SAIL's labour costs are too high, must be cut, says new chief

Steel Authority of India Ltd (SAIL), the country’s second largest steel maker, has to cut its labour costs, says its new chairman, Chandra Shekhar Verma.

Verma, 51, the steel giant’s youngest-ever chairman so far, who took charge today, pointed to cost containment as a priority. Labour costs are 22 per cent of total turnover.

“This is very high, compared to other global steel players. So, we have to conduct a detailed action plan as to how we can achieve higher labour productivity. This does not mean rationalisation (of staff, meaning redundancies), but we have to revise the means,” he said.

Verma said he plans to make SAIL a global player, following an inorganic route, particularly for input asset acquisition in the value chain. “All the steel required in the country should be met within the country, especially in the power sector. We should not be dependent on outside sources.

He also said he would be moving aggressively on value-added products, especially in the power sector. “Value-added products constitute 37 per cent of total SAIL production and compared to global standards, this is very low,” he said here today, while taking charge.

His appointment comes at a time when the government is looking at divesting 20 per cent stake in the public sector unit (PSU). Currently, the government holds 86 per cent stake in SAIL and the sale is estimated to mop up Rs 16,000 crore through a follow-on public offer (FPO), expected to be completed in two phases.

“The FPO will be there some time in the month of September or October,” said Verma.

SAIL posted a net profit of Rs 6,754 crore, up 9.4 per cent from Rs 6,170 crore in 2008-09 in the year ended March 31, while total income declined to Rs 43,233.3 crore as against Rs 45,623.4 crore in the corresponding period, on lower net sales.

It has set a target of achieving 23 million tonnes of hot metal production capacity by 2012-13. “I will ensure there are no time and cost overruns in the ongoing expansion programme … Our sales realisation is coming down, so I have to see labour productivity goes up. We have to also enter new markets and newer areas. We have to ensure that we not only produce common steel but special steel,” he said.