Productivity changes in Indian steel plants: DEA approach

Abstract

Purpose The purpose of this paper is to evaluate the technical efficiency and productivity changes in the integrated steel plants in India over a period of five years. Design/methodology/approach Since this evaluation of integrated steel plants needs consideration of multiple input and output factors, data envelopment analysis (DEA) has been employed including bootstrapping (to account for statistical noise) to evaluate the relative efficiency of the steel manufacturing units. The efficiency and Malmquist productivity indices of a sample of ten integrated steel plants producing around 55 percent of the industry’s output were determined for the period 2008-2013. The results of these changes were further categorized according to the management control, route followed to produce crude steel, size and age of these steel plants, for gaining insights. Findings The study finds that private sector steel plants with larger capacity and which have adopted the latest and most modern technologies are more efficient and productive over the study period. Practical implications Public sector steel plants should therefore be provided with more autonomy and delegation of power and should be agiler in responding to market requirements as well as increasing their installed capacities to be competitive in technical efficiency and productivity as well as profitability in the long term to ensure sustainable achievements. Originality/value Productivity changes over time, both with respect to technological and efficiency changes, for the Indian integrated steel plants producing comparable products using DEA.