J.J. Irani: Tatas Get Sanction Only On Merit

Image: Vikas Khot

J.J. Irani of Tata Steel

J.J. Irani is hanging up his boots this month after 43 years with the Tatas. He joined the Tata Iron and Steel Company in 1968. But he says his association with the group began 10 years before that, albeit in a slightly roundabout manner. It started when he went to work on his Ph.D. at the University of Sheffield on a Tata scholarship. He began his career in the UK’s steel business with BISRA, a research organisation formed to make the local steel industry competitive. BISRA was later taken over by British Steel, which, almost four decades later, was acquired by the Tatas.

Tata’s winning bid for Corus moved it into the global league in the steel industry. Irani had come a full circle as he’d spent years trying to make Tata Steel the lowest cost steel producer in the world. Over the years, he also became the face of the Jharkhand-headquartered company, which after liberalisation, created a manufacturing network through acquisitions in Europe, south-east Asia and the Pacific Rim. He had joined the company as assistant to the director, research and development. He was appointed president in 1985 and managing director in 1992. In 1997, he was conferred an honorary Knighthood by Queen Elizabeth II.

In an interview at Bombay House, he refused to be drawn into any conversation on the search for a new chairman for the group.

You have had a long stint at the Tata group. What would you say are the most significant changes in the group during your time?
The biggest change, especially during Ratan Tata’s time, is that we have gone much beyond our shores. Of course, this is no criticism of JRD’s era because during that time the Indian industry was not allowed to go out. From 1991, we’ve had the freedom and Tata has been able to grab that opportunity with both hands. In the early part of this century, our companies would make one or two acquisitions or joint ventures every year. Now that figure is into double digits and we have both the confidence and wherewithal to do this.

Tata’s influence has set the tone at the top to go out and change your future. Group-wide, roughly two-thirds of our revenues already come from our international businesses. There is no stopping the Tata companies now. Even smaller companies in the group are making acquisitions, not just the big boys.

Has the drive towards globalisation been faster because it is easier to do business abroad?
It is not necessarily easier everywhere else in the world. In some geographies, the bureaucracy may be stronger or more corrupt. But I do feel that in India, the steel industry is still restricted. We have been trying to increase output for many years. We bought land at Gopalpur, 20 years ago, and are still unable to start. Foreign companies like Posco and ArcelorMittal are also stuck. It is easier to expand existing projects, but new sites are very tough.

There are too many government agencies. Single window clearance very often means one more window to clear. Compare this with China. I have done business there and am going there next week. They also have regulations and need clearances. The difference is that once you have submitted the papers needed, everything is done promptly. Here, you have to keep chasing them and writing letters to meet up with politicians. In China, the clearance was delivered to our doorstep in the requisite time. Sometimes, opportunities are better abroad.

Most often in India and abroad, people know that we are not willing to indulge in these experiences. The blue card of a Tata employee is recognised and people know that we will get sanctions only on merit. About 20 years ago, a certain minister wanted something from us for a property lease that was to be extended. We said no and we lost the deal. Sometimes you have to be prepared to walk away — to lose business rather than submit. In the long run, it is beneficial to have values.

Is it difficult to preserve these values, with the group growing so fast?
It is easy to lose track. There are more people coming from outside than [there] are moving up from within the group. The assimilation becomes that much more difficult. But we have agencies like TQMS (Tata Quality Management Services) and others that are  getting employees together.

Corus is now Tata Steel Europe. After the acquisition, you began with the soft touch approach, but over the past four years the Tatas have taken a firmer tack in managing the company.

If I had my way, we would have got authoritative and assertive much earlier. The soft touch approach does not work all the time. We have to know when to put the foot down. But it comes with experience. Our company TRF, for instance, recently acquired a design company in the UK and we had no problems transferring our way of working. Not all acquisitions need us to take a hard line.

In India, people think that companies abroad are always better managed than ours. This is not always so. Our businesses and attitudes are often better. I have worked in England, and am aware of what they call the “I’m All Right Jack” attitude (referring to a satire on British industrial life in the 1950s). This is about saying, I will do my bit, and not more than necessary. In Jamshedpur, by contrast, we’d go ahead and do what is best. This is not related to returns. That is a cultural difference. We are still dealing with it. We are also very innovative, much more than in most other places. We have to use processes to teach people how we operate.

One area where we are certainly ahead of the Western companies is our CSR (corporate social responsibility). Very often, visitors to Jamshedpur are surprised by the extent of our involvement with the locals. They don’t understand why there should be so much interest. Any corporate has to integrate itself with the society it operates in. It cannot be there just to make big profits.

You have been involved in setting up affirmative action programmes with the Indian industry. But progress has been very slow. How can these efforts be made more successful?
The wake-up call to the industry was given by our Prime Minister some years ago. He said the industry is not doing as much as it should and this was true. The CII (Confederation of Indian Industry) took a lead on this and is looking at educating people from less privileged communities as well as providing them with employment. But things are not moving as fast as they should. The problem itself is much deeper in the Indian society. It has been around for a thousand years, or possibly more. Several educated people too still have caste distinctions in their mind. We have to give people the opportunities they lack.

Muthuraman has taken this up in his tenure as the CII (Confederation of Indian Industries) president this year. We could do it faster, but we are moving in the right direction. Having reservations has not helped. We have to change our thinking and this can only come through education. The major difference between the past and now is those people who have been deprived are now impatient. They want change and they want it now.

One manifestation of this need for change is the Maoist violence. How have you dealt with this?
No Tata company has suffered from Maoist action. We work with tribals in our mining areas. The local population is with us. Our group founder, Jamshetji Tata, sent social scientists to Jamshedpur even before he sent the engineers to survey the area. Two British social scientists were sent to study the impact of the factory on the local tribals. This has been our guiding light. If you look after society, they will support you. We have looked after the tribals for over a hundred years now. You would have thought the government would give us credit for this, and more leases. But that is not so. We never give them money, but do a lot of work in the areas around Jamshedpur.

Was Singur an exception in terms of public perception?
No. In Singur, we were simply caught in the crossfire between two political systems. It had little to do with us. The parties were taking potshots at each other. When it got dangerous for our employees, we had no option but to move out.

The steel industry is very fragmented globally as well as in India. You once headed the Indian Steel Alliance (ISA), an attempt by five steel giants to come together. It did not work out then, what went wrong?
Friendships and alliances always develop in tough times. In life, as well as in business, it is only in adverse times that you see co-operation. When the ISA was formed, times were bad and steel production was surplus. The market had collapsed and we needed to find ways to survive. I was heading it and had even travelled to the United States for discussions with the USTR (US trade representative) for opening up new markets.

But when things turned around and demand started growing, it didn’t last. Members could not respect each other’s territories and areas. The steel industry has not been able to do this anywhere in the world, and hence has little bargaining power. Our raw material suppliers, the iron ore producers are united. Three of them control about 80 percent of the global supplies.