This plant produced 1.17 million tonnes of saleable steel last fiscal. It employs 28,300 people, including 2,700 executives.

Reducing manpower by 9,300 at RSP is a formidable task for the management. Normal retirement during the period would be only around 2,000 to 2,500. Therefore, reduction of around 7,000 employees has to come through voluntary retirements in the next three years.

"We are looking forward to an attractive voluntary retirement scheme later this year and feel that although the reduction target is challenging, it is not impossible, provided attractive VR schemes are introduced," a senior Rourkela steel executive told The Financial Express.

Earlier, manpower reduction at Rourkela failed to make much advancement on two counts. First, RSP had to absorb over 3,000 contract workers following a Supreme Court verdict. Second, the raising of superannuation age from 58 to 60 years seriously hampered the process of natural separation. There were no retirements from May 1998 to April 2000. "If the superannuation age had not been enhanced, RSP's manpower without any VRS would have been around 22,000 in 2002.

Meanwhile, US consultancy major McKinsey & Co is carrying out a diagnostic study in some of the major areas of activity like production and productivity optimisation, cost control, product-mix rationalisation and improvement in quality of optimisation. The study is expected to be completed in eight-and-half months.

A seven-member steering committee headed by RSP's executive director for works is constantly interacting with McKinsey.

To overcome technological obsolescence, RSP implemented a Rs 5,300-crore modernisation plan in the nineties covering primarily the iron and steel making zones, the hot strip mill and some supplementary facilities. But most of the finishing zones remained untouched.

When RSP was expected to reap the benefits of modernisation, a downturn in the domestic and international steel markets adversely affected the fortunes of the steel plant. This coupled with huge interest and depreciation burden, led RSP to incur a net loss of Rs 765 crore in 1998-99 and Rs 700 crore in 1999-2000. From December 1999, RSP has been earning operating profits and is expecting a cash profit this fiscal.

The management is looking to McKinsey to help develop a turnaround strategy and generate resources for upgradation of its finishing zones. It believes reduction in manpower along with full capacity utilisation of the plant would lead to dramatic improvement in labour productivity. At present, labour productivity at RSP is around 55 tonnes per man per year - the lowest among the SAIL plants and abnormally low even by Indian standards.

Admitting that RSP produces value-added products and may have to employ marginally higher workforce than other SAIL plants, a senior SAIL official said, "even after taking all these into account, RSP's labour productivity should be around 100 tonnes per man per year.

It was planned that RSP would achieve full post-modernisation rated capacity of 1.7mt of saleable steel in 2000-01, provided the market is buoyant enough. As SAIL plants now operate on the basis of orders booked, doubts have been raised in certain quarters about the possibility of RSP achieving rated capacity in a sluggish flat products market.