SAIL to put 2 SBUs in place by April

Sunil Mukhopadhyay

Kolkata, Jan 7: The two strategic business units (SBUs) of Steel Authority of India Ltd are expected to be in place from April 1, according to sources in the government-owned steel major.

The SBUs are expected to improve SAIL’s business focus. SAIL is creating one SBU each for flat products and long products. SAIL’s Bokaro and Rourkela steel plants along with the flat products wing of the Central Marketing Organisation (CMO) would form one SBU.

The other SBU will be composed of Bhilai and Durgapur steel plants and the long products wing of the CMO. The mines would be linked to the SBUs.

The head of each SBU will have comprehensive business responsibility, with control over both production and marketing.
SAIL feels the restructuring will help improve responsiveness to the market and customer focus, ensure better co-ordination between manufacturing and marketing functions and decentralise to accelerate decision-making.

SAIL’s chairman Arvind Pande, said this will be the first structural change at SAIL.

“Along with divesting our non-core and unviable units, we are now approaching the SBU structure as a part of our restructuring plan,” Mr Pande told The Financial Express.

He denied criticism that SAIL was being broken up. “It has to be viewed as a consolidation exercise because both the SBUs will have a greater marketing orientation with the prime responsibility of profit generation,” he argued.

With the formation of the SBUs, SAIL will concentrate on its core business of carbon steel making, and upgrade product quality. “Our aim is to be a company with the highest productivity and value addition per employee,” he said.

Eight cross-functional teams are fine-tuning the design of the new structure, and administrative orders are expected to be issued soon.
In the new setup, activities of SAIL’s operations and project directorates will be shifted to the SBUs. The commercial directorate would retain divisions such as transport and shipping, international trade, coal procurement (indigenous and imported) and consultancy.
The design and execution team is examining stockyard linkages.

SAIL’s decision to form the SBUs comes in the backdrop of the worst ever recession faced by the steel industry at home as well as abroad. Senior executives said the mindset of officials has to change for the SBUs to make a difference.

For years, the Indian steel industry thrived in a shortage environment and producers were able to sell whatever they produced and at a reasonable profit. Although steel was decontrolled and delicensed a decade ago, the mindset of tonnage production without proper market linkages is yet to change.