THE BEGINNING AND GROWTH

In the 1890s, Jamsetji Tata conceived of a dream projecta modern steel plant,
with stsate-of-the-art-technology to produce 1 million tonnes of steel. Work on
the steel plant commenced in 1907 in Jamshedpur which became operational in
1912. The capacity of the unit at the time of independence was around 1 million
tonnes and this was increased to around 2 million tonnes by 1960. With the
policy of the Indian government to give priority to the public sector to reach the
commanding heights of the economy, the company, like many others in the
private sector, was not allowed to grow until the liberalization of the economy in
1991. ln fact, at the height of the socialist fervour of the 1970s, there was even a
suggestion on the nationalization of Tata Steel taking resort to the Industrial
Policy Resolution that permitted nationalization of any industry if needed in
public interest. Fortunately, the government of the day did not have the
resources to pay adequate compensation to the shareholders of the company
after nationalization and the effort was aborted.

Tata Steel is one of twenty-eight major corporations within the Tata Group and is
the largest private sector steel company in the country with its headquarters
based in Mumbai. The companys stock is listed and traded on the Bombay Stock
Exchange and the National Stock Exchange, New Delhi.

Tata Steel, today, is among the worlds foremost steel makers and Indias largest
integrated private sector steel manufacturer. Its steel plant in Jamshedpur, and
mines and collieries, span eastern India. It employed over 48,800 persons as on
April 2002, out of whom 43,000 were directly involved in the steel business. Its
net sales were approximately $2.2 billion in 200203.

The company decided to focus on modernization of the production facilities in

phases. Through careful de-bottle-necking and marginal investments, capacity
increased to a level of 3 million tonnes in 1996. Low prices, slow growth in
consumption and the reluctance of financial institutions to fund the steel sector
came in the way of the companys expansion. Over the next 3 years, the
company added another million tonnes to its capacity.

The present huge growth in demand for steel globally especially from fast-track
developing countries like China, along with higher prices have imparted the
much-needed impetus to the steel industry. For the first time in several decades,
there is enthusiasm on the part of the steel industry to take to large-scale
expansion.

LIBERALIZATION UNLEASHES EXPANSION

The opening up of the Indian economy has brought about a previously unheard
of growth in the steel industry. In July 2004, B. Muthuraman, Managing Director,
Tata Steel, referred to plans for expanding capacity of the company to 7.5 million

tonnes by 2007. In subsequent months, however, the company has rapidly

widened its sights. In December 2004, he assured that Tata Steel would become
a 15 million-tonne company by 2010. Jamshedpur alone will produce 7.5 million
to 8 million tonnes. The recently acquired 2 million-tonnes capacity, Natsteel,
Singapore, will be expanded by another 2 million tones, outlined Muthuraman. A
greenfield, port-based plant at Orissa, with an initial capacity of 3 million tonnes
and another similar capacity plant in a different state are planned to be set up,
he said.

FOCUS ON SELECT BUSINESSES AND CORE COMPETENCY

When Ratan Tata succeeded J.R.D. Tata as chairman, a comprehensive review of
identifying and focussing on the core businesses of the group was made. Several
of the well established businesses of the group that did not sync with the
companys major involvement in steel production were phased out. These
included electronics, cement, soaps, pharmaceuticals and textiles. Interestingly,
there were suggestions that steel could be one of these!

While it took 90 years to reach a capacity of 3 million tones, the company has
expanded it five-fold in just 14 years! The shift of demand in large volumes to
populous developing countries such as China and India has helped in the
evolution: From the commercialisation of the Bessemer process for producing
steel in 1856, for around 100 years, upto 1960, the industry witnessed
handsome growth of 7 to 8 per cent per annum. During 196080, the rate of
growth dropped to around half that level, to around 4 per cent. During 1980
2002, the growth rate was even half of this, at around 2 per cent. In the earlier
growth phase up to 1960, the US and Europe recorded handsome growth. In the
subsequent decades, Japan and South Korea recorded high growth, observed
Muthuraman. But in India capacities were not being created in a big way. The
steel industry burdened for years with over capacity, of around 250 million
tonnes, had not invested on fresh capacity. With the slack totally adjusted,
naturally, there is this impact on prices. Price of steel started rising and this
affected the ordinary consumer adversely.

PROTECTING CONSUMERS FROM STEEP INCREASES IN PRICES

Tata Steel is conscious of the imperative to protect consumers of steel from
steeper price increases. With the high increase in the cost of basic inputs, such
as coal, iron ore, scrap and petroleum products, there has been a focus on
achieving cost-efficiencies. The company has been especially considerate to its
bona fide customers for whom the prices are offered at around INR 5000 per
tonne lower than market prices. With 70 per cent of products going directly to
customers, this large section of consumers is treated with special concern. The
company also strictly enforces its maximum retail price at the dealer end. To
serve the domestic consumers better, Tata Steel also decided to limit exports last
year to 15 per cent of total sales.

The industry earned very modest profits for several years. In the early 1980s,
annual profits were in the region of INR 6 crore. But costs of expansion and
modernization have been shooting up. Since 1992, when the company started
expansion and modernization, it has spent over INR 10,000 crore.

QUANTUM GROWTH PLANNED

Right through its history, Tata Steel has earned profits every year and declared
dividends (in 2002, it was one of five companies the world over that earned a
profit). The present era of high profits has prepared the company to aim for
quantum growth. Muthuraman provided an idea of the funds required: The 6
million tonne plant in Orissa will require INR 16,400 crore, expansion of capacity
at Jamshedpur by 3.5 million tonnes will call for INR 9800 crore and acquisition of
Nat steel needs INR 1300 crore. Thus total funds required will be in the region of
INR 27,500 crore. To achieve higher growth in production and to reduce cost per
unit, Tata Steel has invested heavily in industrial research. It has enabled the
company to earn the proud position of the worlds cheapest producer of steel.
There have been collaborative research projects with IIT-Kharagpur, Indian
Institute of Science, Bangalore and with research institutions in Sweden,
Germany and Japan. As a result, there has been a steep increase in the number
of research papers published and intellectual property claims registered. Tata
Steel spent a dollar per tonne of steel produced on R&D, which compares well
with $1.8 per tonne spent by leaders like Nippon Steel.

Such focus on development has helped Tata Steel strive continuously to improve
the quality of its product mix and also to increase the share of branded products,
both of which helped it to have better realizations for a given quantum of output.
Combined with the success in achieving continuous increases in production
through rising operational efficiency, reduction in specific consumption of raw
materials refractories, there is the twin advantage of handsome increases in
labour productivity and a much more than proportionate increase in after tax
profits. Of course, the steep increase in prices through the last couple of years
has also contributed to this big jump.

CLOSE ATTENTION TO HR
At the root of the success of Tata Steel lies its close and continuous attention to
human relations. The success of the management in regularly and continuously
interacting with the union leaders has helped in resolving differences.
Succession of leaders believed that the temper of employees is as crucial as the
temperature of the furnaces. The tradition of maintaining a most cordial
relationship with workers in the truest sense of Trusteeship wherein it is believed
that the employer is ordained by Divine Providence to take care of the interest of
workers and hence the resources of the enterprise are entrusted to him, has
been built by J.R.D Tata on the very humane foundation laid by Jamsetji Tata still
continues.

Among the most interesting aspects of Tata Steels evolution is its seamless and
smooth success in downsizing. In 1994, for producing 2 million tonnes, the
company employed around 80,000 workers. Today, for producing 4 million
tonnes, the company employs only 39,000 workers. The reduction was on a welldelineated strategy of right sizing: We closed a sheet mill that earlier produced
buckets and dubbas. The open-hearth furnace continued to be operated for years
more as a museum piece. We scrapped it and built a new blast furnace. We had
extensive communications with the unions on rationalisation of manpower. We
decided to focus on our core areas of steelmaking and decided on a lot of
outsourcing of services such as security, milk distribution and power distribution.
From April, 2004, we also formed JUSCO, transferring 1,400 workers of Tata Steel
to the new company entrusted with the task of running the township and bidding
for such jobs nationally and globally, explained Niroop Kumar Mahanty, Vice
President, Human Relations Management of Tata Steel.

Numerous opportunities were also provided to employees to become

entrepreneurs. VSS (Voluntary Separation Scheme) had an attractive
remuneration package for those opting for VSS. We provided interest-free loans
up to INR 2 lakh; they were paid their basic salaries up to retirement (without
annual increments and allowances but with all retirement benefits) which worked
out to some 55 per cent of the last drawn pay. A transition support centre was
set up to advise the retirees on investing their resources and also to try and find
jobs. They were kept on the rolls for three months and paid the fare for
interviews to them. Through VSS, the company cut down nearly 26,000 jobs.
After such large-scale downsizing, the company introduced massive programmes
of retraining and repositioning of employees. A huge exercise of cross-matching
skills was done. We encouraged workers to pass trade tests and acquire technical
qualifications, observed Mahanty.

ADMINISTERING THE TOWNSHIP

It is well known that Tata Steel has been administering the Jamshedpur town for
the past eight decades, and anyone who visits the place is so impressed by its
orderliness, extensive civic facilities and cleanliness that they would cite it as a
model town. The company has been subsidizing around INR 100 crore on
administering the township. The entire services relating to town administration,
provision of transport services, running schools and hospitals are all done by the
company. Kanwal Midha, General Manager, said that JUSCO has recently taken
over the responsibility as a separate corporate unit: Jamshedpur is spread over
64 sq.km and has a population of 7 lakh with 625 km of roads, 22,000 residential
flats and bungalows of Tata Steel and around 15,000 of Tata Motors and 5000 of
other Tata companies. In the township, over the years, the quality of municipal
services has been maintained at high levels. JUSCO, with its considerable
accumulated expertise in town management, especially in water and sanitation
businesses, intends to become a national leader in these businesses and to bid
for and undertake projects in other parts of the country.

CONTINUOUS REBUILDING

A 98-year plant obviously has evolved with different technologies and makeshift
arrangements. Understandably, it lacks the advantages of building a state-of-theart plant in a greenfield site. Large sections are getting scrapped and rebuilt on a
continuous basis. New blast furnaces are being built to make iron-making more
efficient. Simultaneously, capacities for cooking coal are being enhanced.

WE ALSO MAKE STEEL

Tata Steel coined a beautiful slogan impregnated with a lot of meaning more
than a decade ago. We also make steel. According to Muthuraman: To me the
statement represents everything Tata Steel does. It is pregnant with so much
meaning and conveys a lot of things that making steel is not our only business,
but a whole lot of other things define our business like corporate social
responsibility, being ethical, spending effort and money on sports, having a
green town caring for society. Muthuraman deprecated the tendency to judge
a corporate on a quarterly or yearly basis, not on the sustainability of its success
over long period of time. The close involvement of the company in dozens of
socially ameliorative projects has understandably, been giving much more
meaning to its corporate purpose than mere profits.

TATAS SOCIAL CONCERN AND COMMITMENT

Tata Steels Vision
Tata Steels vision statement tells all as to what it stands for. To seize the
opportunities of tomorrow and create a future that will make us an EVA positive
company. To continue to improve the quality of life of our employees and the
communities we serve.

TATAS CODE OF CONDUCT (CLAUSE 1)

Tata shall not undertake any project or activity to the detriment of the nation,
or those that will have any adverse impact on the social and cultural life patterns
of its citizens.

Tata Steels operating units have all adopted the Tata Business Excellence Model,
an integral part of which is corporate social responsibility. About 1214 per cent
of its PAT (Profit After Tax) is set aside for the welfare of the people. The Tata
code of conduct enjoins every company of the Group to act responsibly in the
interests of the nation where it operates.

Recognized as a benchmark for Corporate Social Responsibility in India, Tata

Steel is among few Indian Companies to be invited to join the UN sponsored
Global Company Forum, comprising organizations committed to translating the
UN decreed principles of human rights, labour and environment, into practice.

Tata Steel is already one of the dozen founder members of the Global Business
Compact (GBC), an initiative of UN Secretary General, Kofi Annan. The credo of
GBC is that industrial corporations have a larger role to play than merely to earn
profits. Tata Steel is the only Indian founder member of GBC that has gained
respect and recognition for its social concerns. One of the secrets behind the
success of a longevity of a corporate lies in its being part of the society. The
belief of the company in such tasks was well-stated by Muthuraman: Our
corporate growth is further strengthened by our efforts in the areas of social
development, relief and rehabilitation and sports. Initiatives such as Mission
Hariyali, Child Survival Projects, Aids Awareness Programmes, Operation
Muskaan etc., help us improve the quality of life of the communities we serve
and other stakeholders.

Since 1998, the ethical principles that govern the companyS activities have
been articulated in the Tata Code of Conduct, which applies to all Tata
Companies. In 2008, taking cognizance of the changing expectations within the
society and the increasingly global scale of the Tata GroupS activities, the Code
was updated in consultation with Corus and other Tata Steel Group Companies.
The revised Code of Conduct was adopted by the Tata Steel Group Board in
October 2008, and now applies to all companies within the group.

ENVIRONMENTAL IMPROVEMENTS
Tata Steel uses suitable resources, technology and work ethics to reinforce its
concern for the environment and its desire to conserve natural resources. It is
committed to reducing its environmental footprint and to achieve the target
levels set by it.

Apart from improving the general standard of rural population, Tata Steel has
been dealing with the problems of education, health, hygiene, family welfare,
agriculture extension, improving the welfare requirements, sports, games and
culture. In addition to the above, it has also involved itself with the needs of the
environment improvements by way of bringing the awareness amongst masses
of the benefits of land reclamation/rehabilitation and afforestation.

Intensive efforts have been made for the utilization of barren and subsided land,
as also utilization of fire areas by large-scale plantations. Over 9 lakhs of plants
have been planted, during the past 8 years with a survival rate of 70 per cent.
Enormous experience has been gained in the process and every effort is being
made to use even the smallest bit of land to provide a shade of greenery in the
area.

Several measures have been taken for controlling water pollution by use of waste
water for growing crops and vegetables, supply of drinking water to the colonies
after proper treatment and launching a pisciculture programme into the village

ponds. Several wells and tube wells have been constructed and repaired for the
local population.

ENVIRONMENT CELL
Tata Steel created a separate Environment Cell that independently looks after
matters of the environment and pollution control activities of the division. They
have regular meetings every month to review pollution control activities. This cell
is continually being expanded.

A laboratory to test air and water samples so as to monitor the environmental

activities has been set up. The company appointed a team from C M R S,
Dhanbad, to study the extent of pollution in their various establishments and to
suggest action to be taken for reducing the pollution. A comprehensive
programme of surface environmental studies with respect to air, water and noise
has been undertaken. Based on the studies conducted and their
recommendations, appropriate steps are being taken.

CORPORATE GOVERNANCE AT TATA STEEL

Good corporate governance should be an integral part of all of these processes,
not just (as often assumed) social responsibility and corporate citizenship. After
all, a good corporate citizen needs to be accountable to stakeholders while
conducting business as well as when investing in the community at a later date.

Tata Steel has gone some way in ensuring corporate governance at all stages of
the business process. Every year the company aims to exceed its targets on the
Employee and Customer Satisfaction Indexes, and the Corporate Citizenship
Index. In order to improve its internal management systems, it has also adopted
the following two systems of evaluation:

Tata Code of Conduct Follows guidelines established by the UN Global Compact.

A company signing to the Tata Code of Conduct entitles that company to use the
Tata brand name. It prescribes principles by which all employees are expected to
act.
Audit committee.
Presently, the governance checklist includes inter alia annual operating plans,
budgets and updates, capital budgets, quarterly results, minutes of all meetings
of various committees, remuneration of senior executives, legal issues.

TATAS CODE OF CONDUCT (CLAUSE 8)

A Tata company shall strive to provide a safe and healthy working environment
and comply, in the conduct of its business affairs, with all regulations regarding
the preservation of the environment of the territory it operates in.

A Tata company shall be committed to prevent wasteful use of natural resources

and minimize any hazardous impact of development, production, use and
disposal of any of its products and services on the ecological environment.

SOCIAL INVESTMENT
Tata Steels social investment reflects its after-profit practice, work in and for
the community that is not directly related to the business of business. Again,
Tata Steel has internal procedures that guide policy, meaning that community
initiatives are seldom ad hoc. Given below are six of these initiatives or
procedures which are being followed religiously:

Tata Council for Community Initiatives (TCCI): TCCI is a product of the Tata
Groups commitment to the community. It serves to help the Tata companies in
their business-community relations, by drawing up Tata Guidelines for
Community Development, designing programmes, then implementing them.
Programmes include training courses in which Tata companies conduct technical
(IT, Vocational) training to members of the community. This is done with the help
of company volunteers, often management staff. A forthcoming project involves
forming a Tata Corps of Volunteers, under which employee volunteering will play
an increasingly important role in developing business-community relations.
Tata social evaluation, responsibility and accountability (ERA): ERA is a procedure
by which Tatas community projects are evaluated for their impact on the target
communities and their level of accountability. Although ERA is not independent of
Tata, such procedures are influential in improving programme delivery and
ensuring continuing self-evaluation and learning.
Global business coalition (GBC): The Global Business Coalition on HIV/AIDS aims
to check the growth of the disease with the help of over a hundred major
international companies. Believing that business holds the necessary marketing
skills, management and infrastructure to be able to raise awareness in rural
communities, the GBC encourages companies to campaign with imagination and
consistency. Tata Steel has done just that and won an award in June 2003 for
Best Initiative. Initially, Tata focussed on educating employees, but now targets
over 600 villages in the State of Jarkhand. This is done through the dissemination
of mass media, as well as more inventive schemes, such as student workshops
which employees are trained to deliver, or travelling street plays in local
languages that reach the rural illiterate. Tata Steel paid for six condom-vending
machines in the city of Jamshedpur in public places, which are also proving to be
a success. At one of these locations, a busy coach station, there is also a clinic
where passers-by can have free check-ups and learn more about HIV/AIDS.
Volunteer database: A Directory of Employee Volunteers was established by the
Tata Group as an efficient way of matching jobs in the community with employee

skills and interests. A corporate committee, comprised of a senior executive,

union and government officials, interacts with the communities to ascertain their
needs. This is done on a quarterly basis with senior citizens of each village, and
biannually with target womenS groups.
Health initiatives: Working with the government to prioritize projects, Tata Steels
involvement in health initiatives remains largely philanthropic, with the exception
of the Global Business Coalition for HIV/AIDS awareness scheme. Tata Steel has
invested in a local hospital which treats an average of 2300 people per day. It
has also bought specialized cancertreating equipment, and part-finances the
running of one blood bank, two rehabilitation centres and five homeopathic
clinics. Donations to the clinics and centres are regular and on a long-term basis,
which does indicate a move from adhoc sponsorship to a more strategic social
investment. This is organized by the Family Welfare department.
Culture and education: Education and Youth Development Programmes have
built and maintained infrastructure for sports across Jharkhand. Over 1,500
young people are currently training at Tata Steels two sporting academies, six
training centres or their Adventure Foundation. Awards are given to employees
who excel in sports. A Tribal Cultural Centre was built in 1993 and a Jubilee
Amusement Park in 2001 to enrich the cultural heritage of the city of
Jamshedpur.
Tata Steel has also invested in education, part-financing eleven schools and
colleges that teach nearly 10,000 students each year.

LOOKING TO THE FUTURE

Along with the TCCIS forthcoming project to formalize employee volunteering,
Tata Steel also hopes to align more with global standards and initiatives. In 2001,
Tata Steel produced a Corporate Sustainability Report following guidelines
established by the Global Reporting Initiative. This is another step forward for the
company looking to make its mark on the new corporate responsibility agenda.

CONCLUSION
Tata Steel Ltd is one of the forerunners of the Indian industry in several respects.
It is the largest private sector steel company in the country. It is also the
countryS largest integrated private sector steel manufacturer, apart from being
among the worlds foremost steel makers. This is not the only distinction the
company has to fame; it has a lot of other things. The company is also known for
its corporate social responsibility. It is known for its ethical stances and its close
involvement in dozens of socially ameliorative activities, sports, building a grown
town in Jamshedpur providing its people all possible facilities to lead a life of
ease and comfort. No wonder Tata Steel has become a national leader in town
planning which is being emulated by other industries and even government
planners.