“Changing with the Time”

Flexibility is about the ability to adapt or change.

I experienced the following while working in cement industry that too in Public Sector.

In late 80s, Indian government did de-licensing of Cement and 100% foreign investment was allowed in Cement Industry. So many private companies had installed new plants of very high capacity at a single location wherein their cost of production was quite less in comparison to already existing plants especially in public sector. With signing of WTO in 1991, open market to other countries, had deteriorated the situation further for Public Sector Cement plants. (E.g. coal from South Africa was cheaper and of better quality than the coal from the collieries in India. It had impact on variable cost.)

With old technology and no further willingness to modernize the plants on regular intervals, to improve the capacity and productivity, caused closing of Public Sector plants. They were referred to BIFR (Board of Industrial & Financial Restructuring) and then to AIFR (Appellate Authority for Industrial & Financial Restructuring). Later, as cement sector in the country had gained self-sufficiency in cement production, government was not at all interested to support the modernization of its plants. Finally after a long process they were either closed or sold to private sector who had built up these plants once again from scratch and with latest technologies.

Some concerns, related to the Public Sector Cement plants with respect to Private Sector, were observed:

·       Order winner was the low cost cement produced from new very high capacity Cement plants.

·       New technology changes and high automation was essential for old plants which required high Capital cost for modernization.

·       To bring continuous orders from consumers, government made it mandatory for all government departments to consume cement from Public Sector plants only. It helped only in survival of these plants for some more years.

·       Public Sector plants tried to achieve 100% capacity utilization but running cost was high enough to compete with new upcoming private plants.

·       Private plants had high profit margins and so they were playing smartly with price while selling cement. Sales officers of Public Sector were not having flexibility of price while selling. Their profit margins were almost zero or they had to sell the produce on loss. Due to competition, slowly and slowly, private sector had captured the market.

Timely interventions even in Public Sector organization may make them competitive and survival is possible. They have to run the organization, professionally.

Government had generated the cement industry infrastructure in the country after independence and by the time de-licensing was done, country had enough technical knowhow and skilled manpower to serve in private sector and achieve self-sufficiency.

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