November 2015

A shrine to steel

The story of how Tata Steel overcame a multitude of challenges to establish its Kalinganagar plant

Kalinganagar plant

The big and the small, the complex and the simple, the details and the broad sweep, human grunt and mighty machinery — the making of a grand new steel plant to state-of-the-art specifications is a gargantuan undertaking. It’s a beast of a task, fraught at every multipart stage with the menace of the unexpected, and the degree of difficulty is high in executing it satisfactorily even when the going is smooth. The tiniest of complications slipping into the mix can cause a haemorrhage; anything substantial and the situation can hurtle from bad to impossible in a hurry.

The complications were king-sized for Tata Steel and its Kalinganagar facility, the largest single-location greenfield project in the Indian steel industry. The company has had to endure a fearsome storm to realise a long-nurtured ambition, and there has been a price to pay.

It has taken a time span in excess of 10 years, patience and perseverance, endless delays, untold frustration and tonnes of effort for the Kalinganagar facility to reach where it has: on the cusp of commissioning, with a projected initial capacity of 3 million tonnes of steel a year and the potential to power Tata Steel’s growth in India over the coming decades. As for the cost of getting this colossus to roll, it has climbed from the original Rs150 billion to about Rs260 billion. Has it been worth it?

Rajiv Kumar 'Most certainly yes,' says Rajiv Kumar, vice president (operations) at Tata Steel ’s Kalinganagar Project Odisha. “I consider creation to be next to godliness and I believe we are creating in Kalinganagar. The team working here is not in it merely for the salary; we are in it for pride.” The precise and measured Mr Kumar, a metallurgical engineer who is at the helm of the project and has been involved with it from its beginning in January 2005, reckons the opportunity to be associated with an operation of this scale and technological finesse comes once in a lifetime for steel professionals like him.“It’s a blockbuster in the making and I don’t know if any of us will get another chance to be part of such a venture. It gives us a real kick.”

The importance of Kalinganagar to Tata Steel’s prospects in India cannot be overstated. With capacity and product range at the company’s mother plant in Jamshedpur hitting the limit, future growth and prosperity will depend increasingly on the new facility’s output. This is expected to jump from 3 million tonnes in 2016 to double that by 2019-20 and to 12 million tonnes in 2025. If and when that happens, Kalinganagar will ease ahead of Jamshedpur in capacity and production.

The Tata Steel plant is the standout structure in Kalinganagar, a planned industrial zone in Jajpur district in the tribal heartland of eastern Odisha. Born of the expansive vision of the state’s late chief minister, Biju Patnaik, Kalinganagar is a geographical entity spread over more than 100 sq km with barely a town in its fold. The purpose was to establish an industrial complex where steel manufacturing would dominate, and land for it began to be acquired in the early 1990s. It was an idea that struggled to find the legs to run.

Spanner in the works
Nothing of significance happened in Kalinganagar for a long period and large parcels of the land continued to be used, mostly for farming, by those they had been acquired from. The nebulous nature of the arrangement would lead to a conflict with the occupiers — the vast majority of them from tribal communities — when the land was sought to be repossessed by the Odisha government for projects such as Tata Steel’s. The consequences were tragic.

Food processing is among the skills taught at training centres such as this one in Kalinganagar
Tata Steel was caught in the crosshairs when, on January 2, 2005, a panicky police force fired on a 100-strong gathering of tribals protesting against what they perceived to be displacement from their ancestral homesteads. The agitation dealt a body-blow to Tata Steel’s hopes of getting work started on the project. Ground conditions got so vitiated by the incident and its aftermath that the company was forced to suspend operations. It did not have a choice: for close to two years following this dreadful episode, Tata Steel’s people could not even visit Kalinganagar due to fears of violent retribution.

“As of January 1, 2005, we thought the land was ours because we had made payments to the government for it,” explains Mr Kumar. “We did not foresee any problem getting it. We had the Tata name to back us, we had been in Odisha for 100 years and we believed we had built social equity with the community. But there were some stakeholders who did not see it that way, there were others fiercely opposed to us, there was the local politics. We were just not aware of the factors at play.”

It was a shock to the Tata Steel system. How could a company so invested in community relations and so steeped in corporate social responsibility (CSR) have miscalculated so badly? “It was a huge learning for us,” says
Mr Kumar. “We understood how crucial getting the community on our side was. We realised that our past behaviour and our reputation counted for little in this place, which has its own dynamics. We got to appreciate the fact that a project does not begin with the acquisition of land; it begins much before that; it begins with a blanket of initiatives for the community.”

Tata Steel had faltered but it had the confidence to back itself. The company knew its intentions were honourable, that it could convince the community that the Tata way of doing business would ensure a better quality of life for the people of Kalinganagar. No immediate solution was forthcoming, though. “The road to our site was blocked for two years; we could have got hurt if we ventured anywhere near,” says Mr Kumar.

The manner in which Tata Steel went about recovering from the disaster was exemplary and extremely painstaking. Plenty was at stake but the company, as its storied history shows, has a remarkable record of resilience when confronted with obstacles. Moreover, it did not want to stumble for a second time in Odisha (as it had in Gopalpur on an earlier occasion). “In India we had not really tested ourselves outside of Jamshedpur; that was our world,” adds Mr Kumar. “Kalinganagar was our chance to break out of the Jamshedpur cocoon.”

A continual endeavour got underway to gain the trust of the community, but there was nothing to show in the context of work at the site itself. Finally, in early 2010, the air cleared enough for Tata Steel to restart building the plant. “We learned from our mistakes and from our difficulties,” says Mr Kumar. “We had the resolve and the tenacity; we had belief in our capabilities and in our intent to do good for society. That’s what kept us going.”

Preparing right
Land acquisition apart, Tata Steel was meticulous in its preparations to set up in Kalinganagar. The company was clear about what it wanted: a cutting-edge facility that would compare with the best in the world, with superior engineering, captive power generation, its own railway lines, extensive provisions for recycling waste, sophisticated safety features and minimal dependence on fossil fuels.

Tata Steel staff at the site before work began on setting up a water system for one of the units
In contrast to Jamshedpur, which was developed in phases and then improved upon down the years, with Kalinganagar Tata Steel could look at establishing a panoptic plant at one shot. “Jamshedpur had grown in spurts and we faced constraints there because of the heritage of the place,” says Mr Kumar. “Kalinganagar was unfettered in that respect; we had a clean slate to fashion a next-generation steel works. Layout, technology, safety, the environment, port connectivity through Paradip and Dhamra, CSR — we wanted to bring it all together and that’s what we’ve done. It’s a big leap from Jamshedpur.”

Tata Steel tapped the expertise of, and sourced equipment from, the finest globally for Kalinganagar. Nippon Steel of Japan was appointed as consultants to guide the company on setting up the plant. Accenture assisted with project management, DuPont on safety, the Singapore-based Jurong with landscaping and infrastructure, and machinery came from Germany, Japan and China.

“From designing the layout to controlling material flow, from dealing with the waste to safety issues, we had it covered,” says Mr Kumar. All of this was based on Nippon Steel’s blueprint from 2005, when the project kicked off, and it has stood the test of the years. “That’s the beauty of it; what was recommended then remains more than relevant after a decade. Our benchmark was Nippon Steel itself and the company was way ahead in suggesting what they did. In fact, their blueprint is ahead of the time even for 2015.”

The Indian component in this blend was almost entirely from Jamshedpur. Besides the project staff, the flow of people from India’s original steel city to lend support has been more than a trickle. “Every other week we have somebody coming down to do some handholding, to give advice or to see how we’re doing,” says Mr Kumar. “It’s a five-hour drive from Jamshedpur to Kalinganagar so it’s not easy, but many of our colleagues come out here and spend a day or two. We could not have pulled this off without Jamshedpur.”

The in-house engineering competence Tata Steel had accumulated in Jamshedpur came in handy once work on erecting the structures at Kalinganagar commenced. “The know-how has all been from Jamshedpur,” says Mr Kumar. “Our people had delivered a multitude of engineering solutions there and their experience proved vital with this project. Basically, Tata Steel is three companies: a mining company, a steel company and an engineering and projects company. We are as significant as anyone in each of these three verticals. We had the talent and the skills; what we needed was guidance and we got the best of it.”

Tata Steel added to its knowledge bank by sending out its people to different parts of the globe to get a first-hand feel of what it takes to construct a modern steel plant. It has been a while since plants of this kind were built in Germany, Japan and elsewhere in the developed world. Where it does happen is in countries placed in the same steel-developing bracket as India. “We didn’t go to the United States, the United Kingdom or Japan for this because nothing is coming up there; we went to the places where new technologies were being implemented: China, Brazil and Russia.”

Mr Kumar and other members of the Kalinganagar project team benefitted immensely from these travels. “My colleagues and I had the privilege of touring extensively over the course of the project,” he says. “There was a lot of money spent on each of us. The organisation invested in us and we had to have a high level of productivity. The team had to be lean so as not to eat into Jamshedpur. We took no shortcuts and that’s what’s great about Tata Steel.”

Residents of the company’s Bamnipal housing complex unwind at a yoga session
There is good reason why conscientiousness pays in the steel industry, particularly so in matters such as repairs and maintenance and in getting the necessary support system in place for a plant to perform optimally. “We have our repair shop and machine shop, but there are about 40,000 line items in the Kalinganagar facility and each one of them has to be made somewhere,” adds Mr Kumar. “We are not a producer of these 40,000 spares; we are in the business of making steel, so we require ancillaries to serve us. It’s a steep challenge.”

The ecosystem that Tata Steel will depend on for Kalinganagar to function without glitches also needs creating. It needs organisations of the calibre of Siemens and ABP and SMS (which has established a Rs2.5-billion spares facility about 120km from Kalinganagar). It helps that Tata Steel is a substantial player. “This company is like a magnet; we have the wherewithal and the resources, so we will get someone to cater to us,” says Mr Kumar. “When they do so they can also cater to Jamshedpur, Rourkela and other centres. The good thing is that [these manufactures] understand India’s potential.”

As with its drawing power, the Tata Steel culture works in the company’s favour. This is evident in the engineering talent and the bench strength it possesses. Pedigree and credentials are solid here and so is the depth. The people requirement in Kalinganagar will be less heavy than in Jamshedpur, and that makes it even more important that the well trained are in place when the time arrives for all systems to go on stream. The aim is to produce 3 million tonnes a year with 3,000 people and double that with 5,000. The productivity goal, calculated for the future, is to get to 1,500 tonnes per person per year and from there to 2,000 tonnes, the gold standard globally.

Keeping its Kalinganagar employees in good cheer is a priority for Tata Steel and the company has, to this end, begun construction on a township to house them. This will not be and cannot be on the Jamshedpur scale, but there will be no shortage of creature comforts. Also in the planning pipeline is a school — an agreement for which has been signed with the Jesuit-run Loyola School of Education — and a 200-bed hospital. The company sees these amenities as prerequisites, providing health and education services to employees as well as villagers in the neighbourhood.

Last-minute hiccups
For now, though, the objective is to start manufacturing steel. Last-mile hiccups have led to the commissioning date being stretched to the second half of 2015-16, by when it is expected that the remaining loose ends will be tied up and final regulatory clearances secured. The Kalinganagar project team is bracing itself for the deadline and it is, in the meantime, keeping complacency at bay.

“There is a queasiness attached to anything that is not experienced,” explains Mr Kumar. “Kalinganagar is not Jamshedpur, as we keep saying, and it will take a long time to have an environment similar to that. You have to get people to understand the language of steelmaking. In Jamshedpur we have a dependable support network where people know how to serve a steel plant. Any problem you have is a phone call away from being resolved. Here we have to, first of all, figure out whom to talk to and then hope he comprehends us. That’s how it goes with greenfield projects.”

Tata Steel knows that the nature of the challenge in Kalinganagar, post commissioning, is such that preparedness will be critical. “We have to be doubly sure about everything,” adds Mr Kumar. “It’s a new place with a new bunch of people, the bulk of them rookies. Having the training is fine but you are facing this situation for the first time and there will be lots to learn, not least from missteps.”

It is in countering the unforeseen that the company’s investments in advanced processes and systems will come to the fore. Automation, information technology, data capture and mining, these are some of the tools Tata Steel will bank on to ensure it stays on track in Kalinganagar. Having all of this is slotted in from day one, rather than leaving it for later, should ensure that operations at the plant will progress according to plan.

The industrial rhythm
A factor that Tata Steel may have to perhaps struggle harder with is the work culture in Kalinganagar, still primarily an agricultural society where the industrial way of life and its rhythms are alien to people. “That’s the way it is,” says Mr Kumar. “These are some of the cultural characteristics here and you need to be aware of it to be able to cope with the repercussions.”

There is a pot of steely gold in prospect for Tata Steel when the plant gets to flex its muscles. The finished products slated to emerge from the Kalinganagar facility include high-tensile steels and flat products that will enhance the company’s ability to meet rising customer demand in a variety of industries in India, among them automotive — where it has a 44-percent market share — infrastructure, oil and gas, energy and shipbuilding.

There is no doubt about one point: without Kalinganagar in the bag, Tata Steel’s ability to enhance or even retain its market share in the Indian steel industry, currently at about 15 percent, will be seriously compromised. Based on GDP projections for India, Tata Steel will have to increase its output from the present 12 million tonnes per annum to 24 million by 2025 to hold on to the market share it has. It will have to do better still to up that share, and that translates into producing an extra million tonnes of steel and then some every year over the next decade.

Automotive is the prize catch in this equation. It is a segment where the highest quality is deemed an essential and it is, in the Indian scenario, probably the best paying proposition for a steelmaker. “Serving the automotive sector lifts your entire process; the lower-end products, too, are brought onto a higher pedestal,” says Mr Kumar. “That’s because automotive pushes you all the way on quality, and the discipline it requires to serve the industry is huge. We want to partner our auto customers to a greater extent and Kalinganagar will give us the capability to manage that.”

There is a calm confidence about Tata Steel as it girds its loins for Kalinganagar going on stream and Mr Kumar epitomises it. Pressure is ever-present, he says, and so are the challenges. “You cannot switch on and switch off in a steel plant. Things take their own time; individual facilities have to be ramped up and synchronised with others. What lifts me and the organisation is the integrity and the honesty that the outside world sees in us. I’ve experienced that in full bloom. We have the social equity now and that’s why I’m certain that when we start in Kalinganagar it will be at full throttle.”

A road less travelled
The agreement to establish the Kalinganagar steel plant was signed with the Odisha government in November 2004. The intent was to set up a facility that would rank among the best in the steel industry in terms of technology and processes.

  • The objective was to build a plant — on a 3,741-acre parcel of land that had been allotted by the government — that would produce 3 million tonnes of steel a year, and at a later stage go up to 6 million tonnes.
  • Work on the boundary wall at the site began in January 2005. This is when tribal villagers opposed to the government acquiring land for the project clashed with the police.
  • Work was suspended in the aftermath of the agitation and Tata Steel, facing threats of violence, withdrew its people from the area for about two years.
  • From early 2006, the company began an intense if low-key campaign to get the tribal people of Kalinganagar on its side. This was a slow and painstaking task.
  • Community development programmes were initiated in and around Kalinganagar to build social equity and convince people of the benefits of having Tata Steel in their midst.
  • Construction work on the steel plant commenced in right earnest in 2010. The best global partners were roped in for guidance, including Nippon Steel, Accenture, DuPont and Jurong. Equipment and machinery were sourced from Germany, Japan and China.
  • The Kalinganagar facility, located 100km from the state capital of Bhubaneswar, boasts state-of-the-art processes and technology in waste management and environmental fallout, energy conservation, safety and material flow. It has one of India’s biggest blast furnaces.
  • Tata Steel will draw the iron ore required for the plant from its captive mines in Joda, Nuamundi and Khondbond (all in Odisha). It may have to import ore in the future.
  • The cost of the project has mounted steeply due to the delay in its completion, from the original Rs150 billion to Rs260 billion. This has been due to the ever rising prices of raw materials like iron ore, which has soared from Rs500-600 per tonne in 2003 to the current Rs5,000  per tonne. The cost of steel is stuck where it was in 2003.
  • Products from the Kalinganagar stable will help Tata Steel better serve customers in industry sectors such as automotive, infrastructure and energy. The plant’s output will be critical in enabling the company to retain its flat products market share in India, and in improving it.
  • Tata Steel expects to produce about 3 million tonnes of steel a year by 2016, then 6 million tonnes by 2019 and 12 million tonnes by 2025. By then investment in the project may rise to Rs500 billion.

This article is part of the cover story on the setting up of Tata Steel's ultramodern Kalinganagar plant, featured in the October 2015 issue of Tata Review:
'Kalinganagar has the potential to be bigger than Jamshedpur'
It pays to be generous
The making of steel and more