100 years since Jamshedji Tata met Charles Perin

Chronicling the journey of Tata Steel

KOLKATA: The door to a small, crowded office in New York opened. At a table covered with books sat Charles Page Perin, a geologist and metallurgist, renowned for his knowledge of iron and steel that made him sought after across the globe.

He looked up and was startled by the apparition standing right there before him. Here was a stranger in an even stranger garb-a man in a simple white coat, wearing a rather peculiar headgear. He later came to know it was a Parsi dugli and pagdi outfit. Who was he? Even as he wondered, Charles Perin knew the answer. He had been informed about this Parsi gentleman from India, who dreamt of building a steel plant in his country.

For long, the two men gazed at each other in silence. Two men from different continents, poles apart in every way. The visitor said in a deep voice, “Are you Charles Perin?” The metallurgist nodded. Jamshedji Nusserwanji Tata said, ” At last, I have found my man.” He said, ” I’ve been told that you build steel plant wherever advised. I will foot the bill. Will you come with me to India?”

As Perin was to recall years later, he was dumbfounded, struck by the character and force and kindliness that radiated from JNT. Perin’s answer was short. “Yes,” he said. “Yes I will go with you.”

And Tata Steel was born. Now, as it starts commemorating its centenary, starting August 26, 2007, it may be worth looking at what history tells as to why Tata Steel took 100 years to produce 7 million tonnes, when others in India and abroad have done it in a decade or two or little more.

Of course, there is now Natsteel, Millennium Steel and the big one, Corus. And a combined capacity of 24 million tonnes. But these happened only after it turned 97.

Was it the fading of entrepreneurship, shown a century ago by JNT, over the years? Was it the regulatory environment and shortage of capital-raising opportunities? Or was it lethargy and comfort of operating in a regulated and non-competitive environment?

The answer to the apparent disconnect between its undisputed corporate stature and metal-making capacity lies in a mix of all these and more. After all, the vision of the founders of Tata Steel was never just about making steel.

Remember, “We also make steel,” which Tata Steel used to say till a few years ago.

But, first the business of steel-making. In the first 40 years of the country’s independence and Nehruvian economics, the apocryphal story goes that subsequent prime ministers stalled Tata Steel’s expansion plans, fearing that a bigger Tata Steel will make it difficult for the public sector Hindustan Steel Limited (HSL), now SAIL, to sell in the domestic market.

But ironically, when the economy started to open up, Tata Steel suddenly woke up to find itself with an antiquated plant, saddled with a workforce of 78,000. And it also was in the midst of one of the worst depressions of the modern world steel industry.

“You must appreciate Tata Steel’s operations in a tightly regulated economic environment. But you can also say that the company, working in a regulated, non-competitive economy, grew lethargic and comfortable in developing the home market,” said A S Feroz, a steel analyst and former economist with the Union steel ministry.

According to Tata Steel, “Post liberalisation, we found ourselves with outdated plants and obsolete machinery. Between 1991 and 2000, we spent Rs 10,000 crore to build a new plant within the old campus, borrowing heavily, showing a lot of courage. This laid the foundation of entering the competitive world with new technology.”

All this, at a time when many others in the Indian steel industry, most notably the Mittals, had already set the pace in global business.

The Mittals, then an undivided family, had already set up base in Trinidad, Tobago and Indonesia.

“The business models of the Mittals and the Tatas are very different. The Mittal USP has been to pick up decrepit steel plants with failed managements overseas and turn them around. Also, they did not really have a production base in India, apart from re-rolling mills. The Tatas, in contrast, had a well-established steel-making business in India and naturally focussed on the domestic market,” Feroz said.

In 2004, Tata Steel spent $486 million on acquiring Natsteel, Singapore. Next year, it paid $167 million for Millennium Steel, Thailand, and then early this year, the mother of all acquisitions, that of Corus, for $12.9 billion. But in a history spanning 100 years, is this too little in too long a time? Some do think so.

“Tata Steel operates in one of the most unfairly advantageous playing fields. No other steel plant in the country can hope to get the resources as Tata Steel has — be it iron ore, coal, manganese, charge chrome or railway link,” said V Saran, a former Tata Steel official for 25 years-turned-entrepreneur, who is now spearheading, Visa Steel, one of the fastest newgen steel company based in Orissa.

“It is possibly because of these advantages that Tata Steel has not been able to become a multi-locational steel producer within the country,” said Saran, referring to Tata Steel’s failed greenfield venture in Gopalpur, Orissa, in the early 90s.

Tata Steel had 40 years of regulated environment, but then it had 20 years of liberal economy thereafter, and another 40 years before independence to do whatever it wanted, Saran said.

But then, unlike many in the modern steel industry, the Tatas never benchmarked success to aggregate steel-making capabilities and this is what is possibly the crucial differentiator for Tata Steel.

This is best borne out by a letter written by JNT to son Dorab Tata. Dismayed by the squalor and inequalities brought about by industrialisation, during one of his visits to England, JNT wrote to Dorab in 1902 – “Be sure to lay wide streets lined by shady trees, every other of the quick-growing variety. Be sure that there is plenty of space for lawns and gardens. Reserve large land for playing hockey and football. Earmark areas for Hindu temples, Mohammedan mosques and Christian churches?..”

That is today’s Jamshedpur. But now, after spending $12.9 billion on Corus, it may not be about ‘also making steel’ anymore for Tata Steel, but just about that.

Original article here

  • saket kr. singh

    As i read this article one thing is coming into my mind is that tata steel is not just a steel company instead of it’s a public benefit company for the welfare of society and country and also it shows large amount of respect for it’s employee. As the letter written by J.N. TATA to his son it shows this effect. once J.R.D.TATA , son of R.D. TATA, also chairman of TATA STEEL for 50 years,said “i want to see INDIA a HAPPY country rather than a weathier country. i just want to say that it’s a blessing of GOD that TATA STEEL is in our country. i wish if i get the chance to work for it and lead it,i’ll be proud of myself. As my father is working for it, i want my dream to come true. i also wish the never ending success of TATA STEEL.

  • saket kr. singh

    what can i say about the meeting of two great man, were exceptional in their field,it’s simply can be said that the combination of knowledge and vision to make suppier steel plant not only for the country but also for the WORLD. it’s a meeting of two genius and greatest ever. that’ it.