "third culture"- Sheets defined "as the behaviour patterns created,  Heavy & Chequered Plates shared, and learned by men of different  Electrical Steel (CRNO/CRGO) GP Coils societies who are in the process of relating & Sheets/GC Sheets their societies, or sections thereof, to each  The Fertilizer Plant produces calcium other." This cultural pattern where Indians ammonia nitrate (CAN) fertilizer are regularly interacting with Germans is marketed under the brand name "Sona” known as "the first culture" and for the (gold). Germans in the "Rourkela Germans" as "the second culture." Propositions 1. Studying the initiative of RSP towards Requirements of Greenfield project in steel Greenfield Project. industry 2. Finding out the requirements of The major requirements for Greenfield Projects for Steel Industry. Greenfield projects for RSP were- 3. Impact of Greenfield Project of RSP for 1. Land acquisitions growth and prosperity. 2. Environmental Clearances,

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3. Resettlement & Rehabilitation Policy of The other realities for “ground zero” state displaced persons for Greenfield projects. of RSP in June 2001 Thus after going through all these  Lack of conviction about the future stages, Rourkela came to be known as  Militant unionism Industrial capital of Odisha and became the  Fear among employees first PSU Integrated Steel Plant in the country  Low morale of the employees was set as Rourkela Steel Plant. This provided  Absence of leadership nucleus for establishment of many ancillary  Respect for Rourkela Steel Plant missing and downstream Industries in this area. completely.

Impact of Greenfield project of RSP for Steps for restructuring RSP growth and prosperity With change in leadership in June Though Rourkela has become the hub 2001 ten priorities were identified and of Foundry and Engineering Industry of the reforms were initiated afresh like never State along with many downstream Industries before. There was a massive campaign to of Rourkela Steel Plant. However, during the regain equipment health with direct years 1995-1998 economic downturn in communication at all levels of Organization. Rourkela area began, and people started calling Rourkela as a dying city. The ten golden rules by the managing director Reasons for degradation of RSP in 2001 1. Employee Motivation and Employee  Stagnation in steel consumption with Pride. overcapacity fierce competition and 2. Leadership Practice. export restrictions. 3. Environment relations and Organizational  20-25% drop in Net Sales, Image.  Net loss of around Rs. 3 Crores per day, 4. Plant Maintenance and Equipment Health.  Heavy interest and depreciation burden 5. Small Investment Schemes for of the order of Rs.800 Crores against a maintaining current operations. turnover of Rs.2400 Crores. 6. Sustained operation and consistent  Unsold finished inventories of almost one production. and half month’s production, 7. Strengthening secondary streams of Cash  Substantial pay out for wage revision and generation. voluntary retirement scheme. 8. Operational and Purchase cost Reduction.  Rise in costs of vital inputs and freight. 9. Sustaining the Benefits of the Project on Gradually after coming up of various Operational Improvement in certain areas. Sponge Iron Plants, the economy of this area 10. Enhancing Gross Margin and Net Sales was again revived. We can compare the Realization. above findings about the low performance by The steps taken to reach these goals plant in 2001 by the table given below- were by reaching out to people in the lower Low performance of the RSP in 2001 level in the shop floor, trying to create bonding between the employees, promoting Item Capacity utilization (%) revenue and cash awareness, having good Raw material relation with customers, training the 60 Handling Plant employees in workshops, updating the issue Hot Metal 70 to employees, allotting work to each Crude Steel 66 employee. So the Managing Director put forth

BJR[1][1][2014]016-025 Ara et al______ISSN: 2394-3718 his Leadership Practice Programme for taken for the development of the plant and the regenerating strength with people. These region like Project Bramhani, Project Prakriti, programmes were mass contact exercise, Project Sanskrit, Project , Project performance improvement programmes, Viswakarma. Major steps were taken for the MD’s interaction with young managers and renovation of the city- like rebuilding/major General Manager (GM) Communication repair of roads, repair of houses and Meetings (GMCM). Thus there was a Mass buildings, cleaning and major repair of Contact Exercise which is a unique sustained Township drainage system, repair of schools, exercise in corporate history running till date. renovation and bringing back greenery of This is interaction of MD and ED (Works) parks thus making the environment friendlier. with a group of 500 employees every week, In addition to the above progress there was focus of sessions on ‘Survival and Future of also growth in city architecture, encouraging RSP’ in the first year and ‘Profitability and sports and games by making Synthetic Astro Prosperity of RSP’ in later years and engages turf, Biju Pattnaik Hockey Stadium, fostering all the employees by turns (about 30,000, to team spirit and innovativeness in schools by begin with, now around 20,000). organizing, open school sports tournaments every year, revival of Childrens’ Day The five Modules of Leadership are- program on Nov 14 organising Science 1. SAMSKAR Exhibition for school children by exploring 2. Empowerment and promoting culture in the society by 3. Safety staging of mega events Megha Malhar 4. Preventive Maintenance Vedvyas Sangeet Nrutyotsav 5. Family atmosphere in workplace. Sangeet Samaroh, Kumar Utsav, Makar New initiative by the Managing Utsav, Baisakhi Kavya Sandhya. Director to pick the young minds to bring freshness to the reform process and address Rourkela steel plant: Modernization & old and long pending issues with fresh ideas expansion plan and Reinforcement changes were observed  The Fertilizer Plant was set up in the year like closeness among people ,involvement of 1964 with a view to utilizing the residue people leads to growth of production, of the steel plant and the re-utilization of enhancement of capacity utilization, the chemicals. improved techno economics, increase in sales  A Pipe Plant and Special Plate Plant were revenue and cost reduction, bleeding issues set up during the 1970s for production eliminated and emphasis on every day to be a of ERW pipes. “good day”, shackles of apprehension broken,  Steel plates were made for defense employees are ready and eager to speak, requirements. suggest, innovate and create, changes felt in  NSPCL started as a joint venture themselves and they realized their future to company of NTPC Limited and SAIL by be linked with the plant performance with set up of a captive power plant of 120 improvement in the net profit as shown in the MW capacity. figure 1.  RSP’s modernization program in 1988 with an outlay of INR 4500 crores. This Contribution of RSP to the society, state revamped the process of supply of raw and nation materials, new oxygen plant, improved During the process of restructuring of techniques in blast furnaces, selling the Plant some of the major Projects were of dolomite plant, cast house, slag

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granulation plant, supply of raw materials and supplied by Simplex Castings Ltd, sintering plants and coal handling plants Bhilai India. among others. Following the  All major units of the plant, including its modernization RSP became the first SAIL Personnel Department and Steel plant to have adopted continuous casting Township, are certified to ISO: 9001 route for all its hot metal production. It is standards. also the first Indian steel plant to have  RSP’s Silicon Steel Mill, Sintering Plant adopted external desulfurization of hot II, Environment Engineering Department, metal by the calcium carbide injection Plate Mill, Hot Strip Mill, ERW and SW process. Pipe Plants, Special Plate Plant as well as  In 1988 the modernization of RSP was Steel Township have been awarded ISO: begun for producing qualitative materials 14001 certification for Environment and establishing its importance in the Management. world market.  In 1998 the modernization program with Awards received: RSP an outlay of INR 4500 crores.  Genentech Environment Gold Award.  In 2010 RSP-SAIL plans for its capacity  Srishti Good Green Governance Award expansion in its existing 2.2 MT to 4.5 for 2010. MT of production.  National Energy Conservation Award  In 2013 Rourkela Steel Plant on (2nd Prize). modernization and expansion project  Best corporate stall. process. Expected to be 4.5 MT steel  Global CSR Leadership & Excellence plants by the year 2013, on existing 2.2 Awards in 2013. MT.  SAIL projected to take SAIL’s hot metal Greenfield project venture by RSP production capacity to a level of 23.5 SAIL plans 1.2 MTPA cold rolling million tons by 2012-13. mill at Rourkela Steel Plant in Orissa 39 km  August 10, 2013, Rourkela Steel Plant stretch connecting Thandalam to Arukilpadi unveiled the country's largest blast in to be four laned Steel furnace having a useful volume of 4060 Authority of India (SAIL) has proposed to cubic meters with a production capacity establish a 1.2 million tonnes per annum of 8000 tons hot metal per day, thus (MTPA) cold rolling mill for the auto sector increasing its production capacity form at its Rourkela Steel Plant (RSP) in existing 2.2 MT to 4.5 MT. Sundargarh, Orissa. The proposal has been approved by the company’s Board Sub- Environment management Committee on strategic alliance and joint As a responsible corporate citizen, venture.  RSP has taken effective measures in the area of pollution control in By-Product Danieli corus commissions India’s largest Coke Oven Batteries, Battery No: 4 and blast furnace 7m tall Battery No: 6. Recently Danieli Corus (August  RSP has taken adequate steps to check 8.2013) has commissioned the greenfield emissions from Coke Ovens and has Blast Furnace No. 5 built for SAIL (Steel installed air-cooled self-sealing doors Authority of India Limited) at their Rourkela resulting in significant reduction in door (Odisha, India) steel plant. This blast furnace emissions; doors designed, manufactured was built by a consortium consisting of

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Danieli Corus and Tata Projects Limited and even some newer entrants have signed MoU’s is currently India’s largest Blast Furnace. The with concerned State Governments in the first hot metal was tapped after 27 hours. states of Jharkhand, Orissa, & With the collaboration with Danieli West . Corus (its fourth Greenfield Project in india) the largest operating Blast Furnace was built, CONCLUSION according to the “Hoogovens” philosophy, in this important market. This Furnace is named India should be an initiation in after goddess and was Greenfield Project instead of delaying the designed according to European standards approvals for granting access to foreign and technology. It was built to produce investors for investing in Greenfield Project. around 8,000 tonnes of hot metal per day for a Environment is the big issue and so is the land twenty year campaign. It is part of a 1.75 acquisition. The land acquisition laws is still Million Euro expansion program at the too primitive and any new land acquisition Rourkela Steel Plant. law needs ’s approval which is too time consuming. We can see that the Suggestions for Greenfield project in steel resettlement and rehabilitation policies of sector Orissa, Jharkhand and Chhattisgarh states, The solution to the above problems is rich in mineral resources are still in a not easy and needs a well planned approach. developing stage. The leasing of iron-ore & This requires having an overall view of the coal mines as well as site related issues (land impact Greenfield has on the economic and acquisition and rehabilitation of displaced social conditions of all the stakeholders. The persons) have appeared as serious bottlenecks other major step to reduce the tension is in almost all the Greenfield projects. Thus in related to the land acquisition, communicating spite of the global economic slowdown, we with local people in local languages. There can assume that capacity expansion at the needs to be a change in the mind-set of the locations of the existing steel plants may have people. There should be an awareness of the a better scope. long term as well short term benefits of the The government should come with new Greenfield projects. Fighting talent flight new and improved legislation especially for and managing talent is yet another challenge Greenfield project, else it would be difficult before the company.” Out of the foreign for companies to grow thus lead to the leaders in steelmaking. slowdown of the mining sector with all other POSCO of South Korea signed a investments. The Government should take MoU with the Government of Orissa quite note that Greenfield Project is providing some time ago but the project has been maximum design flexibility to meet project bogged down due to various reasons. There requirements with reduced required are issues of land acquisition & rehabilitation maintenance. Hence the Industry is thus of displaced persons, apart from long-term designed to meet current and future needs and lease of iron-ore, among others. ArcelorMittal is an opportunity to improve corporate image signed a MoU with the government of by its success and prosperity which is Jharkhand followed by another one with the beneficial for the mankind. government of Orissa but the progress here too has been tardy. Among the Indian players, REFERENCES almost all-Tatas, Jindal South West, Jindal 1. http://en.wikipedia.org/wiki/Greenfield_l Steel & Power, , Bhushan Steel & and.

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2. http://planningcommission.gov.in/aboutu 13. John D. Montgomery, "Crossing the s/committee/wrkgrp12/wg_steel2212.pdf Culture Bars: An Approach to the 3. http://www.fundinguniverse.com/compa Training of American Technicians for ny-histories/steel-authority-of-india-ltd- Overseas Assignments," World Politics, history/. July 1961, pp. 544-.560. 4. http://www.steeltimesint.com/news/view 14. John and Ruth Useem and John /danieli-corus-commissions--lar- Donoghue, "Men in the Middle of the gest-blast-furnace. Third Culture: The Roles of American 5. http://www.sail.co.in. and Non-Western People in Cross- 6. http://www.sail.co.in/rourkela-steel- Cultural Administration,". plant/about-rourkela-steel-plant. 15. Human Organization, Vol. 22, No. 3 7. http://articles.timesofindia.indiatimes.co (Fall 1963), pp. 169-179. See also: John m/2012-01-24//30658526_ Useem, "The Community of Man: A 1_rourkela-steel-plant-steel-consumption Study in the Third Cultttre The -c-s-verma. Centennial Review, Vol. 7, No.4 (Fall 8. Voestalpine. "VÖEST up to the 1963), pp. 481-498. Beginning of the Formation of the 16. http://www.answers.com/topic/steel- Group". Voestalpine website. Voestal- authority-of-india-limited#ixzz2kp0W4 pine Group. 1Jc. 9. "Plants and Projects". NSPCL website. 17. http://rcci.co.in/component/content/articl NSPCL Limited. e/77-latest-news/99-welcome-speech-by- 10. "Rourkela Steel Plant Completes 50 sri-mahesh-j-vajir-president-rcci. Years". Rourkela Steel Plant Completes 18. http://www.cmie.com/kommon/bin/sr.ph 50 Years. Outlook (magazine). Retrieved p?kall=wclrdhtm&nvdt=2013110610352 24 October 2011. 7053&nvpc=099000000000&nvtype=TI 11. "SAIL to invest Rs 12,000 cr for DINGS&ver=pf. expansion of Rourkela plant". Economic 19. http://www.danieli-corus.com/en/news- Times. Jan 6, 2008. press.php. 12. "India's largest blast furnace starts 20. http://www.sig.org/newsletter.php?id=83 operating at SAIL plant". Hindustan 78. Times, 10th August, 2013.

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2000 1000 0

No in Crores -1000 2001-02 2002-03 2003-04 -2000 2004-05

2001-02 2002-03 2003-04 2004-05 No in Crores -1036 -593 -109 1076

Figure 1. Improvement in the net profit in crores

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