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SAIL’s Rourkela Steel Plant Eyes Leaner Workforce with New Five-Year Strategic Plan

Synopsis: Steel Authority of India Limited is implementing a new strategy to streamline its workforce at the Rourkela Steel Plant. The company aims to reduce its workforce by over 50%, cutting the current 11,800 employees down to around 5,000-6,000. This move is part of SAIL's broader plan to improve workforce efficiency, adopt modern technology, and enhance cost competitiveness as part of its ambitious expansion and modernization initiatives. The company is focused on reducing labor costs while boosting productivity and production capacity in line with global benchmarks.
Friday, February 21, 2025
RSP
Source : ContentFactory

SAIL’s Strategic Workforce Roadmap at Rourkela Steel Plant: A New Era of Efficiency and Cost Competitiveness

In a major move towards improving its operational efficiency, the Steel Authority of India Limited has set a clear course for transforming the workforce at its flagship Rourkela Steel Plant. As part of its ambitious goal to become a leaner, more cost-competitive entity, the company has instructed RSP to develop a five-year ‘Strategic Workforce Roadmap’ that will guide the plant’s workforce planning and optimization efforts from 2025-2026 onwards.

This bold initiative comes at a time when the global steel industry is facing increasing challenges related to labor costs, productivity, and technological advancements. SAIL’s decision to significantly reduce its manpower is driven by the need to streamline operations, enhance labor productivity, and align with international industry standards. The roadmap will play a crucial role in achieving these objectives by reworking its labor force structure, embracing automation, leveraging advanced technologies, and adopting strategic outsourcing.

Key Objectives of the Strategic Workforce Roadmap

The core goal of the SWR is to reduce RSP’s total workforce to between 5,000 and 6,000 employees. Currently, the plant operates with a total of approximately 11,800 employees, which includes about 9,350 non-executive staff, 1,700 executives, and 780 employees in the mines sector, in addition to 12,000 contractual workers. This drastic reduction reflects SAIL’s desire to create a more streamlined operation and align with global benchmarks for labor productivity.

The company’s current labor productivity is significantly below industry standards, with SAIL reporting 604 tonnes of crude steel per man per year. This figure is considerably lower compared to domestic industry peers, who operate with an average productivity of around 1,400 TCS/man/year. SAIL’s goal is to achieve a more competitive labor productivity figure of 1,200 TCS/man/year by 2031-32, as part of its wider expansion and modernization strategy. This requires a more efficient workforce and the strategic use of technology to improve output while minimizing labor costs.

Adoption of Advanced Models and Technology

Under this plan, RSP will focus on integrating advanced models and technologies into its operations. The need for enhanced workforce efficiency will be met with the use of automation and digital tools to streamline processes, reduce manual labor, and improve safety. These innovations are expected to significantly increase the plant’s production capabilities while reducing the dependence on manual labor. This is in line with SAIL’s long-term vision to modernize its facilities and improve its overall competitiveness on a global scale.

By reducing the number of employees, SAIL also intends to shift some operations to strategic outsourcing. Outsourcing non-core functions will allow the company to maintain operational flexibility, focus on its core strengths, and optimize its labor costs. This approach is expected to be cost-effective while also enabling SAIL to scale operations efficiently as it modernizes its steel production processes.

High Manpower Costs and International Benchmarks

One of the driving forces behind the SWR is the issue of high manpower costs. SAIL has one of the highest labor costs in the industry, with more than 11% of its total expenditures going toward workforce-related expenses. In comparison, the average labor cost of SAIL's domestic industry peers is approximately 2%. The company’s “per tonne manpower cost” is significantly higher than industry benchmarks, highlighting the need for drastic reforms to improve efficiency and reduce costs.

The high labor costs have been a significant hindrance to SAIL’s ability to remain competitive, especially in an industry where profit margins are often tight, and cost control is crucial. By reducing the workforce and leveraging automation, SAIL aims to lower its manpower costs and align itself with international standards, allowing it to be more competitive in the domestic and global steel markets.

SAIL’s Expansion and Modernization Plans

SAIL’s ambitious expansion and modernization plan are also central to the company’s workforce restructuring initiative. The company has set a target to increase its production capacity to 35 million metric tons per annum by 2031-32. To achieve this, SAIL plans to upgrade its infrastructure, enhance operational efficiency, and modernize its steel-making processes. However, this expansion will require a more efficient workforce that can handle larger volumes of production while keeping labor costs under control.

A more streamlined workforce will also enable SAIL to implement its modernization plans effectively, ensuring that the company remains agile and competitive in a rapidly evolving steel industry. By aligning the workforce size with production capacity and technological advancements, SAIL can achieve a balanced and cost-effective approach to its expansion.

RSP’s Role in SAIL’s Vision

The Rourkela Steel Plant, one of the most important steel production facilities in India, plays a pivotal role in SAIL’s overall strategy for growth and modernization. As part of its efforts to optimize operations, the plant will serve as a model for workforce restructuring, showcasing the benefits of automation, strategic outsourcing, and leaner operations. RSP is also expected to lead by example in terms of improving labor productivity, reducing costs, and increasing operational efficiency.

The plant’s contribution to the national economy and SAIL’s bottom line makes it crucial to the company’s long-term goals. By implementing the SWR, SAIL hopes to set a benchmark for other plants in its network, ensuring that the entire organization can achieve its targeted production capacity while maintaining competitive costs and high labor efficiency.

Challenges and Implementation Timeline

While the roadmap outlines an ambitious plan, its success will depend on several factors, including the smooth implementation of technological advancements, the upskilling of existing workers, and the effective management of the workforce reduction process. SAIL has already set a deadline for submitting the SWR by February 28, 2025, and is expected to begin implementing the plan soon after. The transition will likely involve retraining workers for more advanced roles, offering voluntary exit packages, and transitioning some operations to external service providers.

The implementation timeline is aggressive, with SAIL aiming to drastically reduce its workforce over the next few years while improving productivity to meet its long-term growth targets. If successful, the roadmap will not only result in a more efficient and cost-competitive workforce but also help SAIL achieve its goal of becoming a global leader in steel production.

Key Takeaways:

• Workforce Reduction: SAIL plans to reduce RSP’s workforce from 11,800 employees to 5,000-6,000 as part of a new five-year Strategic Workforce Roadmap (SWR).

• Labor Productivity: RSP's current labor productivity stands at 604 TCS/man/year, much lower than the industry average of 1,400 TCS/man/year. The target is to improve this to 1,200 TCS/man/year by 2031-32.

• Cost Reduction: SAIL aims to reduce its high labor costs, which currently account for over 11% of its total expenditures, compared to about 2% in the industry.

• Automation and Technology: The SWR will leverage automation and advanced technologies to streamline operations and improve workforce efficiency.

• Strategic Outsourcing: Non-core functions will be outsourced to reduce costs and maintain operational flexibility.

• Expansion Plans: SAIL’s goal is to increase its steel production capacity to 35 MTPA by 2031-32.

• RSP’s Role: The Rourkela Steel Plant will serve as a model for workforce optimization and modernization.

• Implementation Deadline: The SWR is expected to be submitted by February 28, 2025, with implementation beginning soon after.

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