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Dear Stakeholders, Business confidence continuously increased through 2003-04' as projections of growth of the Indian economy were progressively scaled up, from 6% at the start of the year to over 8%. India's GDP growth of 8.1% in 2003-04 was the highest achieved in over a decade and amongst the strongest in the world this year. This has been a year of overall progress. India will need several years of such robust performance to mature into a developed economy. In a developing country like India, demand for steel is strongly correlated with growth in industrial production. During the year under review, domestic finished steel production increased by 8%, and apparent consumption of steel increased by about 6.5% over the previous year. Also the exports of steel witnessed another year of top performance. Major steel users such as automobiles, capital goods, consumer durables and construction achieved significant growth during the year.
The Company is currently operating at a level of 4 million
tonnes of crude steel per annum. It meets all iron ore requirements, and the bulk of coal
requirements, internally. This has enabled it to insulate itself from the adverse impact
of increase in input costs, in comparison with other global steel makers. It has a
dominant domestic market share in its areas of focus. Through continuous modernization and
expansion of its production facilities and innovative work in the market place, Tata Steel
has focused its product mix to meet the high standards of customers in the automobile,
appliance, construction, and engineering segments. In 2002-03, the Company established a
significant position in the wire industry, and in 2003-04, it acquired management control
of the Indian Steel & Wire Products Limited in Jamshedpur, through the BIFR process.
It also acquired the business of Mascons, a wire making company in Sri Lanka, through its
100% subsidiary, Lanka Special Steels Limited.
During next year, Tata Steel proposes to increase the gross saleable steel output to 4.15 million tonnes, despite a planned shut down of "G" Blast Furnace for 100 days for up-gradation. The proportion of semi-finished steel is expected to come down from the current year's level of 5% to 2%. The product mix will be further enriched, with higher volumes of CRCA sheets, CR galvanized sheets and specialty long products. With the expansion plan already under way, the Company's saleable steel capacity will increase to about 5 million tonnes in 2005-06. Plans are being drawn to further enhance the capacity by another 2.5 million tonnes in Jamshedpur. It is the Company's Vision to be a 15 million tonne company by the year 2010. This would be achieved through organic growth and through acquisition of steel capacities, both within and outside the country. Production at all other major business units reached record levels during the year. The Ferro Alloys & Minerals Division's operations improved, with an 8% increase in output of both ferro chrome and chrome ore/concentrate. Production of chrome concentrate increased to 103,514 tonnes (2002-03: 95,480 tonnes) and 1,650,009 tonnes (2002-03: 1,522,228) respectively. The Tubes Division's output increased by 3% to 0.185 million tonnes (2002-03: 0.179 million tonnes). The Bearings Division's production was higher by 10% at 22.0 million numbers (2002-03: 20.0 million numbers). To meet the high demand, innovative solutions were deployed to overcome capacity constraints in iron making. These included using oxygen enriched air blast, higher input of metallic, lower ash coke, and lower alumina sinter in the blast furnaces. These changes enabled the Company overcome operational problems at three of its blast furnaces, and achieved a highest ever hot metal output of 4.47 million tonnes. A breakthrough initiative resulted in reduction of ash in clean coal from 17% to 16% at West Bokaro and Jharia. The iron ore production was at a recorded 8.8 Million tonnes during the year.
The Company has followed a philosophy of building strong relationships with its customers in its focus market segments. In line with this, its pricing strategy has focused on long-term contracts with relationship customers. In 2003-04, the Company entered into long-term contracts and honored them, despite tremendous market upheavals and input cost increases. In an effort to nurture long-term relationships, the Company has assisted its key customers with additional volumes at contracted prices, as far as possible. Approximately 75% of the Company's flat product sales are covered by contracts and the balance 25% sold in the spot market.
Risk is inherent in business activity, particularly in the steel industry. The Company has processes in place to identify warning signals at an early stage to hedge itself against potential threats. On the other hand, these processes enable early recognition of opportunities emerging in the business environment. The Company has systems of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded and reported properly and applicable statutes, the Tata Code of Conduct and Corporate Policies are duly complied with. The Corporate Audit Division continuously reviews the adequacy and efficacy of the internal controls. The scope of the audit activity is broadly guided by the annual audit plan developed by the Corporate Audit and approved by the Audit Committee and the Managing Director. The steel industry displays strong commodity characteristics and is subject to cyclical price movements in business cycles. The Company has sought to mitigate the impact of this commodity characteristic of the steel industry in its focus markets and it has achieved some measure of success in this endeavor. An increasing volume of the Company's products are marketed as brands, including the popular TISCON rebars, Tata Pipes, Tata Bearings, Tata Shaktee and Tata Steelium. These branded products command a premium over non-branded products in the market and the turnover of these products has almost doubled in the past one year. A key feature of the marketing strategy has been the development of strong relationships with key customers, through customer value management programs, and long term pricing contracts. On the production front, the development of value added products has significantly enriched the product mix, which is relatively less susceptible to price cycles. The Company follows prudent financial norms and practices. It is the considered opinion of the Management that it has taken all possible steps to maintain and enhance the competitive position of the Company.
On obtaining confirmation from the various units of the Company of having compiled with all the statutory requirements, a declaration regarding compliance with the provisions of the various statutes is made by the Managing Director at each Board Meeting. The Company Secretary, as Compliance Officer, ensures compliance with the Securities & Exchange Board of India (SEBI) regulations and provisions of the Listing Agreements. The Chief Financial Officer, as the Compliance Officer for prevention of insider trading, ensures compliance with the Tata guidelines on Insider Trading, which are more stringent, then, the SEBI guidelines.
Having espoused the philosophy of sustainable development, the Company's operations are now inextricably interlinked with the progress of the enterprise, the welfare of the people and the health of the environment. Further rationalization of the labor force during the year resulted in a reduction in the men on rolls from 43,248 at the end of the previous year to 42,511 as on 31st March 2004. Our responsible behavior in rationalization of the labor force is testified by industrial harmony in Jamshedpur. In the midst of these market opportunities, Tata Steel continued its efforts in resource conservation and environmental upkeep. Some of the important achievements during the year in this regard include reduction in specific greenhouse gas emissions by 2%; raw material consumption by 5%; water consumption by 4% and increased waste reuse and recycling from 79% in the previous year to 82%. Jamshedpur has become the first Asian city to join a select band of six global cities that will be a part of the United Nation's Global Compact Cities Program. Under the program, each of these cities will be required to join hands with a neutral partner and conduct a pilot socio economic project using a standardized UN model. The Global Compact Cities Program has two objectives; to mainstream nine guiding business principles and catalyze actions in support of UN goals. The Company's efforts at continual improvement of its environment is well recognized. Apart from the Main Works at Jamshedpur, Jamshedpur Town Division, the Ferro Alloys Plant, Tubes Division, Bearing Division, West Bokaro and Jharia Collieries, Noamundi & Joda East Iron Mines and Sukinda Chromite Mines have all been certified to the requirement of International Standard ISO-14001. The company is in advance stage of acquiring OHSAS-18001 & SA-8000 certification.
We sincerely recognize the contributions of all our stakeholders in contributing to our financial and non-financial success gained during the reporting period. We have made our best efforts to balance the financial value as described in the report.
We have received many awards/recognitions received during the reporting period the important amongst are:
This is our fourth Corporate Sustainability Report that highlights our performance for the year 03-04. We solicit feedback from all our stakeholders on this report.
B Muthuraman 31.12.2004 |
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