July 2016 | Nithin Rao
'We made Kalinganagar happen and that's part of our culture'
'There has never been a moment short of excitement,' says TV Narendran as he recounts his two-and-a-half-year journey as managing director of Tata Steel India and South East Asia. “We are a cyclical industry and challenges will always be there."
In this interview with tata.com, Mr Narendran speaks about the troubles confronting the steel sector, the company’s operations, its greenfield project in Kalinganagar in Odisha, and the future of the meaty metal. Excerpts:
What has been the impact of the Chinese slowdown on the Indian steel sector?
As a nation we should have a plan on how to deal with the impact of the Chinese slowdown on our industries, especially because their excess capacities could be dumped on us.
The domestic steel industry has been seeking and getting some kind of support from the government following the flooding of Chinese steel in the Indian market, though some consumers are opposed to import barriers.
The fundamental point, which is relevant not just for the steel sector but for any other, is that this conversation is not about competitiveness. If Chinese manufacturers were selling steel at current prices and still making a profit, then one could call them competitive. When they are losing money by selling steel at these prices, they cannot be called competitive.
If Tata Steel did not have to worry about shareholders and profits, we too could have sold steel at any price, just to keep our plants running. Today this is happening in steel; tomorrow it could happen with any finished product.
India is one of the most exciting consumer markets for producers from around the globe. The logic behind Prime Minister Narendra Modi’s ‘Make in India’ initiative is to have international companies participating in the growth of the country’s economy by investing here, in manufacturing here and creating jobs here.
If we allow companies and countries to benefit from India’s growth by exporting into India from facilities and capacities they have elsewhere, how are we going to encourage investments in India and job creation in India?
Did the China crisis also hurt the South East Asian market and Tata Steel’s operations in the region?
South East Asia was hurt badly following the crisis in China and our operations in NatSteel and Tata Steel Thailand were also affected. But NatSteel has emerged from the experience a leaner and more agile organisation, and so has Tata Steel Thailand.
|The coke oven at Tata Steel's greenfield project in Kalinganagar in Odisha|
South East Asia is one of the fastest-growing steel markets in the world after India. The demand for steel in India is around 80 million tonnes a year, while the ASEAN region accounts for about 70 million tonnes. India and South East Asia are among the few bright spots in the global steel market and hence we have an opportunity to leverage our footprint in these two geographies.
Most of the ASEAN requirements are met through imports. Unlike India, the region does not have iron ore and other raw materials in abundance, which is why about 30 percent of the exports of steel-producing countries such as China, Japan and South Korea end up in South East Asia.
Could you tell us about the Kalinganagar project?
It was a huge challenge for us. The journey began in 2005 and we are proud that we have built a steel plant there. We made it happen while others wavered and that is part of the Tata culture. You find ways to bridge differences with the local community, you persevere and you succeed.
Even as recently as four years ago, there was nothing much in Kalinganagar. Today it is buzzing with activity and this is just the beginning. The operation has the potential to become, in a decade, bigger than the Jamshedpur plant. Kalinganagar is one of the biggest make in India stories. We have invested more than Rs250 billion in the project and we have plans for further expansion.
|The Sansailo Colony is part of the rehabilitation and resettlement programme of Tata Steel in Kalinganagar|
Above all, Kalinganagar is a great case study for Tata Steel. Before we started work there, we assumed that just because we are from the Tata group everybody would welcome us. Those villagers in and around Kalinganagar did not know of the legacy and history of the Tatas. Many of them got misled and were susceptible to being exploited.
A key learning from Kalinganagar is that if we want to develop a greenfield site we have to first build equity and a relationship with the local community. Also, it’s not just about creating jobs but about encouraging job creators. You have to help local youth become entrepreneurs as well because a single steel plant cannot meet all the job aspirations of the local community.
What has been the impact of the Tata Steel Europe crisis on the company’s India operations?
To be fair to the Tata Steel Board, the Indian operation has got all the funds that it has asked for. Last year was a difficult one for Tata Steel India as our Ebitda [earnings before interest, taxes, depreciation and amortisation] was 19 percent. This compares well with leading companies not only in our industry but in other industry sectors as well.
What are your views on the future of steel and the emergence of new materials such as graphene?
There are many materials that are superior to steel but it basically boils down to value-for-money and costs. Titanium is a fantastic material, but it has not gone beyond some specialised applications.
Aluminium has also been touted as an alternative, but the demand for steel is 40 times more than that for aluminium. Ford Motors, which switched to aluminium about two years ago, is now planning to revert to steel. Most car manufacturers still prefer steel, given that it is easier to repair.
We are confident about steel being the dominant metal for many years to come, but meanwhile we are pursuing work in developing alternate materials. We have already made some good progress on graphene, for instance.
Could you tell us about the changes that have happened in Jamshedpur during your time as managing director?
As far as the culture of the company is concerned, things are changing. We want to retain the good parts and get rid of the bad ones. Tata Steel is still the most preferred employer in the industry. We are sensitive to demographics and many young people are joining the company.
We are going through a digital transformation journey. We also want to improve on gender diversity and have brought about a lot of changes in policies that affect our women employees.
The emotional connect between employees and Tata Steel is something special. The connect we have with the communities around us is also special. The challenge is to change what needs to be changed and preserve what needs to be preserved. I’m sure that with the help of our strong and committed team we will do that well.