Jamshedpur: Tata Steel has decided to float a fully-owned subsidiary which would gradually take over its non-core activities in a phased manner.

Christened Jamshedpur Utility & Services Ltd (Jusco), the company, with a nominal share capital, is expected to offer its quality services more economically.

"All services-related activities will be put in the new company," Tata Steel managing director B Muthuraman told newspersons here on Thursday evening.

He said "the new company would be formed in the next two to three months".

Initially services like gardening, cleaning, etc, are to be put under Jusco, which will gradually take over "lots of other services which form non-core activities of Tisco today".

Jusco is intended to serve other Tata group companies also like Tata Engineering, Tata Yodagawa, Tinplate Company of India Ltd (TCIL), etc, and would gradually spread its wings outside Jamshedpur.

"The company will not have any assets but only people under it," clarified Mr Muthuraman, adding, "it will have knowledge and slowly acquire the expertise".

One of Tata Steel’s goals behind the formation of the new company is to reduce its wage bill, which stands at around 17.5 to 18 per cent of its total turnover at present. This is despite Tata Steel having reduced its manpower from around 63,000 about six years ago to 43,000 at present, through the employee separation scheme (ESS) route.

"We want to bring this down to around 10 per cent in the next 5 to 6 years," the managing director said.

"We are going to transfer some employees of Tata Steel to this company and different people have to get different salaries," he said.

He, however, clarified that, "this does not mean we’ll reduce the salaries of our employees, their future increases may become different".

Jusco would also take in new recruits under a different pay-scale than that offered by Tata Steel at present.

The steel major is in discussion with the Tata Workers’ Union on various different models on how to reduce employee cost.

"We’re talking with TWU about various models on how to reduce the employee cost to 10 per cent of the turnover," said Mr Muthuraman.

"Its an important challenge for Tata Steel," he said.

China Steel, a leading player in steel, is said to have a wage bill of around five to six per cent of its turnover.

In countries like Japan, Korea, etc, support services like supply of power, roll management, etc. are mostly provided by subsidiary companies of the core company.