A crash in commodity prices is making the state-owned Steel Authority of India (SAIL) to post its first loss in 13 years in the current fiscal year.
Given the lacklustre outlook for the industry and escalating employee costs, the steel making company will also soon announce a nearly Rs 400-crore voluntary retirement scheme (VRS) to cut its 91,000-strong workforce by 1,500.
The company board is expected to give its nod for the VRS plan at its meeting in January and the scheme would be launched immediately after the approval, sources close to the developments told The Financial Express.
The job cuts will be spread across its five integrated steel plants and non-plant set-ups and include both executive and non-executives.
"The proposed VRS would be launched with the idea of pruning both executive and non-executive redundancies. Though the company is fine-tuning the age-limit and the entire package, the scheme is likely to be offered to workers who are in the 46-50 years age bracket," a source said
"SAIL is likely to keep both the deferred payment option as well as one-time payment option open for employees who would be opting for VRS," said the source.
However, the company will not put freeze on further recruitment as it wants to continue hiring young people to fill the "skewed skill-gap".
SAIL has the lowest labour productivity compared to its peers in the Indian steel industry. During the April-August period this year, the company recorded a labour productivity of 314 tonne of crude steel (TCS)/man/year, which is far below the international standard of 500-1000 TCS/man/year.
Currently, the domestic steel industry is hit by increased imports, falling prices and weak demand. The poor state of the industry has made SAIL to reduce its employee cost, which currently accounts for 21% of its gross sales. The company has already announced a net loss of Rs 1,057-crore for the first quarter in the current fiscal year.
SAIL is projected to post an adjusted loss of Rs 3,303 crore in the fiscal year 2015-2016 as against net profit of Rs 2,093 crore recorded in the last fiscal, according to brokerage firm Motilal Oswal.
