Kalinganagar to be lower-cost steel producer

Tata Steel's Kalinganagar plant to produce cheaper steel than Jamshedpur plant

Tata Steel’s Kalinganagar (Jajpur district here) project is set to become a lower-cost steel-producing centre compared to the company’s other integrated steel facility at Jamshedpur.

“Between Jamshedpur and Kalinganagar, the latter will eventually become a lower-cost producer of steel because of the comparative advantage of logistics though in the initial days, it has to deal with high depreciation cost for being a new plant,” said T V Narendran, managing director of Tata Steel.

“Our aim is to take the per-employee output to over 2,000 tonnes of steel to compete with global leaders like Posco, whose per-employee steel output stands at 2,300 tonnes,” he added.

At present, Tata Steel’s Jamshedpur plant, oldest steel mill in the country, compares unfavourably with some of the new-age steel plants in the private sector from a cost point of view. With a capacity to produce 10 million tonnes per annum (mtpa) of steel, it has a work force of 37,000. JSW, which produces 14.3 mt steel annually, has a workforce of 12,271 employees.

The saving on logistics at Kalinganagar is thanks to its proximity to the Paradip. Kalinganagar is only 118 km from Paradip, whereas the distance between Jamshedpur and its nearest port, Kolkata, is 270 km. This is in addition to the advantages it enjoys for being a new-age plant that gives it scope for judicious deployment of personnel and use of modern technology.

The ousted chairman of Tata Sons, Cyrus Mistry, has taken credit for commissioning of the Kalinganagar project in his letter to the board members. “On the more positive side, Kalinganagar, the largest domestic capital investment of the group was completed, overcoming significant obstacles that had left the project in doubt previously,” he wrote. Mistry’s claims are not far from the reality considering all the hassles the company faced in putting up the project at Kalinganagar, which took more than a decade to be operational after signing of the memorandum of understanding due to protracted agitation by the locals over land acquisition and other bottlenecks.

Mistry’s removal as chairman of Tata Sons is unlikely to have any effect on the Kalinganagar project, which is marching toward achieving a capacity of three mtpa in the first phase.

Tata Steel plans to add six mtpa to its existing 13 mtpa capacity across two at Jamshedpur and Kalinganagar over the next few years. Out of the proposed expansion, while one mtpa capacity could be added to the 10 mtpa steel mill at Jamshedpur, the capacity Kalinganagar steel project would be increased by five mtpa.