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Case Report

Role of Greenfield Project on Growth and


Prosperity: Case Study of Rourkela Steel
Plant
Kishore Kumar Das1 and Aftab Ara*2
1
Head, Department of Commerce and Management,
Ravenshaw University, Cuttack, Odisha, India
2
Research Scholar in Management, Ravenshaw University,
Cuttack, Odisha, India

*Corresponding author e-mail: ara.aftab@gmail.com

ABSTRACT
Green field projects are the present requirement of the economy and are sustainable in the long
run. Thus the project commissioned with present requirements not only feasible for the economy
but also brings growth and prosperity in the economy of a country. An increment to
manufacturing production creates more economic activity both within and outside the sector than
does a similar increment in any other major sector because of manufacturing’s high multiplier
effect and its extensive linkages to other parts of the economy. Incremental growth in the sector
is likely to increase R&D activity which leads to increase the intensity of innovation in
manufacturing, boosts overall productivity growth and improve standard-of-living. Rourkela
Steel Plant is the perfect example in the management of green field project for prosperity and
growth. It’s continuous up gradation, innovation and modernization brings the sustainable
development and growth. Greenfield in many disciplines is a project that is lacking the
constraints imposed by previous work. The construction on Greenfield land does not need to
remodel or demolish any pre-existing structure. This Project can be undertaken in a cellular
network, computer networking or Greenfield investment opportunity in a marketplace that is
completely untapped. In the present study of Rourkela Steel Plant, which is the first integrated
steel plant in the public sector in India which was set up with German collaboration is the result
of Greenfield Project .The purpose of our study is to find the problems faced by the Steel
industry, the steps taken for by Greenfield Project and the contribution it has made to Orissa by
its growth and prosperity. The methodology of study is purely qualitative and the results points
out the problems, its implications, steps taken to revive the industry and its further contribution
to Greenfield Project recently to the region, society and the nation as a whole.

Keywords: Greenfield project, Growth and prosperity, Rourkela steel plant.

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BACKGROUND OF STUDY
Greenfield land is undeveloped land publicly owned integrated steel plant, which
in a city or rural area either used was sited at Rourkela, in the state of Orissa,
for agriculture, landscape design, or left to to make use of iron ore mined at Barsua and
naturally evolve. These areas of land are Kalta. Greenfield Project venture was
usually agricultural or amenity properties undertaken by the Republic of Germany
being considered for urban development. It which used this Greenfield land of Rourkela
can be unfenced open fields, urban lots or by provided technical knowhow for the
restricted closed properties kept off limits to construction of the steel plant. German
the general public by a private or metallurgical firms Mannesmann, Krupp,
government entity. Rather than build upon Demag, Siemens and Voestalpine provided
Greenfield land a developer may choose to machinery and consultancy to the plant.
re develop Brownfield or Greenfield, areas Further after facing many hurdles during its
that have been developed but left abandoned modernization it faced many obstacles and is
or underused. now well equipped to start its own
Steel is the key to the development Greenfield Project venture afresh.
of any country as well as in India. It is
considered to be the mainstay of the human Objective of the study
civilization. In the pre-liberalization era, 1. To study the initiative of RSP towards
besides TISCO (Tata Iron and Steel Greenfield Project
Company presently known as TATA steel) 2. To find the requirements of Greenfield
and secondary steel producers, SAIL was Projects for Steel Industry.
then the only major steel producer in India. 3. To study the impact of Greenfield Project
But after post liberalization and of RSP for growth and prosperity.
globalization, the private players like Essar,
Jindal, Ispat etc. set up steel plants in India. Statement of the problem
Since 1947, India became Rourkela Steel Plant is thus an
independent as the biggest, but not the only, integrated steel plant located at Rourkela in
successor state to the British raj, there were the state of Orissa was a Greenfield Project
three major iron and steel companies had a venture by the German collaboration. Since
total capacity of only 2.5 million tons. A 12 years RSP has been facing a lot of
great deal of their plant was already more problems. In 2001 there was stagnation in
than three decades old, and badly in need of steel consumption with overcapacity fierce
repair and replacement, while demand for competition and export restrictions, 20-25%
iron and steel was growing. drop in Net Sales, net loss of around Rs. 3
In 1948 new government's Industrial Crores per day, heavy interest and
Policy Statement, confirmed in the depreciation burden of the order of Rs.800
Industries Development and Regulation Act Crores against a turnover of Rs. 2400 Crores,
three years later, new ventures in the iron unsold finished inventories of almost one and
and steel industry were to be undertaken half month’s production, Substantial pay out
only by the federal government, but existing for wage revision and voluntary retirement
ventures would be allowed to stay in the scheme, rise in costs of vital inputs and
private sector for the first ten years. As for freight.
new projects, in 1953 the government signed
an agreement with the German
steelmakers Krupp and Demag on creating a

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Research methodology 2. Some of the employees were reluctant to


For this case study I took Rourkela disclose confidential date about their
Steel Plant as my Sample and my research company.
methodology is purely qualitative. I collected
my data from newspapers, articles, journals, RSP: An overview
publications, opinions of RSP employees and Rourkela Steel Plant (RSP)-SAIL is
internet. located in Rourkela, Odisha. RSP is the first
integrated steel plant in the public sector in
Literature review India. It was set up with German
According to definition a Greenfield collaboration with an installed capacity of 1
Project is “A form of foreign direct million tons in 60s. Then its capacity was
investment where a parent company starts a enhanced to 2 million tons. The RSP is the
new venture in a foreign country by first plant in Asia to adopt the energy-efficient
constructing new operational facilities from LD process of steel making and the first
the ground up. In addition to building new integrated steel plant of SAIL which adopted
facilities, most parent companies also create the cost effective and quality centered
new long-term jobs in the foreign country by continuous casting route to process 100% of
hiring new employees. This is opposite to a steel produced. It is for the first time in India,
brown field investment. SAIL had adopted external desulphurization
In the present scenario a host of steel of hot metal by calcium carbide injection
companies have lined up major investment process. RSP is one of the unique steel units
proposals. We see that with an expanding under the SAIL umbrella with a wide variety
consumer market, the Indian steel industry of special purpose steels.
has probability of receiving huge domestic Rourkela Steel Plant also possesses a
and foreign investments. The development of Fertilizer Plant that produces nitrogenous
Greenfield steel projects in India has virtually fertilizers using ammonia feedstock (from its
come to a standstill now. The reason for this coke oven plant). On February 3, 1959, then
stagnation is due to issues like land President Rajendra Prasad had inaugurated
acquisition, rehabilitation and political RSP's first blast furnace named 'Parvati' when
interference. India’s plan is to have an the company was known as Hindustan Steel
annual steel production capacity of 124 Limited (HSL). The RSP became a unit of the
million tonnes (MT) by end of 2011-2012. Steel Authority of India Ltd (SAIL).
But other than the already planned steel plant RSP ‘s present capacity to produce 2
projects, most of the proposed steel plant million tons of hot metal, 1.9 million tons of
projects in the country continue to remain in crude steel and 1.67 million tons of saleable
standstill. These Greenfield projects are steel. It is SAIL’s only plant that produces
unable to gain momentum due to political, silicon steels for the power sector, high
local, and rehabilitation issues. Some of these quality pipes for the oil & gas sector and tin
projects like the Archelor Mittal’s Steel plates for the packaging industry. Its wide and
Project at Khumti, JSW’s Steel Ltd at Khumti sophisticated product range includes various
at Jharkhand and POSCO Steel Plant, Odisha. flat, tubular and coated products. Rourkela
Steel Plant is all set to double its annual
Limitations of the study capacity to 4.5 million tons expansion work,
1. Due to time constraints it was difficult to according to a top company official. It
probe deeper. completed 50 years in 3 February 2009.

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RSP is in the final stage of Initiative of RSP towards Greenfield


implementing a massive modernization and project
expansion project with capital investment of RSP was a Greenfield Project which
around of Rs 12,000 crores that will more was set up with the help of German
than double its present capacity. collaboration.
It was in the year 1950s, in the jungles
Post expansion production plan (In Million of Orissa which was about 270 miles west of
Tons per annum). Calcutta, a small village of Rourkela was
selected to become one of the new large steel
Post plants of modern India. From the year 1957
Item Existing capacity
Expansion
to1962 in this rural area of northern Orissa,
Hot Metal 2.00 4.5 among the wooded hills and a prevalent tribal
Crude Steel 1.90 4.2 population, a large numbers of Indian and
German engineers and technicians engaged
Saleable Steel 1.67 3.9
together for the erection of the 1-milliontons
steel plant of Rourkela.
Product mix The years from 1957 to 1961 were the
SAIL's Rourkela Steel Plant under the main years of construction of the Rourkela
SAIL umbrella produces a with a wide variety plant. The majority of personnel held 18-
of products .To name a few are the products months contracts; some stayed for a longer
mentioned below are- span of time even in the present. some
 Plate Mill Plates (usually specialists in a narrow technical field
 HR Plates who were needed only for particular tasks)
 HR Coils came out for a few months stay only .During
 ERW Pipes this period of their stay they faced severe
 SW Pipes cultural difference with the Indians .This
 CR Sheets & Coils intersections of societies came up to be a new
 Galvanized Sheets development known as ONE WORLD and
 Electrolytic Tin-Plates Silicon Steel this complex pattern is the "third culture"-
Sheets defined "as the behaviour patterns created,
 Heavy & Chequered Plates shared, and learned by men of different
 Electrical Steel (CRNO/CRGO) GP Coils societies who are in the process of relating
& Sheets/GC Sheets their societies, or sections thereof, to each
 The Fertilizer Plant produces calcium other." This cultural pattern where Indians
ammonia nitrate (CAN) fertilizer are regularly interacting with Germans is
marketed under the brand name "Sona” known as "the first culture" and for the
(gold). Germans in the "Rourkela Germans" as "the
second culture."
Propositions
1. Studying the initiative of RSP towards Requirements of Greenfield project in steel
Greenfield Project. industry
2. Finding out the requirements of The major requirements for
Greenfield Projects for Steel Industry. Greenfield projects for RSP were-
3. Impact of Greenfield Project of RSP for 1. Land acquisitions
growth and prosperity. 2. Environmental Clearances,

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3. Resettlement & Rehabilitation Policy of The other realities for “ground zero” state
displaced persons for Greenfield projects. of RSP in June 2001
Thus after going through all these  Lack of conviction about the future
stages, Rourkela came to be known as  Militant unionism
Industrial capital of Odisha and became the  Fear among employees
first PSU Integrated Steel Plant in the country  Low morale of the employees
was set as Rourkela Steel Plant. This provided  Absence of leadership
nucleus for establishment of many ancillary  Respect for Rourkela Steel Plant missing
and downstream Industries in this area. completely.
Impact of Greenfield project of RSP for Steps for restructuring RSP
growth and prosperity With change in leadership in June
Though Rourkela has become the hub 2001 ten priorities were identified and
of Foundry and Engineering Industry of the reforms were initiated afresh like never
State along with many downstream Industries before. There was a massive campaign to
of Rourkela Steel Plant. However, during the regain equipment health with direct
years 1995-1998 economic downturn in communication at all levels of Organization.
Rourkela area began, and people started
calling Rourkela as a dying city. The ten golden rules by the managing
director
Reasons for degradation of RSP in 2001 1. Employee Motivation and Employee
 Stagnation in steel consumption with Pride.
overcapacity fierce competition and 2. Leadership Practice.
export restrictions. 3. Environment relations and Organizational
 20-25% drop in Net Sales, Image.
 Net loss of around Rs. 3 Crores per day, 4. Plant Maintenance and Equipment Health.
 Heavy interest and depreciation burden 5. Small Investment Schemes for
of the order of Rs.800 Crores against a maintaining current operations.
turnover of Rs.2400 Crores. 6. Sustained operation and consistent
 Unsold finished inventories of almost one production.
and half month’s production, 7. Strengthening secondary streams of Cash
 Substantial pay out for wage revision and generation.
voluntary retirement scheme. 8. Operational and Purchase cost Reduction.
 Rise in costs of vital inputs and freight. 9. Sustaining the Benefits of the Project on
Gradually after coming up of various Operational Improvement in certain areas.
Sponge Iron Plants, the economy of this area 10. Enhancing Gross Margin and Net Sales
was again revived. We can compare the Realization.
above findings about the low performance by The steps taken to reach these goals
plant in 2001 by the table given below- were by reaching out to people in the lower
Low performance of the RSP in 2001 level in the shop floor, trying to create
bonding between the employees, promoting
Item Capacity utilization (%) revenue and cash awareness, having good
Raw material relation with customers, training the
60 employees in workshops, updating the issue
Handling Plant
Hot Metal 70 to employees, allotting work to each
Crude Steel 66 employee. So the Managing Director put forth

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his Leadership Practice Programme for taken for the development of the plant and the
regenerating strength with people. These region like Project Bramhani, Project Prakriti,
programmes were mass contact exercise, Project Sanskrit, Project Saraswati, Project
performance improvement programmes, Viswakarma. Major steps were taken for the
MD’s interaction with young managers and renovation of the city- like rebuilding/major
General Manager (GM) Communication repair of roads, repair of houses and
Meetings (GMCM). Thus there was a Mass buildings, cleaning and major repair of
Contact Exercise which is a unique sustained Township drainage system, repair of schools,
exercise in corporate history running till date. renovation and bringing back greenery of
This is interaction of MD and ED (Works) parks thus making the environment friendlier.
with a group of 500 employees every week, In addition to the above progress there was
focus of sessions on ‘Survival and Future of also growth in city architecture, encouraging
RSP’ in the first year and ‘Profitability and sports and games by making Synthetic Astro
Prosperity of RSP’ in later years and engages turf, Biju Pattnaik Hockey Stadium, fostering
all the employees by turns (about 30,000, to team spirit and innovativeness in schools by
begin with, now around 20,000). organizing, open school sports tournaments
every year, revival of Childrens’ Day
The five Modules of Leadership are- program on Nov 14 organising Science
1. SAMSKAR Exhibition for school children by exploring
2. Empowerment and promoting culture in the society by
3. Safety staging of mega events Megha Malhar
4. Preventive Maintenance Vedvyas Sangeet Nrutyotsav Odissi
5. Family atmosphere in workplace. Sangeet Samaroh, Kumar Utsav, Makar
New initiative by the Managing Utsav, Baisakhi Kavya Sandhya.
Director to pick the young minds to bring
freshness to the reform process and address Rourkela steel plant: Modernization &
old and long pending issues with fresh ideas expansion plan
and Reinforcement changes were observed  The Fertilizer Plant was set up in the year
like closeness among people ,involvement of 1964 with a view to utilizing the residue
people leads to growth of production, of the steel plant and the re-utilization of
enhancement of capacity utilization, the chemicals.
improved techno economics, increase in sales  A Pipe Plant and Special Plate Plant were
revenue and cost reduction, bleeding issues set up during the 1970s for production
eliminated and emphasis on every day to be a of ERW pipes.
“good day”, shackles of apprehension broken,  Steel plates were made for defense
employees are ready and eager to speak, requirements.
suggest, innovate and create, changes felt in  NSPCL started as a joint venture
themselves and they realized their future to company of NTPC Limited and SAIL by
be linked with the plant performance with set up of a captive power plant of 120
improvement in the net profit as shown in the MW capacity.
figure 1.  RSP’s modernization program in 1988
with an outlay of INR 4500 crores. This
Contribution of RSP to the society, state revamped the process of supply of raw
and nation materials, new oxygen plant, improved
During the process of restructuring of techniques in blast furnaces, selling
the Plant some of the major Projects were of dolomite plant, cast house, slag

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granulation plant, supply of raw materials and supplied by Simplex Castings Ltd,
sintering plants and coal handling plants Bhilai India.
among others. Following the  All major units of the plant, including its
modernization RSP became the first SAIL Personnel Department and Steel
plant to have adopted continuous casting Township, are certified to ISO: 9001
route for all its hot metal production. It is standards.
also the first Indian steel plant to have  RSP’s Silicon Steel Mill, Sintering Plant
adopted external desulfurization of hot II, Environment Engineering Department,
metal by the calcium carbide injection Plate Mill, Hot Strip Mill, ERW and SW
process. Pipe Plants, Special Plate Plant as well as
 In 1988 the modernization of RSP was Steel Township have been awarded ISO:
begun for producing qualitative materials 14001 certification for Environment
and establishing its importance in the Management.
world market.
 In 1998 the modernization program with Awards received: RSP
an outlay of INR 4500 crores.  Genentech Environment Gold Award.
 In 2010 RSP-SAIL plans for its capacity  Srishti Good Green Governance Award
expansion in its existing 2.2 MT to 4.5 for 2010.
MT of production.  National Energy Conservation Award
 In 2013 Rourkela Steel Plant on (2nd Prize).
modernization and expansion project  Best corporate stall.
process. Expected to be 4.5 MT steel  Global CSR Leadership & Excellence
plants by the year 2013, on existing 2.2 Awards in 2013.
MT.
 SAIL projected to take SAIL’s hot metal Greenfield project venture by RSP
production capacity to a level of 23.5 SAIL plans 1.2 MTPA cold rolling
million tons by 2012-13. mill at Rourkela Steel Plant in Orissa 39 km
 August 10, 2013, Rourkela Steel Plant stretch connecting Thandalam to Arukilpadi
unveiled the country's largest blast in Tamil Nadu to be four laned Steel
furnace having a useful volume of 4060 Authority of India (SAIL) has proposed to
cubic meters with a production capacity establish a 1.2 million tonnes per annum
of 8000 tons hot metal per day, thus (MTPA) cold rolling mill for the auto sector
increasing its production capacity form at its Rourkela Steel Plant (RSP) in
existing 2.2 MT to 4.5 MT. Sundargarh, Orissa. The proposal has been
approved by the company’s Board Sub-
Environment management Committee on strategic alliance and joint
As a responsible corporate citizen, venture.
 RSP has taken effective measures in the
area of pollution control in By-Product Danieli corus commissions India’s largest
Coke Oven Batteries, Battery No: 4 and blast furnace
7m tall Battery No: 6. Recently Danieli Corus (August
 RSP has taken adequate steps to check 8.2013) has commissioned the greenfield
emissions from Coke Ovens and has Blast Furnace No. 5 built for SAIL (Steel
installed air-cooled self-sealing doors Authority of India Limited) at their Rourkela
resulting in significant reduction in door (Odisha, India) steel plant. This blast furnace
emissions; doors designed, manufactured was built by a consortium consisting of

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Danieli Corus and Tata Projects Limited and even some newer entrants have signed MoU’s
is currently India’s largest Blast Furnace. The with concerned State Governments in the
first hot metal was tapped after 27 hours. states of Jharkhand, Orissa, Chhattisgarh &
With the collaboration with Danieli West Bengal.
Corus (its fourth Greenfield Project in india)
the largest operating Blast Furnace was built, CONCLUSION
according to the “Hoogovens” philosophy, in
this important market. This Furnace is named India should be an initiation in
after the Hindu goddess Durga and was Greenfield Project instead of delaying the
designed according to European standards approvals for granting access to foreign
and technology. It was built to produce investors for investing in Greenfield Project.
around 8,000 tonnes of hot metal per day for a Environment is the big issue and so is the land
twenty year campaign. It is part of a 1.75 acquisition. The land acquisition laws is still
Million Euro expansion program at the too primitive and any new land acquisition
Rourkela Steel Plant. law needs Parliament’s approval which is too
time consuming. We can see that the
Suggestions for Greenfield project in steel resettlement and rehabilitation policies of
sector Orissa, Jharkhand and Chhattisgarh states,
The solution to the above problems is rich in mineral resources are still in a
not easy and needs a well planned approach. developing stage. The leasing of iron-ore &
This requires having an overall view of the coal mines as well as site related issues (land
impact Greenfield has on the economic and acquisition and rehabilitation of displaced
social conditions of all the stakeholders. The persons) have appeared as serious bottlenecks
other major step to reduce the tension is in almost all the Greenfield projects. Thus in
related to the land acquisition, communicating spite of the global economic slowdown, we
with local people in local languages. There can assume that capacity expansion at the
needs to be a change in the mind-set of the locations of the existing steel plants may have
people. There should be an awareness of the a better scope.
long term as well short term benefits of the The government should come with
new Greenfield projects. Fighting talent flight new and improved legislation especially for
and managing talent is yet another challenge Greenfield project, else it would be difficult
before the company.” Out of the foreign for companies to grow thus lead to the
leaders in steelmaking. slowdown of the mining sector with all other
POSCO of South Korea signed a investments. The Government should take
MoU with the Government of Orissa quite note that Greenfield Project is providing
some time ago but the project has been maximum design flexibility to meet project
bogged down due to various reasons. There requirements with reduced required
are issues of land acquisition & rehabilitation maintenance. Hence the Industry is thus
of displaced persons, apart from long-term designed to meet current and future needs and
lease of iron-ore, among others. ArcelorMittal is an opportunity to improve corporate image
signed a MoU with the government of by its success and prosperity which is
Jharkhand followed by another one with the beneficial for the mankind.
government of Orissa but the progress here
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2000
1000
0
-1000 No in Crores
2001-02 2002-03
-2000 2003-04
2004-05

2001-02 2002-03 2003-04 2004-05


No in Crores -1036 -593 -109 1076

Figure 1. Improvement in the net profit in crores

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