Tata Steel Eyes Lower Wage Cost, Not Just Pruning

Jamshedpur, December 23: | Updated: Dec 24 2002, 05:30am hrs
Tata Steel has shifted its focus from reducing manpower just in terms of numbers, to bringing down the cost of the manpower itself.

The steel major, in order to make a direct impact on reducing its wage cost, is now looking at many other ways of bringing it down, other than solely adopting the path of offering attractive early separation schemes (ESS) to its employees.

Our interest today, from the old focus of numbers, is cost, said Mr Niroop Mohanty, vice-president (human resource management), Tata Steel. He told FE recently that all these years weve concentrated on numbers, but our wage cost has gone up.

The steel major is, according to Mr Mohanty, running at a wage level of 18 per cent to 20 per cent of its gross turnover and thats much too high, he said. The company has set a target of bringing this down to 10 per cent by 2007.

According to Mr Niroop Mohanty, while costs towards energy, raw materials, spares etc, have come down, its employee cost has not. The steel majors seriousness in bringing down its salary bill is reflected in the fact that a senior accounts functionary has been attached for the first time to the VP-HRMs office to gain greater control in the area.

Some of the other ways it is thinking of adopting to reduce its flab further are: outsourcing of non-core activities in a big way, formation of joint venture companies and adoption of a new grade system for non-core jobs, etc, to mention a few. It will henceforth be different horses for different courses, emphasised Mr Mohanty. After having reduced manpower from around 79,000 in 1995-96 to 46,000 at present, mostly through the ESS route, Tata Steel is finally feeling the pinch. ESS is gradually becoming unbearable because we are taking a direct hit of Rs 250 crore to the P&L account, the vice-president (HRM) said. When asked about the target, in terms of numbers, the company was looking at achieving by 2007, the vice-president (HRM) said I have a moving target. It might be that a new grade will start, it might be joint ventures, theres no simple solution. Tata Steel had recently outsourced its port operations at Haldia and Paradip by way of forming a joint venture company, Tata Martrade Ltd, with a global logistics major.

Similarly, it has signed an MoU with Vivendi Water, UK, to form a joint venture company which would take over Jamshedpurs water supply network. Sources said it is also looking forward to forming a joint venture company to run the 700-bed Tata Main Hospital here.

Tata Steel has, however, declared its intention of keeping a controlling 51 per cent stake in all these ventures. Having been able to bring down its workforce at the plant to a fairly decent manning level of around 17,400 from around 30,000 in 1995-96, by way of closing down several units, the steel major considers that currently its tooth to tail ratio is quite out of proportion.