Tata Steel Announces Significant Cost Reduction Initiatives Across Various Sectors

Tata Steel has announced an ambitious plan to reduce costs by ₹11,500 crore (approximately $1.3 billion) across its global operations over the next 12 to 18 months. This initiative, highlighted by Executive Director and CFO Koushik Chatterjee during a recent earnings call, builds on previous cost savings of ₹6,600 crore achieved in FY25. The company is focusing on controllable expenses, including fixed cost rationalization and manufacturing efficiency, as it also expands its Kalinganagar plant and transitions to greener steelmaking practices in the UK and the Netherlands.

Cost Reduction Strategy

Tata Steel’s cost transformation strategy aims to enhance operational efficiency and reduce expenses significantly. The company has already made strides in cutting costs, with consolidated expenses dropping to ₹54,167.61 crore in the March quarter of FY25, down from ₹56,496.88 crore the previous year. During this period, Tata Steel also reported a consolidated net profit of ₹1,200.88 crore. Looking ahead to FY2026, the company is targeting further savings through various measures, including workforce productivity improvements and supply chain optimization. In India alone, Tata Steel plans to achieve cost savings of ₹4,000 crore by focusing on operational enhancements and reducing conversion costs by ₹1,000 to ₹1,200 per tonne.

UK Operations and Transition

In the UK, Tata Steel is implementing a strategy to cut fixed costs by 29% year-on-year, aiming for a reduction of approximately £220 million. The company has successfully decreased its fixed costs from £995 million in FY24 to £762 million in FY25, with a target of £540 million for FY26. The UK government is supporting this transition with a pledge of £500 million to assist Tata Steel in shifting to electric arc furnace technology. The company has made significant progress in planning and design engineering, having already spent £35 million in FY25. The Port Talbot facility, which has a capacity of 3 million tonnes per annum, currently employs around 8,000 people.

Focus on the Netherlands

Tata Steel is also targeting substantial cost savings in the Netherlands, aiming for £500 million through improved production efficiency and cost control. The IJmuiden facility, which produced 6.75 million tonnes of liquid steel in FY25, is central to this strategy. Ongoing discussions with trade unions and the Dutch government are focused on the decarbonization transition and securing financial support for the planned transformation. These efforts are part of Tata Steel’s broader commitment to sustainable practices and operational excellence across its global operations.

Capital Expenditure and Debt Management

For FY26, Tata Steel has allocated ₹15,000 crore in capital expenditure, with 80% designated for its Indian operations. As of March 2025, the company’s net debt stood at ₹82,579 crore, reflecting a reduction of ₹6,200 crore from ₹88,870 crore in September 2024. This strategic focus on capital allocation and debt management underscores Tata Steel’s commitment to financial stability while pursuing growth and efficiency in its operations.

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