478 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JULY-SEPT 2008 Figure 16. Performance in Competitiveness Indicators 4.1.13. Mukand Ltd. Mukand Ltd. was originally incorporated as Mukand Iron and Steel Works Ltd. in 1937, but in 1939 it was taken over by Bajaj Group. In 1989, it was renamed Mukand Ltd. and the registered office setup in Mumbai. The company functions through two steel plants at Kalwa near Mumbai and Ginigera in Karnataka. The activities of the company include manufacture of steel, machine building, turn-key projects and highway construction. The steel division produces alloy, special and stainless steel long products in a variety of grades and sections. Mukand Ltd. is engaged in highway construction projects funded by the World Bank and has signed a Joint Venture Agreement with Vini Iron & Steel Udyog Ltd. for captive mining of coal block in Jharkhand as per the letter for allocation of coal block issued by Government of India, Ministry of Coal. The joint venture company will accomplish mining operations and allocate the production from the mine to Mukand Ltd. and Vini Iron & Steel Udyog in the proportion of 58.81 per cent and 41.19 per cent, respectively. Table 21. Competitive Performance of Mukand Ltd. Indicator Weighted Rank Score (1) (2) (3) Productive Performance 6.93 5 Financial Performance 2.16 12 Cost Effectiveness 7.39 13 Sales and Marketing Strategy 1.75 12 Stock Market Performance 2.30 5 Consumer Satisfaction 0.50 7 Technology and Environment 1.61 11 Human Resource Development 2.03 5 Foreign Trade 2.94 12 Growth Variables and Potential 3.13 6 Overall Competitiveness 30.75 13 The firm, Mukand Ltd., is in the thirteenth position, i.e., the second last in all the sample firms, with a score of only 30.75. It has performed reasonably well on the productive performance index (fifth position) with 83 per cent capacity utilisation and HRD index (fifth position) with
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478 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JULY-SEPT 2008
Figure 16. Performance in Competitiveness Indicators
4.1.13. Mukand Ltd.
Mukand Ltd. was originally incorporated as
Mukand Iron and Steel Works Ltd. in 1937, but
in 1939 it was taken over by Bajaj Group. In 1989,
it was renamed Mukand Ltd. and the registered
office setup in Mumbai. The company functions
through two steel plants at Kalwa near Mumbai
and Ginigera in Karnataka. The activities of the
company include manufacture of steel, machine
building, turn-key projects and highway
construction. The steel division produces alloy,
special and stainless steel long products in a
variety of grades and sections. Mukand Ltd. is
engaged in highway construction projects funded
by the World Bank and has signed a Joint Venture
Agreement with Vini Iron & Steel Udyog Ltd. for
captive mining of coal block in Jharkhand as per
the letter for allocation of coal block issued by
Government of India, Ministry of Coal. The joint
venture company will accomplish mining
operations and allocate the production from the
mineto Mukand Ltd. and Vini Iron & Steel Udyog
in the proportion of 58.81 per cent and 41.19 per
cent, respectively.
Table 21. Competitive Performance of Mukand Ltd.
Indicator Weighted Rank
Score
(1) (2) (3)
Productive Performance 6.93 5
Financial Performance 2.16 12
Cost Effectiveness 7.39 13
Sales and Marketing Strategy 1.75 12
Stock Market Performance 2.30 5
Consumer Satisfaction 0.50 7
Technology and Environment 1.61 11
Human Resource Development 2.03 5
Foreign Trade 2.94 12
Growth Variables and Potential 3.13 6
Overall Competitiveness 30.75 13
The firm, Mukand Ltd., is in the thirteenth
position, i.e., the second last in all the sample
firms, with a score of only 30.75. It has performed
reasonably well on the productive performance
index (fifth position) with 83 per cent capacity
utilisation and HRD index (fifth position) with
VOL. 20 NO. 3 THE PERFORMANCE OF INDIAN IRON AND STEEL INDUSTRY ... 479
Figure 17. Performance in Competitiveness Indicators
decent expenditure on staff welfare and some
other such expenses and stock market index (fifth
position) (Table 21). Moreover, the firm has
reported the highest growth in profits in the last
three years which has secured it a sixth rank on
the growth index. However, in all the other eight
indicators of competitiveness, the firm has shown
disappointing performance. Special mention can
be made of its foreign trade performance, as it is
in twelfth rank there due to negative net foreign
exchange earned as well as minimal exports in the
total sales. Furthermore, the firm has little market
share and spends least on advertising, which has
resulted in low score on the sales and marketing
index of competitiveness.
4.1.14. Lloyds Steel Industries Ltd.
Lloyds Steel Industries Ltd., a flagship
company of the Lloyds Group was incorporated
in 1970 under the name Gupta Tubes & Pipes Pvt.
Ltd. It was renamed Lloyds Steel Industries Ltd.
in 1985. The firm is mainly engaged in the
manufacture and marketing of sponge iron, hot
rolled and cold rolled coils, galvanised sheets and
coils. It also undertakes designing and fabrication
of various chemicals, pharmaceutical and other
machinery coupled with manufacture of steel
pipes, tubes and steel castings. Presently the
company has three manufacturing units situated
in Maharashtra. Two units are located at Wardha,
manufacturing hot rolled, cold rolled, galvanised
plain and corrugated coils of steel. The third unit
located at Thane manufactures silos, steel pipes
and tubes and fabricates chemical and
pharmaceuticalmachinery. Since its inception the
company has entered into various technical
collaborations and tie-ups with national and
international engineering companies. However,
due to poor performance in all spheres, the
company has filed references with BIFR for four
consecutive years since 2001, for consideration
of its sickness.
Lloyds Steel Industries Ltd. show especially
dismal competitive performance having largest
480 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JULY-SEPT 2008
the difference of score of 6.75 with the previous
firm, i.e., Mukand Ltd.. Mainly because of poor
performances at the stock exchange and all the
growth variables, the firm is in the last position
of the overall competitiveness index. It has also
displayed poor comparative performance in the
financial indicators (thirteenth rank) and
technological and environmental indicators
(thirteenth rank). It can be seen in table 22 that
the firm has scored zero in two of the indicator
indices (stock market performance and consumer
satisfaction), which is suggestive of minimum
scores among rivals in all the sub-indicators of
that particular indicator. As far as consumer
satisfaction index is concerned, the firm ranked
eighth there, despite zero score because some of
Table 22. Competitive Performance of
the other firms, up the order, are on same ranks.
Lloyds Steel Inds. Ltd.
Indicator Weighted Rank
Score
(1) (2) (3)
Productive Performance 4.98 9
Financial Performance 1.70 13
Cost Effectiveness 9.23 6
Sales and Marketing Strategy 1.95 9
Stock Market Performance 0.00 14
Consumer Satisfaction 0.00 8
Technology and Environment 1.27 13
Human Resource Development 0.29 9
Foreign Trade 3.59 8
Growth Variables and Potential 0.98 14
Overall Competitiveness 24.00 14
Figure 18. Performance in Competitiveness Indicators
5. Financial and Non-Financial
Competitiveness of the Firms
The financial and non-financial performance
of a firm is complementary to each other, as either
cannot be sacrificed at the expense of the other.
However, in the short term, financial
performance may take more prominence in
determining the competitiveness of a firm,
whereas to sustain it in the long run, a firm must
pay enough attention to the non-financial aspects
of competitiveness. When we look at the financial
and non-financial indices separately, it is found
that the financial index has only 39.85 per cent of
VOL. 20 NO. 3 THE PERFORMANCE OF INDIAN IRON AND STEEL INDUSTRY ... 481
the total weights of 100 whereas the non-financialindex has the remaining 60.15 per cent. Thisindicates more importance to the non-financialfactors given by the industry experts in the surveyof sample firms, as they interpret that it is thefactors such as productivity, technology, humanresource, sales and marketing strategies, etc., thatstrengthens their financial performance in thelonger run. The weighted average scores of theindicator indices are summed up into financialand non-financial indices for further analysis. Asalready mentioned, financial performance, costeffectiveness, stock market performance andforeign trade indicators comprise the financialindex whereas the non-financial indicatorsincorporate productive performance, sales andmarketing strategy, consumer satisfaction,technological issues, human resource and growthvariables.
The industry average for the financial index is19.08, whereas that of the non-financial index is
20.00 (table 23). It is marked that while nine firmsshow above industry average performance on thefinancial index, only seven of them are above thesame in the case of the non-financial index. Thissupports the observation that firms in the Indianiron and steel industry needs to perform better inthe non-financial indicators of competitiveness,in order to improve the industries performance asa whole. This is evident by the fact that mosthindering problems of the industry relate tonon-financial aspects, such as low labourproductivity, capacity underutilisation andenvironmental pollution issues. It may be notedthat the industry averages of both the indices arevery close. However, the actual performance ofthe firms in the non-financial index iscomparatively poorer as reflected by the lessernumber of firms showing above industry averageperformance. The high average score, despite ofinferior firm performance, is a result of relativelyhigher weights attached to the non-financialindicators of competitiveness.
Table 23. Scores and Ranks in Financial and Non-financial Indices
Overall CompetitivenessFirms Financial Index Non-Financial Index Index
Score Rank Score Rank Score Rank
(1) (2) (3) (4) (5) (6) (7)
Tata Steel Ltd. 24.90 1 30.26 2 55.16 1
Steel Authority of India Ltd. 19.45 7 30.83 1 50.28 2
482 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JULY-SEPT 2008
Figure 19. Comparison of Financial and Non-financial Index
A general industry analysis shows that eight
firms namely Tata Steel Ltd., JSW Steel Ltd.,
Jindal Stainless Ltd., Uttam Galva Steels Ltd.,
Bhushan Steel Ltd., Shree Precoated Steels Ltd.,
National Steel & Agro Inds. Ltd., and Lloyds
Steel Inds. Ltd., have bettercompetitive positions
in the financial indicators of competitiveness
(figure 19). Further, only the remaining six firms
performbetter in non-financial indicators in terms
of ranks. However, in terms of scores, only six
firms show superior performance in the financial
indicators, while remaining other eight have
better non-financial scores. This once again
evidences the higher scores in the non financial
index on account the higher weights attached.
While examining firms’ competitive standing
in both the indices, the objective is to figure out
whether financial factors or non-financial factors
have a greater contribution to the overall
competitiveness. Furthermore, it will reflect the
specific areas on which a firm should focus, while
formulating targets and policies. Tata Steel stands
at the top in both the financial and the overall
indices, whereas in the second position on the
non-financial index. Its superiority is established
in all the spheres of competitiveness, although the
non-financial index contributes more (30.26
score) to its overall score. This is mainly because
of its superior performance in technological
issues, consumer satisfaction and sales and
marketing strategies. SAIL, the second firm in the
overall index shows comparatively mediocre
performance in the financial index, with seventh
rank (19.45 score) mainly because of the lowest
score for foreign trade index. However it has the
first rank on the non-financial index due to best
consumer satisfaction and superior human
resource development efforts.
The other firm which has striking differences
in financial and non-financial performances is
Uttam Galva Steels Ltd., which stands in the
fourth rank in terms of the former index, whereas
tenth in the latter index. The opposite is the case
with Ispat Industries Ltd., whose non-financial
performance (fifth rank) is much superior than the
financial performance (eleventh rank). Another
prominent observation is that in spite of below
average overall competitive position (eleventh
VOL. 20 NO. 3 THE PERFORMANCE OF INDIAN IRON AND STEEL INDUSTRY ... 483
rank) of Shree Precoated Steels Ltd., it is on thethird rank in the financial index due to the highestscore in foreign trade measures and a good costperformance. In sharp contrast to this, is itsnon-financial performance at the thirteenth(11.83 score) rank despite the fact that it showsgreat growth potential in future. Remarkably,Bhushan Power & Steel Ltd. is on the last positionon the financial index, whereas it performssatisfactorily on the non-financial index. Thedifference of scores is also notable in its case asout of a 34.23 overall score, only 13.45 comesfrom the financial indicators, which lays stress onthe requirement of more attention on the financialfactors of competitiveness. All the other samplefirmshave obtained more or less similar ranks andclose scores in both the financial andnon-financial indices.
Therefore, since the competitiveness index isthe sum of the financial and the non-financialindices, with higher weights assigned to theindicators of non-financial index by the industryexperts, it may be concluded that the overallcompetitiveness of a firm is relatively moredependent on its non-financial performance.There are two contrasting examples of firms inour indices to substantiate this. Shree PrecoatedSteels Ltd. has excellent financial score with thirdrank, whereas its poor non-financial score withthirteenth rank has pulled it down to the eleventhrank on the overall competitiveness index.Counterpointing, SAIL stands second on theoverall competitiveness index even with seventhrank on the financial index, mainly due to itssuperior non-financial performance with the firstrank.
6. Conclusions
It might be concluded that the performance ofthe Indian iron and steel industry with respect tokey indicators such as production, consumption,foreign trade, prices, etc., has certainly improvedover the past years, especially after its
liberalisation. The growth in production andconsumption during the post-liberalisation periodof 1991-92 to 2006-07 was estimated to be at arate of 8.11 per cent and 6.26 per cent per annum.Furthermore, the trade performance of thisindustry is excellent especially in terms of exportswith 30.70 per cent growth during thepost-liberalisation,which wasnegativeduring thepre-liberalisation period (1975-76 to 1991-92).Therefore, the industry has positive prospects forthe future too. The capacity utilisation has alsoimproved to about 90 per cent in the last few years.However, employment is theonly indicator whichhas shown negative growth during thepost-liberalisation period indicating joblessgrowth in the industry.
The industry is then examined in terms ofincreased competition between its firms in thewake of its liberalisation. The study reflects therelative competitive positions of the 14 samplefirms for the year 2006-07, out of which,performance of five firms was above the industryaverage score of 39.07. After reviewing the firstfive positions of the firms in the competitivenessindex, it may be concluded that as the differenceof scores remain substantial between the firms,the competition is not that substantial at the toplevel, each firm having their own securedpositions. The only exception is the third andfourth positions, i.e., JSW Steel Ltd., (47.76score) and RINL (45.15 score) where thecompetition is tough. The firms which performexceptionally well are Tata Steel Ltd. and SAILmainly due to superior competitive performancein all the indicators except productivity andforeign trade. Below the industry average, UttamGalva, Ispat Industries and National Steel seemto be in close competition whereas Bhushan Steel,Shree Precoated and Bhushan Power competehard between themselves. Special mention needsto be made regarding the competitiveperformance of Mukand Steel and Lloyds SteelIndus. Ltd., which have performed poorly on theoverall as well as indicator indices. These firms
484 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JULY-SEPT 2008
need to develop their technological base, improveforeign trade andmaintain growth in key financialindicators in order to sustain in the industry.
When the competitiveness index is dividedinto financial and non-financial indices, the mostimportant observation is the weighting pattern bythe experts in the Indian iron and steel industry.Visibly higher weights have been attached to thenon-financial sub-indicators of competitivenesssuch as productivity, consumer satisfaction,technological development, research anddevelopment, human resource, etc., as in the longrun they are considered most influential indetermining and sustaining the competitivenessof a firm. Looking at the financial andnon-financial index separately, it is seen that thecompetitive rankings differ somewhat as somefirms perform better in one than the other.Nonetheless, because of the higher weightsattached, the firms which showed betterperformance on the non-financial index, haveensured better positions on the overallcompetitiveness index.
NOTES
1. We have defined apparent consumption as productionminus export plus import. However, the data source, namely,joint plant committee (JPC) gives the apparent consumptiondata which is already adjusted for change in stocks and interplant transfers. The separate data for all these variables arenot published, therefore we have used definition of apparentconsumption as quoted in the paper. See Government of India(2006), Table 1.8 for further clarification.
2. Prowess is a firm level database which containsinformation on approximately 10000 large and medium sizeIndian firms. The database is maintained by a firm namedCentre for the Monitoring of the Indian Economy (CMIE). Inorder to be included in the database the firm needs to be eithera listed company or if it is a public limited company it needstosatisfy the condition (Income + Liabilities) / 2 = 200 MillionIndian Rupees. The firms in the database account for 75 percent of all corporate taxes collected by the Indian government,more than 95 per cent of excise duty and 60 per cent of allsavings of the Indian corporate sector. The firm level data inProwess is gathered from their annual accounts or reports andfrom other sources such as stock exchanges, Registrars ofCompanies associations, etc. The number of indicators per
company is close to two thousand and the information isusually available for ten years. Prowess also provides anormalisation of the firm level data across companies and overtime and updates the data everyday for its clients.
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Appendix Table 1: Summary of Results of Competitiveness Index for Indian Iron and Steel Industry
Firms Technology HumanProductive Financial Cost Sales and Stock Market Consumer and Resource Growth
Performance Performance Effectiveness Marketing Performance Satisfaction Environmental Development Foreign Trade Variable and Overall CompeIndex Index Index Strategy Index Index Index Index Index Index Potential Index titiveness
Industry Average 6.16 4.56 8.83 2.69 1.60 3.49 2.80 1.68 4.09 3.17 39.07
N.B. Zero indicator scores is indicative of worst performance of the firm in all the sub-indicators of that particular indicator index.
VOL. 20 NO. 3 THE PERFORMANCE OF INDIAN IRON AND STEEL INDUSTRY ... 487
Appendix Table 2. Performance of Key Indicators of the Industry
Years Production for Sale Apparent Consumption of Export Import Number ofof Non-Alloy Non-Alloy (Million Tonnes) (Million Tonnes) WorkersFinished Steel Finished Steel
and Potentialo Sales Percent PROWESS Positiveo PAT Percent PROWESS Positiveo Investment Percent PROWESS Positive
o Total Assets Percent PROWESS Positiveo Net Worth Percent PROWESS PositiveFuture Plans:o Firm’s Investment Plans over the Scale Primary Positive
Next 2 Yearso Plans to Produce any New Types Yes/No Primary Positive
of Steel in Next 2 YearsContingency Planning:
o Insurance Premium Expenses Percent PROWESS Cost compared to Sales Positiveo Repairs and Maintenance Expense Percent PROWESS Cost compared to Sales Positiveo Department for Disaster Yes/No Primary Positive
Management
Appendix Table 5. Basic Dataset of Sub-indicators of Competitiveness for 2006-07
Productive Performance Financial Performance
Firms Capacity Labour Quick Current Debt-Equ Interest Net Finished Debtors Profit Return on Return on Net Profit Return on Asset Util NetUtilisation Productivity Ratio* Ratio* ity Ratio* Coverage Working Goods Turnover Margin Capital E Net Margin Assets isation Worth*
Ratio* Capital Turnover Ratio* Over mployed* Worth* Ratio* Ratio* Ratio*Cycle* Ratio* Total
Income*Percent Ratio Times Times Times Times Days Times Times Percent Percent Percent Percent Percent Ratio Rs.