Low Labour Productivity Worries Steel Industry

Steel corporates in the country are slowly waking up to the implications of the extremely low labour productivity in terms of crude steel production on financial margins.

Statistics reveal domestic crude steel production per employee is one of the lowest globally.

Even the Steel Authority of India (SAIL) and the Tata Iron & Steel Company (Tisco) fall short of world standards in terms of productivity.

While SAIL has a productivity of 83 tonne per employee, Tata Steel is further behind at 46 tonne per employee.

Studies show that global players like British Steel, Thyssen, BHP and SCI have a significantly higher labour productivity. British Steel has a per employee productivity of 335 tonne, while SCI has the highest productivity at 3,502 tonne per employee.

 

According to B N Sarangi, assistant general manager (raw materials), Tata Steel, "In the context of the domestic steel industry, the advantage of cheap labour costs and low priced iron ore is now getting neutralised by the massive wage hikes and poor labour productivity.

"To survive, the steel manufacturers need to restructure their organisations on the lines of cost reduction, improvement in productivity, and better profitability.

Human resource capital would play a significant role in this process and it is a recognised fact that for quicker decision-making and greater responsiveness, organisations have to be flattened," Sarangi said.

SAIL has had excess manpower for a long time. But it is now trying to trim flab at the shop-floor level by diverting manpower to other avenues through rehabilitation measures.

Tata Steel has started separating employees through the entrepreneurship development training programmes.

Though redeployment is one way to handle an oversized workforce, higher productivity levels can be achieved only through incentives and training.

Wages, at least a part of it, must be linked to performance so that competence is recognised, said Sarangi.

Successful leaders in business play an important part in improving employment productivity. Sarangi added investments are required in shop-floor productivity and at the managerial level too.

The run-of-the-mill compensation package will neither attract nor retain business leaders. For this, a distinct and innovative compensation package has to be developed.