Cyrus Mistry, Chairman of Tata Sons, must be a very pleased man, now that Tata Steel’s new plant, located in Odisha’s Kalinganagar, has finally been commissioned . Ever since he took over the helm of the holding company of the Tata conglomerate in December 2012, the ₹25,000-crore project has been one of his top priorities.
For someone who comes from a family that runs one of the country’s largest construction and real estate companies, Mistry is a stickler for meeting deadlines. But the Odisha project, that has been in the making since 2005, has been delayed at least twice. In fact, even now, it is not fully commissioned. The most critical parts of a steel plant — such as blast furnace and sinter plant — are yet to get clearances from local authorities. At present, only a few of the facility’s units, including the power plant and hot strip mill, have gone on stream. But with yet another deadline for the commissioning — December 2015 — looming large, Mistry and the top brass at the steel company are probably relieved that they are past it.
A landmark
For Tata Steel, the commissioning is an important milestone. In the first phase, the plant will produce three million tonnes of steel every year. The company wants to double the capacity, and by 2025, make it big enough to produce 16 million tonnes of the metal every year. If the company sticks to that timeline, it has a chance to once again dominate the domestic steel industry, as it used to do until a few years ago.
The rise of entrepreneurs such as Sajjan Jindal (whose JSW Steel continues to have the largest single-location steel plant in the country) and mushrooming of secondary steel producers (they don’t produce crude steel) has taken the sheen off Tata Steel. Even the acquisition of the UK-based Corus in 2007, brought the company more woes than it could imagine, instead of making it a world-beater. Just last month, Tata Steel announced another round of job cuts in the UK units.
The Kalinganagar plant comes more than a 100 years after the company set up its first facility in Jamshedpur, which is also called Tatanagar. With one large production centre, the company, not surprisingly, was run from Jamsedhpur, the power centre. But the new location, which will be soon bigger than the ‘mother’ plant, will force a culture change in the company.
But is timing right?
Fortunately for Tata Steel, the delay in the new plant hasn’t cost much, in terms of lost business. In fact, this is not the right time to increase supply in the market anyway, which is already weighing under low prices and subdued demand.
As I had written earlier , the World Steel Association has called the Indian market one of the few bright spots in the global steel industry.
Steel demand in India is expected to cross the 80 million tonne-mark this year, and will continue to grow in 2016. But a report by India Ratings and Research says that capacity utilisation will further decline in the industry. This will push down the prices and erode the already-thin margins.
However, there is a silver lining for the Kalinganagar plant. The facility will make flat steel used in the auto industry which, fortunately, has got a fillip because of the ongoing festival season.
Tata Steel will be hoping that the good run continues when steel starts rolling at Kalinganagar.