Vertical Integration and the Indian Steel Industry

Abstract

At a very early stage in their respective careers, most of the major iron and steel plants of Europe and North America recognized the strategic importance of possessing colliery capacity in order to safeguard their requirements of coking-coal, a basic input to the blast furnace. In the Ruhr—where the tendency towards vertical integration probably reached its apotheosis—the Huttenzechen (tied mines), accounted for nearly twenty per cent of the total coal output at the turn of the century and no less than fifty per cent during the inter-war period. The precise legal standing of the integrated units naturally varied from country to country. In Britain and Germany, for example, the most favoured practice was for the iron and steel plant to establish outright ownership of the mines and to treat them merely as a department of the enterprise complex itself, whereas in the United States, the giant steel works such as Kaiser, Republic, and Bethlehem, preferred to create semi-autonomous subsidiary companies. In India, the two steel firms ofthe pre- Independence era, i.e. the Tata Iron and Steel Company (henceforth abbreviated to T.I.S.CO.) and the Indian Iron and Steel Company (I.I.S.CO.), inclined towards the former organizational model (with the single exception of T.I.S.CO.'s West Bokaro colliery which was purchased in 1947 and was wholly owned by the Company's shareholders).