People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 23

June 06, 2010


Disinvestment in Sail Hampers Growth of Public Sector


M K Pandhe


DESPITE sustained growth of performance of public sector undertakings in steel industry, the decision of the government of India to disinvest shares of SAIL and RINL (Rashtriya Ispat Nigam Limited) in market will adversely affect the growth of public sector steel industry.


Prior to the advent of globalization, public sector steel industry was contributing 60 per cent of the production in the industry which has now come to about 30 per cent. The government of Indiaís decision to allow private sector steel plants resulted in Jindal, Mittal, Essar entering integrated steel plants operation, while Tatas have expanded their production capacity. During 2009-10, Indian crude  steel production stood at 64.9 million tones out of which SAIL and RINL (Vishakhapatnam) produce16.7 million tonnes. During 2009-10 Tatas increased their production capacity to 6.6 million tones while Jindal steel produced 7.3 million tonnes. Ispat Steel was responsible for the production of 2.7 million tonnes. The mini-steel plants in the country together produce 28.2 million tonnes by melting scrap through electric arch furnace technology.


South Korean steel giant, POSCO is coming with a big plan of producing 10 million tonnes of steel and Arcelor Mittal is also contemplating big investment in steel industry. Inspite of modernisation plans of SAIL and RINL, the private sector steel plants are planning to produce more steel in the forthcoming period.




According to Composite Project Feasibility Reports of SAIL in the next 10 years the production of SAIL is likely to be doubled. Its hot metal capacity is likely to be increased from 13.82 million tonnes to 26.18 million tonnes during this period while the crude steel capacity will go up from 12.84 million tones to 24.59 million tonnes. SAIL is also planning to invest Rs 54,623 crores in the modernisation programmes and Rs 10,264 crores for the development of raw material and Rawaghat iron ore mines. IISCO steel plant has the largest investment plan of Rs 14,443 crores which will raise its production capacity from the existing 0.85 million tonnes to 2.91 million tonnes.


The production, modernisation and expansion plans visualise expansion of installed capacity in Bhilai Steel Plant from 4.08 million tonnes to 7.50 million tonnes. Durgapur Steel Plant will increase its installed capacity from the present 2.09 million tonnes to 2.45 million tonnes. The Rourkela Steel Plant will enhance its installed capacity from 2 million tonnes to 4.50 million tonnes. The production programme of Bokaro Steel Plant indicates a rise from existing 4.58 million tonnes to 5.77 million tonnes in the same period. The Salem Steel Plant will also expand its installed capacity from the existing 18 lakh tonnes to 3.5 lakh tonnes.


However, the Plant does not spell out the expansion programme of Alloy Steel Plant and Vishweshwaryya Iron and Steel Plant. Without expansion and modernisation the existence of the plant is likely to be at stake. It should also be noted that Durgapur Steel Plant has been allotted the lowest investment and its capacity will increase marginally. After modernisation DSP will be the smallest integrated steel plant under SAIL. Without additional investment and development of finished products, the Plants profitability is likely to be adversely affected in the forthcoming period.


If the production programmes of Indian and foreign private sector companies are taken into account, the total steel production in India is likely to reach 120 million tonnes. The government of India has permitted private sector steel plants to manage their production by engaging a large number of contract labour with much less wages than paid by SAIL and RINL which enables them to compete with the public sector companies effectively and add to their profitability. Absence of genuine autonomy despite granting Maharatna status to SAIL is adversely affecting the performance and growth of the public sector steel industry. Despite announcement by the chairman of SAIL in NJCS to pay arrears of wages to IISCO plant workers, it has not been implemented so far due to obstructive tactics of ministry of steel and department of public undertakings. The RINL has no source of iron ore supply and it has to pay a higher price for its supply of raw materials is also adversely affecting its performance. While the government of India is extending all facilities to private sector steel companies, it is failing to take steps to ensure granting captive iron ore mines to RINL. The government is thus throttling the growth of public sector steel industry and facilitating the growth of private sector steel companies. The disinvestment will make the matters worse for the public sector steel industry since directors of private companies will be on the board of directors of steel industry and take full advantage for this strategic position.


The position of all trade unions of opposition to disinvestment of shares of public sector and for making uniform wage levels and regular employment in private sector is being curtly ignored by the UPA government which is profusely helping the private sector to strengthen their grip over the steel industry.


The private sector steel companies are allowed to violate all the labour laws. They do not permit formation of genuine trade union while only company scab unions are operating in the industry. Victimisation of large number of workers for trying to form a democratic union in private sector steel plants has taken place while the government of India non-chalantly allows their anti-working class policies.




Though India is the fifth largest steel producer in the world, its per capita consumption of steel is only 70 kg while the world average is 190 kg. If India keeps the objective of achieving the average steel consumption in the world it has big potential of developing steel industry.


The crude steel production in the world during 2009 was 1220 million tonnes. China alone produced during the year 568 million tonnes which works out to 46 per cent of the world steel output. It is worth noticing that China alone produced during 2009 twice the total output of USA, Japan and European union taken together. Japanís steel output declined by 26 per cent during the year while in European Union the decline was 30 per cent. The steel production in USA, the largest capitalist economy in the world, declined  from 98 million tonnes to 58 million tonnes. During 2009 USA produced only one million tonne more than India. The net decline in US steel output was 30 per cent in 2009. When the entire world experiences decline in steel output, China could increase its production by 13 per cent. It is more important to note that the increase in the steel output in China during 2009 was more than total steel output in India during the same year. Despite world economic crisis, Indian steel output increased by 3 per cent during 2009 due to rise in demand of infrastructure industry.


It is estimated that the world steel output is likely to increase by 8 per cent to reach a level of 1340 million tonnes during 2010. Despite this possibility of growth in some countries, the production level would be still below 2007 level indicating continuation of the economic crisis in their economy.




During 2008-09, SAIL earned profit before tax to the tune of Rs 9403 crores and during the year it paid dividend of 13 per cent to the government. During April to December 2009-10 alone, the profit before tax earned by SAIL was Rs 7065 crores and the total for the year 2009-10 is likely to exceed previous yearís performance. During 2009-10, the SAIL will pay 16 per cent dividend. Despite such improved performance, the proposal of the government to disinvest share has no justified reason except the commitment govern by the UPA government to the World Bank and the IMF.


Despite such a good performance, SAIL is resorting to engaging contract labour in an increasing scale in the industry while the vacancies created by superannuation of the workers are not being filled up. The SAIL management is recruiting contract labour even in permanent and perennial nature of jobs. These workers who do the same work as regular employees, the wages paid to them are one fourth of the wages paid to the regular employees. SAIL management is not implementing all the statutory commitments as a principle employer. The trade unions have demanded payment of scales of regular employees to all contract workers but the management has not taken any step in that direction. It is estimated that about 40 per cent of the workforce in steel industry are working under contractors with extremely bad working and living conditions. Despite announcement by former union minister for steel that every contract worker would be paid Rs 1000 per month over and above his wage, it has not yet not been implemented by the SAIL management.


The committee of public undertakings of parliament had pointed out excess expenditure incurred by SAIL management in modernisation of Durgapur and Rourkela steel plants earlier in which hundreds of crores of rupees were over spent by the management. The CITU has pointed out to the management that there should be proper monitoring of expenses during modernisation. There is need to plug the loopholes of corrupt practices prevailing in the organisation where a cut is involved in sanctioning payment of bills of the contractors. The CITU also demanded more transparency in awarding contract to the contractors.


The contractors do not maintain safety standards and workers lives are in danger. SAIL should strictly supervise the observation of safety rules by the contractors. At times SAIL officials ignore this aspect in return for some benefits given to them by the contractors under the table.


Under these circumstances, the proposals of the UPA government to disinvest upto 49 per cent equity of SAIL in the share market will only cripple the public sector steel industry. The trade union movement in steel industry is campaigning against disinvestment and privatisation and fighting for strengthening the role of public sector in steel industry which alone will ensure the self reliant development of Indian steel industry.