Steel yourself for better workers from China

A recent Wall Street Journal report foretells decisive growth in China and India’s steel industry for 2012. The details are very interesting. India’s position in steel production is meek and lagging, mainly on account of government control, bureaucratic hurdles and red-tapism, coinciding with poor planning, unprofessional functioning, and poor productivity. Not just Asian countries like South Korea, but even countries like Malaysia have productivity standards much better than India’s. A research report titled ‘Indian Steel Industry: Outlook to 2012’ predicts that Indian crude steel production will grow at a CAGR of 10 per cent during 2010-2013. Still, India’s average consumption of finished steel is significantly less than that of its neighbours. Not only is India’s annual steel production capacity, in absolute numbers, far less than what nations like China and South Korea have, but the per capita consumption is also at a rock-bottom figure. A time-series analysis indicates that both India and China started their tryst with steel production approximately during the same time. Just after Independence, India’s and China’s annual steel production were at the same level. However, by the end of 1990, where the per capita steel consumption in China increased by 65 kg and touched a figure of 160 kg, India’s per capita consumption languished at 29 kg (an increase of just 7 kg per capita) by the end of 2003. As per the latest ASSOCHAM report, the per capita consumption of steel in India is only 35.5 kg per capita per year compared to 220 kg in China and 950 kg in South Korea.

The same goes for production too. China’s steel production increased by 105 million tonnes while that of India increased by just 7 million tonnes! As per the World Steel Association, India’s annual production of steel in 2010 was merely 66.8 million tonnes compared to China’s 626.7 million tonnes and Korea’s 58.5 million tonnes. South Korea has two large companies namely Hyundai INI Steel and POSCO, which respectively produced 12.9 and 35.4 million tonnes of steel in the previous year; still, China’s more than 10 large steel plants seem to be far ahead in the race. Chinese steel plants like Hebei Iron and Steel (produced 52.9 million tonnes in 2010), Baosteel Group (37.0), Wuhan Iron and Steel (36.6), etc are standing as stalwarts in the global steel sector.

In the week gone by, I had the opportunity to sit with a gentleman who is a consultant to a company called Electrosteel Steels Limited. He told me the most amazing story of a venture—for setting up a steel plant—by one Mr Kejriwal near Bokaro on about 1,500 acres of land. It is a steel plant being set up with a capacity of 2.2 million tonnes.

This Bokaro plant has a planned capacity of 2.2 million tonnes. This is a private factory. No Indian company or technology can set up such a big plant before four to six years. But this plant is being set up in 18 months flat! The typical cost of setting up a plant would have been two times higher than what it is costing now to build this new plant. And yes, it seems a visit to this tract of land, which is being developed out of nowhere, is like visiting heaven compared to the typical steel plants that are set up elsewhere. The facilities for people who are setting up the factory are no less than almost five star.

Any guesses why all this? Well, that’s because those are not Indians who are setting the plant up. The entire plant has been contracted out to a Chinese company! So the Chinese firm has got 1,200 odd Chinese workers, engineers and supervisors working day and night to finish the project on time! The Indians associated with the project say that the Chinese workers work most sincerely and their output is two to three times that of the Indian worker on a daily basis.

Now are you still wondering why the Chinese are far, far, far ahead of us in almost every possible respect, and even in capturing businesses worldwide, including in India? Well, this is why. It’s a shame politicians in India try to take the name of China and India in the same breath. India is nowhere, absolutely nowhere in comparison to them. But it’s time we learnt from them and started doing something; else, even Indians will be not just importing Chinese technology but also getting their workers to work in India.

The opinions expressed in this column are the author’s own

Chaudhuri is a management guru and Honorary Director of IIPM Think Tank