JASC: Journal of Applied Science and Computations ISSN NO: 1076-5131

Empirical analysis of Total Factor Productivity

growth of Indian Steel Industry
Priyanka Narwade1, Harshad Sonar2*,
1
Assistant Professor, International Institute of Information Technology (I2IT), Pune, India- 411057
2*
Research Scholar, National Institute of Industrial Engineering (NITIE), Mumbai, India- 400 087

Email id: narwadepriyanka3@gmail.com1, harshadsonar@gmail.com2*

ABSTRACT
The steel industry is one of the basic or key industries in the national economy of any country. Keeping this as a backdrop, this
paper evaluates productivity growth for three selected India’s leading steel manufacturers which includes SAIL, Tata Steel and
JSW. The study is based on firm-level panel data drawn from PROWESS, compiled by the Center for Monitoring Indian
Economy (CMIE) for the period from FY 2007-08 to 2016-17. The estimation of productivity will be very useful to evaluate the
variations in the performance of industry over a period. As far as steel industry is concerned, it has been observed that average
TFP for selected industries is 1.21 during the study period. The results on partial factor productivity of factors show consistency
in productivity of material, labour and capital. The result on the overall productivity shows declining total factor productivity
growth over the study period. Very few literature is available which compares the productivity of India’s leading steel industries.
This study attempted to measure and compare productivity of three major steel producers in India.

Keywords: Total Factor Productivity, Steel Industry, Productivity Measurement, PROWESS

1 INTRODUCTION
The rapid development of steel production capacity is indeed a necessity for rapid industrialization of any developing country.
The steel industry is one of the basic or key industries in the national economy of any country. The iron and steel industry
comprises one of the main foundations on which the industrial structure of the country can be built. The Indian steel sector is
booming, and now it occupies the fifth position globally. India’s crude steel output increased by 5.4 percent to 61.8 million
tonnes (MT) in the first seven months of the calendar year 2018, according to the World Steel Association. India is the world’s
third-largest producer of crude steel. The growth in the Indian steel sector has been driven by the domestic availability of raw
materials such as iron ore and cost-effective labor. Steel consumption in India is growing. However, the pace of growth is much
slower in contrast with world consumption.

In recent years, the burden of global competition has forced companies to focus on strategies for productivity improvements. In
this context, total productivity measurement is needed in order to boost internal efficiency and thereby the competitiveness of a
business unit (Hannula, 2002). Total factor productivity (TFP) growth is essential and therefore, TFP growth became
synonymous with long-term growth as it reflects the potential for growth (Mahadevan, 2004; Rao, 1996). At the business unit
level, productivity measures belong mainly to the group of non-financial measures. Any of the operational phases of a business
unit, including purchasing, promoting, finance, sales, and support services contribute to total productivity. In the current scenario,
the Indian steel industry plays a significant role in the country’s economic growth. The country has also attained an imperative
position on the global steel map due to its giant steel mills, acquisition of global scale capacities by players, continuous
modernization & up gradation of old plants, improving energy efficiency, and backward integration into global raw material
sources (Singh and Raina, 2015).

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For measuring the productivity, the ratios of outputs that are produced to inputs are used, whereas, in case of more than one
input, the inputs needed to be aggregated into a single index. Total factor productivity growth (TFPG), which represents a level
of technological shift of production frontier in an economy, is considered to be the best proxy to account for the impact of such
policy changes (Maiti, 2013). In this paper, productivity is defined as “Productivity is a relationship (usually a ratio or an index)
between the output (goods and services) produced by a given organizational system and quantities of input (resources) utilized
by the system to produce that output.” In economics, productivity is often measured as the ratio of output changes over input
changes. Productivity has several sub-concepts which include total productivity, total factor productivity, and partial
productivity. Total productivity is the most comprehensive productivity concept since it is defined as the total output over the
total input used to produce the output. Total factor productivity is mainly used in productivity measurement at the macroeconomic
level. Partial productivity is the ratio of gross or net output to single factor input.

1.1 Industry Background

The iron and steel industry is one of the most important industries in India. During 2014 through 2015, India was the third largest
producer of raw steel and the largest producer of sponge iron in the world. The industry produced 91.46 million tons of total
finished steel and 9.7 million tons of pig iron. In FY17, crude steel production in India was 72.35 MT, with the total crude steel
production growing at a CAGR of 4.90 percent over the last five years & reached 89.79 MT in FY16. During April-January
2017, crude steel production in India grew by 7 percent & stood at 39.98 MT (World Steel Association Report, 2017). Steel
manufacturing output of India is expected to increase from 88.4 million tonnes (MT) in 2017 to 128.6 MT by 2021, accelerating
the country’s share of global steel production from 5.4% in 2017 to 7.7% by 2021. World steel association has projected Indian
steel demand to grow by 6.1% in 2017 and by 7.1% in 2018 while globally, steel demand has been projected to grow by 1.3%
in 2017 and by 0.9% in 2018. This paper evaluates productivity growth for three selected India’s leading steel manufacturers
which includes SAIL, Tata Steel and JSW for measuring total factor productivity based on secondary data.

1.1.1 SAIL:

Steel Authority of India Limited (SAIL) is the leading steel-making PSU company in India. It is a fully integrated iron and steel
maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defense
industries and sale in export markets. Steel Authority of India Limited (SAIL) is the largest steel-making company in India and
one of the seven Maharatna’s of the country’s Central Public Sector Enterprises. With an annual turnover of ₹ 44,452 Crore
(US$6.83 Billion) for the fiscal year 2016-17. Incorporated on 24 January 1973, SAIL has 79,601 employees (as of 01-Oct-
2017). With an annual production of 13.9 million metric tons, SAIL is the 24th largest steel producer in the world. (Annual
Report: Steel Authority of India, 2017).

1.1.2 Tata Steel:

It is one of the top steel producing companies globally with annual crude steel deliveries of 23.88 million tons (in FY17), and
the second largest steel company in India (measured by domestic production) with an annual capacity of 13 million tons
after SAIL. Tata Steel was established in India as Asia’s first integrated private steel company in 1907. Today, we are among
the leading global steel companies. Our annual crude steel capacity across Indian operations is nearly 13 MnTPA, and we
registered a turnover of US $7889 Mn in FY 2017. We also set up our second greenfield steel plant in the eastern state of Odisha;
commissioning the first phase (3 MnTPA) of 6 MnTPA capacity in 2016 (Annual Report: Tata Steel, 2017).

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1.1.3 JSW:

The flagship company of JSW Group - JSW Steel, is India’s leading primary and integrated steel producer. JSW Steel, after the
merger of ISPAT steel, has become India's second largest private sector steel company. It has a production capacity of 18 MTPA
with plants located across six locations in South and West India, namely, Karnataka, Tamil Nadu, and Maharashtra. JSW Steel
is India’s leading private sector steel producer and amongst the world’s most illustrious steel companies with an installed capacity
of 18 MTPA. JSW Steel boasts of one of the largest blast furnaces with a capacity of 3.3 MTPA, taking JSW’s overall capacity
to 12 MTPA at Vijayanagar, Karnataka, its flagship steel plant. With its plants located across six strategic locations in South and
West India, JSW Steel will continue to raise the bar with its high quality & diverse product range. (Annual Report: JSW Steel,
2017).
In view of the importance and the need of the steel, main objectives of the study are (i) to examine the partial factor productivities
and total factor productivity, (ii) to estimate the total and partial productivity ratios and (iii) to examine the TFP growth trends
in some selected Indian steel firms.

1.2 Productivity Measures

The concept of productivity refers to the efficiency with which physical inputs are converted to useful outputs. (Lieberman and
Johnson, 1999). This study presents several measures of productivity, including labor productivity (man-hours per ton, or
preferably, value-added per worker-hour), capital productivity (value-added per unit of capital stock), and a weighted average,
representing multi-factor productivity.
Productivity Accounting Model is as follows:

1. Total Productivity =

2. Partial Productivity =

In the Steel industry, the following factors of production constitute the input parameters for measuring the productivity of the
steel industry (Chaudhary et al., 2016). They are, 1) Labour input (L) 2) Capital input (C) 3) Material input (R) 4) Miscellaneous
input (Q) and the output (Qt) comprises of the quantity of steel made. Entering these inputs and outputs in the productivity
accounting model, we obtain the productivity measurement model suited for industry. The model is shown below
Total productivity = Qt ÷ (L+C+R+Q).
In this model, all values relating to output and inputs are in monetary terms. The terms used in the proposed
model specific to the steel industry are discussed below.
Total Output (Qt): The output (Qt) represents the total sale of made steel in monetary terms.
Inputs to the Model: The input to the model consists of labor, capital, and Material. A detailed description regarding various
inputs to the model given by Gupta and Dey (2010) is presented below:
1.2.1 Labour input (L): Labour input comprises the following costs incurred by the steel industry.
a) Wages for expansion work
b) Wages for direct and indirect factory workers
c) Wages for indirect factory workers like drivers, etc.
d) Wages for Maintenance, Salary of staff.
e) others including overtime, bonus, etc.
1.2.2 Capital input (C): The capital input includes the following expenses of the steel Plants.

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a) Interest on working capital,

b) Interest on long-term expenditure,
c) Depreciation on plant machinery and other capital assets,
d) Other capital input like insurance premiums, Mediclaim’s, etc.
1.2.3 Material input (R): This input includes the following costs of the steel industry.
a) Cost of raw material. b) Cost of sheets. c) Cost of materials issued and other material cost d) Cost of packing
1.2.4 Miscellaneous input (Q): The expenses relating to the following heads:
a) Various contract work. b) Purchased repairing. c) Security cost. d) office expenses. e) Social
overheads, f) other overhead. g) Taxes and levies input h) loading and unloading charges i) infrastructural maintenance j) taxes
and other inputs

Many researchers have attempted to study productivity and related aspects of the steel industry in India. This paper contributes
to the existing literature by providing productivity estimates based on firm-level panel data obtained from the CMIE (Centre for
Monitoring Indian Economy) PROWESS database. This article compares the historical productivity performance of the major
Indian steel companies from 2007-08 to 2016-17.

2 LITERATURE REVIEW
There is a large body of literature available on the methods of measurement of TFP, its different components, and determinants
of technical efficiency. Ray (2003) used non-parametric linear programming techniques to construct the MPI and calculate the
annual rate of change in productivity and technical efficiency (TE) in manufacturing firms for individual states in India for the
period of 1986-87 to 1995-96 and concluded that the annual rate of productivity growth has been higher in the 1990s in
comparison to the 1980s. Ray and Pal (2008) attempted to measure the productivity performance of the iron and steel industry
in India and the results on partial factor productivity of factors showed improvement in the productivity of material, labor and
capital whereas, the result of the overall productivity showed decline with total output growth in Indian iron and steel industry
as mainly input-driven rather than productivity-driven. Rajan, Reddy, and Pandit (2008) found declining TFPG in Indian iron
and steel industry probably due to inefficient utilization of factors of production particularly and underutilization of labor input
in accordance with changing demand, together with slow growth in technical progress.

Practical total productivity measurement method with acceptable validity for the business unit level is presented by Hannula
(2002). This method is based on relatively simple and commonly used partial productivity ratios. Ma et al. (2002) determined
the technical efficiency and Malmquist productivity indexes of a sample of 88 enterprises producing 72 percent of the industry’s
output. Wu et al. (2017) explore the influences of government expenditures and corruption on total factor productivity. Kumar
and Naidu (2011) attempted to study the productivity performance of 10 Indian steel firms using partial factor productivities,
capital intensity, the relationship of labor productivity and capital intensity, index of the efficiency of labor and Divisia total
factor productivity (TFP) indices and their growth rates during the period 1989–2009. S. C. Ray (2002) analysed state-level input
and output quantity data for the period 1986-7 through 1995-96 and measured the levels of technical efficiency for each state.
Productivity growth for three selected major industries in the organized manufacturing sector - aluminum, iron, and steel
products, and refined petroleum products - at the 3-digit level NIC classification, over the period 1973-74 to 2004-05 is evaluated
by Rajan, Reddy, and Pandit (2008). Empirical results for TFPW based on data from 2000 to 2006 suggest that increased
investment needs time to deliver increased productivity and efficiency (Kim and Saravanakumar, 2012).

Singh and Raina (2015) examine the technical efficiency and total factor productivity of firm of the steel industry in India by
employing data envelopment-based Malmquist productivity approach. The result of total factor productivity reveals that both

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efficiency and technology change components are responsible for the improvement in the productivity of firms. He et al. (2013)
claimed that environmental regulation has a potentially positive impact on technical change. The study first used a conventional
data envelopment analysis model and the Malmquist Productivity Index (MPI) to measure the energy efficiency and productivity
change over the period 2001–2008. Japanese and U.S. integrated steel producers productivity is measured by Lieberman and
Johnson (1999). Calculations of multifactor productivity suggest that the American Firms, nevertheless, maintain a small
advantage in overall efficiency. Saha (2014) attempted to estimate the aggregate Total Factor Productivity (TFP) for the Indian
economy using the conventional growth accounting method.

The DEA-based Malmquist Productivity Index (MPI) approach has been applied to measure the TFP by Joshi and Singh (2010).
This paper measures the TFP and identifies its sources by applying a non-parametric DEA-based MPI approach. Maiti (2013)
investigates how market deficiencies distort the impact of trade reform on productivity growth. Chaudhary, Neshat Anjum, and
Mohammed Pervej (2016) proposes a relatively simple productivity measurement model suited to the steel industry. The total
factor productivity (TFP) of firms in China's iron and steel industry over the period 1998 to 2007 is examined by Sheng and
Song (2013). The results suggest that firms TFP in China's iron and steel industry has been steadily increasing over time with
the key drivers of productivity improvement with different characteristics.

3 RESEARCH METHOD
The present study is based on secondary data and covers the period from 2007-08 to 2016-17. To examine the objectives of the
study, the data has been drawn from PROWESS, compiled by the Center for Monitoring Indian Economy (CMIE). For this
study, India’s leading steel manufacturers which include SAIL, JSW, and Tata Steel have undertaken for measuring total factor
productivity based on secondary data. For calculating the TE and TFPG, one output variable Income is used in the model which
includes income by sales, income from financial services, prior period and extra ordinary income and income from the other
sources of the industry. On the other hand, while taking into consideration the inputs the first variable is Expenses that includes
expenses incurred on the raw material utilized by these manufacturing industries in order to produce output, expenses incurred
on the power, fuel and water charges by these industries, expenses incurred on the compensation to the employees that itself
includes the salaries and wages, bonus and ex-gratia, provident fund, gratuities, staff welfare, staff training, voluntary retirement
scheme amortized, payment under voluntary retirement scheme, payments, reimbursement, other expenses on employees,
directors’ remunerations, etc. Productivity performance of the selected major Indian steel companies for the year 2007-08 to
2016-17 is calculated and examined as follows.

3.1 SAIL
Table-1. Annual output and consumption of resources in Steel Authority of India Ltd.

Year Labor Capital Raw Misc. Total input Total Output

Material Expenses
2007-08 10744.84 1486.42 17,257.67 737.79 30,226.72 42,096.54
2008-09 11521.15 1538.36 23,915.45 878.94 37,853.90 47,674.22
2009-10 8781.3 1739.25 18,611.12 206.62 29,338.29 41,995.45
2010-11 11181.45 1960.57 21,912.27 4,126.44 39,180.73 46,271.34
2011-12 12401.79 2244.73 24,804.77 4,458.56 43,909.85 49,210.43
2012-13 13467.64 2150.64 23,334.91 5,197.15 44,150.34 47,349.47
2013-14 14520.66 2684.33 21,611.97 5,752.88 44,569.84 47,644.31
2014-15 15159.86 3227.51 21,157.56 6,147.61 45,692.54 48,139.68
2015-16 15,514.99 4146.29 19,827.61 6,820.27 46,309.16 39,126.23
2016-17 14,181.76 5207.77 23428.90 6683.08 49501.51 44650.65

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Table-2. The percentage share of different Inputs in Total Input from 2007-08 to 2016-17

Year Labor Input Capital Input Material Input Misc. Input

2007-08 35.55 4.92 57.09 2.44
2008-09 30.44 4.06 63.18 2.32
2009-10 29.93 5.93 63.44 0.70
2010-11 28.54 5.00 55.93 10.53
2011-12 28.24 5.11 56.49 10.15
2012-13 30.50 4.87 52.85 11.77
2013-14 32.58 6.02 48.49 12.91
2014-15 33.18 7.06 46.30 13.45
2015-16 33.50 8.95 42.82 14.73
2016-17 28.65 10.52 47.33 13.50

Table-3. Total and partial productivity ratios on a yearly basis from 2007-08 to 2016-17

Year Labor Capital Material Misc. Total Factor

Productivity Productivity Productivity Productivity Productivity
2007-08 3.92 28.32 2.44 57.06 1.39
2008-09 4.14 30.99 1.99 54.24 1.26
2009-10 4.78 24.15 2.26 203.25 1.43
2010-11 4.14 23.60 2.11 11.21 1.18
2011-12 3.97 21.92 1.98 11.04 1.12
2012-13 3.52 22.02 2.03 9.11 1.07
2013-14 3.28 17.75 2.20 8.28 1.07
2014-15 3.18 14.92 2.28 7.83 1.05
2015-16 2.52 9.44 1.97 5.74 0.84
2016-17 3.15 8.57 1.91 6.68 0.90

Table-4 Relative Productive Index

Particular Labor Capital Material Misc. productivity

productivity productivity productivity index
index index index
2008 100.00 100.00 100.00 100.00
2009 107.22 103.49 138.58 119.13
2010 81.73 117.01 107.84 28.01
2011 104.06 131.90 126.97 559.30
2012 115.42 151.02 143.73 604.31
2013 125.34 144.69 135.21 704.42
2014 135.14 180.59 125.23 779.74
2015 141.09 217.13 122.60 833.25
2016 144.39 278.94 114.89 924.42
2017 131.98 350.35 135.75 905.82

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From the above results, it is seen that total factor productivity is declining over the period. The primary rational for this decline
was a considerable amount of increments in input costs, though the productivity output was constant. When we consider capital,
labor and raw material inputs, declining capital productivity is the root cause of declining TFP. For increasing TFP, operational
effectiveness through operational improvement programs can be the way forward for SAIL. The company needs to focus on the
operation efficiency enhancement.

3.2 Tata Steel

Table-5. Annual output and consumption of resources in Tata Steel

Year Labor Capital Raw Material Misc. Total Input Total Output
Expenses
2007-08 2628.54 1763.64 6,063.53 1,029.30 11,485.01 20,279.55
2008-09 3528.29 2462.9 8,568.71 1,180.08 15,739.98 25,240.66
2009-10 3744.92 2931.34 8,356.45 1,287.04 16,319.75 26,046.76
2010-11 4395.95 2881.89 7,841.47 5,850.29 20,969.60 30,746.45
2011-12 5037.42 3,076.86 9,917.37 7,662.62 25,694.27 35,551.62
2012-13 6,118.69 3517.15 12,421.63 8,937.47 30,994.94 38,831.54
2013-14 6445.39 3749.28 12,641.57 9,962.35 32,798.59 42,512.09
2014-15 7306.34 3973.54 14,701.62 10,513.41 36,494.91 45,003.80
2015-16 7206.07 3,393.38 13,116.66 10,532.89 34,249.00 40,375.52
2016-17 7486.05 6230.1 16,129.77 13,830.90 43,676.82 49,033.75

Table-6. The percentage share of different Inputs in Total Input from 2007-08 to 2016-17.

Year Labor Input Capital Input Material Input Misc. Input

2007-08 22.89 15.36 52.80 8.96
2008-09 22.42 15.65 54.44 7.50
2009-10 22.95 17.96 51.20 7.89
2010-11 20.96 13.74 37.39 27.90
2011-12 19.61 11.97 38.60 29.82
2012-13 19.74 11.35 40.08 28.84
2013-14 19.65 11.43 38.54 30.37
2014-15 20.02 10.89 40.28 28.81
2015-16 21.04 9.91 38.30 30.75
2016-17 17.14 14.26 36.93 31.67

Table-7. Total and partial productivity ratios on a yearly basis from 2007-08 to 2016-17.

Year Labor Capital Material Misc. Total Factor

Productivity Productivity Productivity Productivity Productivity
2007-08 7.72 11.50 3.34 19.70 1.77
2008-09 7.15 10.25 2.95 21.39 1.60
2009-10 6.96 8.89 3.12 20.24 1.60
2010-11 6.99 10.67 3.92 5.26 1.47
2011-12 7.06 11.55 3.58 4.64 1.38
2012-13 6.35 11.04 3.13 4.34 1.25
2013-14 6.60 11.34 3.36 4.27 1.30

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2014-15 6.16 11.33 3.06 4.28 1.23

2015-16 5.60 11.90 3.08 3.83 1.18
2016-17 6.55 7.87 3.04 3.55 1.12

Table- 8 Relative Productive Index

Particular Labor Productivity Capital Productivity Material Productivity Misc. Productivity

index index index index
2008 100 100 100 100
2009 134.23 139.65 141.32 114.65
2010 142.47 166.21 137.81 125.04
2011 167.24 163.41 129.32 568.38
2012 191.64 174.46 163.56 744.45
2013 232.78 199.43 204.86 868.31
2014 245.21 212.59 208.49 967.88
2015 277.96 225.30 242.46 1021.41
2016 274.15 192.41 216.32 1023.31
2017 284.80 353.25 266.01 1343.72

From the above results, it is seen that Tata Steel is performing fairly concerning TFP. However, when we consider labor
productivity, it shows a sharp decline in the trend. Improvement in labor productivity is a way forward to improve TFP of Tata
Steel.

3.3 JSW

Table-9. Annual output and consumption of resources in JSW

Year Labor Capital Raw Misc. Total Input Total Output

Material Expenses
2007-08 806.41 1182.02 6560.14 146.99 8695.56 11984.52
2008-09 961.82 1664.48 9386.47 170.58 12183.35 13683.34
2009-10 1380.02 2023.67 11415.86 138.95 14958.50 18706.45
2010-11 1667.75 2232.88 16043.43 1562.01 21506.07 24284.60
2011-12 2309.71 2894.58 22397.47 2082.49 29684.25 31778.81
2012-13 2635.06 3698.37 24193.12 2527.27 33053.82 35557.94
2013-14 4113.22 5466.01 29236.47 3409.54 42225.24 44180.57
2014-15 4422.50 5693.19 29921.27 4538.84 44575.80 47824.72
2015-16 4049.58 5238.79 21333.08 4539.77 35161.22 30094.69
2016-17 5264.42 6667.40 31708.59 5163.46 48803.87 53935.15

Table-10. The percentage share of different Inputs in Total Input from 2007-08 to 2016-17.

Year Labor Input Capital Input Material Input Misc. Input

2007-08 9.27 13.59 75.44 1.69
2008-09 7.89 13.66 77.04 1.40
2009-10 9.23 13.53 76.32 0.93
2010-11 7.75 10.38 74.60 7.26
2011-12 7.78 9.75 75.45 7.02

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2012-13 7.97 11.19 73.19 7.65

2013-14 9.74 12.94 69.24 8.07
2014-15 9.92 12.77 67.12 10.18
2015-16 11.52 14.90 60.67 12.91
2016-17 10.79 13.66 64.97 10.58

Table-11 Total and partial productivity ratios on a yearly basis from 2007-08 to 2016-17.

Year Labor Capital Material Misc. Total Factor

Productivity Productivity Productivity Productivity Productivity
2007-08 14.86 10.14 1.83 81.53 1.38
2008-09 14.23 8.22 1.46 80.22 1.12
2009-10 13.56 9.24 1.64 134.63 1.25
2010-11 14.56 10.88 1.51 15.55 1.13
2011-12 13.76 10.98 1.42 15.26 1.07
2012-13 13.49 9.61 1.47 14.07 1.08
2013-14 10.74 8.08 1.51 12.96 1.05
2014-15 10.81 8.40 1.60 10.54 1.07
2015-16 7.43 5.74 1.41 6.63 0.86
2016-17 10.25 8.09 1.70 10.45 1.11

Table-12 Relative Productive Index

Particular Labor Capital Material Misc.

productivity productivity productivity productivity
index index index index

2008 100 100 100 100

2009 119.27 140.82 143.08 116.05
2010 171.13 171.20 174.02 94.53
2011 206.81 188.90 244.56 1062.66
2012 286.42 244.88 341.42 1416.76
2013 326.76 312.89 368.79 1719.35
2014 510.07 462.43 445.67 2319.57
2015 548.42 481.65 456.11 3087.86
2016 502.17 443.21 325.19 3088.49
2017 652.82 564.07 483.35 3512.80

From the above results, it is seen that sharp increment in all aspects, i.e. labor, capital, and material productivity indices. JSW
total factor productivity is fairly well however it needs to incorporate global competition with SAIL and Tata Steel. JSW needs
to reduce its miscellaneous inputs to control over TFP.

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Figure 1 Comparison of Total Factor Productivity of all Companies

Figure 1 shows a comparison of the total factor productivity of all three companies. It is seen that Tata Steel is performing well
in comparison to SAIL and JSW. However, the trend of TFP is continuously declining over the period from 2007-08 to 2016-
17. SAIL needs to reduce its capital input to control the declination of its TFP as seen from the results. It has been seen that a
sharp increase in the miscellaneous inputs for all companies during the period from 2009-10 to 2010-11 and then continuous
increment over the period. It was found that labor productivity is relatively declining. From figure 1, it is observed that the
relative level of TFP of SAIL and JSW shows a small increment from 2015-16 to 2016-17. However, TFP of Tata Steel is
continuously declining over the period. This fluctuation may be due to a shift in the production function. All companies are
performing well with material and labor input. However, they must focus on controlling its miscellaneous inputs to improve
TFP. All the companies need to focus on the operation efficiency enhancement.

4 CONCLUSION
This study has provided a comparative analysis of the total factor productivity of major steel producers in India. As far as steel
industry is concerned, it has been observed that average TFP for selected industries is 1.21 during the study period. The results
on partial factor productivity of factors show consistency in productivity of material, labour and capital. The result on the overall
productivity shows declining total factor productivity growth over the study period. SAIL and JSW shows a small increment for
TFP from 2015-16 to 2016-17. It is observed that there is greater variability in labor and miscellaneous productivity indices of
all three firms. Productivity growth is necessary not only to increase output but also to enhance the competitiveness of a country.
The estimation of factor productivity will be very useful to evaluate the variations in the performance of industry over a period.
In future, it is necessary to study (i) how to link trends in the financial performance of the firm to operational level decision
making, (ii) how to leverage productivity with new improvement programs and (iii) how to leverage selection, deployment, and
implementation of these firm-specific improvement programs based on productivity.

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