3. TISCO During the Decade of the 1900s: The Formation Period

Basic biographical information on J. N. Tata and his family can be found in Elwin (1958), Fraser (1919), Harris (1958), Lala (1981, 1984, 1992, 1995, 2004, 2007), Sen (1975), and Wacha (1914).

The managing agents of the Tatas changed the name several times after the founding in 1887. We use Tata Sons throughout this monograph to avoid confusion.

The report was written at the Government’s request by R. H. Mahon, who was deputy director-general of ordnance with experience during the second half of the 19th century as the superintendent of Cossipore Ordnance Factory, where the production of steel was successfully undertaken. At the time, Mahon was recognized as “the first expert” in India on iron and steel manufacturing (Sen 1975, p. 32).

Sen has noted that both Hamilton and Curzon “eagerly sought…the investment of British capital in Indian iron and steel industry” (Sen 1975, p. 34).

C. U. Wills, third Secretary of the Chief Commissioner of Central Provinces, to Secretary to Government of India (Department of Commerce and Industry), 15 May 1912, Geology and Mineral-A (Department of Commerce and Industry), May 1912, pro. 25–26, File 79, part B, National Archives of India, Delhi, India (NAI).

ibid. The underline is in original.

C. P. Perin had worked as a chemist, superintendent, and general manager of blast furnaces and steel works in Alabama, Kentucky, and Tennessee before he was hired by TISCO. Concerning his career as TISCO see TISCO (1937, p. 253ff).

This means that the Tatas basically were to follow the US model of iron and steelmaking. Bagchi has remarked on the cotton mill industry of colonial India, “India’s early retardation in textile technology and business organization in comparison with Japan may have owed as much to the blinkered imitation of British models” (Bagchi 1997, p. 21). In contrast, the Tata iron and steel venture would take a different path.

Progress report on iron and steel manufacturing in Central Provinces of India, 1903, Weld Papers, File A 24, p. 28, Tata Steel Archives, Jamshedpur, India (TSA).

Gupta and Chaliha, ‘Nostalgia: Life and times of P. N. Bose’, P. N. Bose Papers, Box 646, File 5, Tata Central Archives, Pune, India (TCA).

Ibid.; Harris (1958, pp. 179–80).

Gupta and Chaliha, ‘Nostalgia: Life and times of P. N. Bose’, P. N. Bose Papers, Box 646, File 5, TC, Pune, India.

Mahon wrote in his report that, “ore of a promising nature… yielded 71.2, 63.4, 59.7 of iron… and 0.03, 0.16, 0.19 of phosphorus, respectively” (Mahon 1899, p. 12). Because of its high percentage of iron and a low percentage of phosphorous, the iron ore from Gorumahisani hill and the Dhalli and Rajhara hills was excellent for iron and steel making.

C. P. Perin and C. M. Weld, Perin and Weld Report, 1905, TSA (PWR).

Perin and Weld reported in 1905 that “The cost of mining this ore [of the Dhalli and Rajhara Hills] will be the same as at Gorumahisani…The railway lead will bring the total cost [of the Dhalli and Rajhara Hills] delivered Sini [proposed worksite at that time] up to Rs. 580 per ton” while “Freight [of iron ore from Gorumahisani Hill] to Sini…brings the total estimate for the ore delivered Sini up to Rs. 240” (PWR, pp. 18–9).

Thomson, Kilburn and Co. to Shapurji Saklatvala, Tata and Sons, 4 November 1904, Padshah Papers, Box 1, File 1, TSA.

TISCO, Annual report of TISCO (ART), 1906/07, TSA.

The names, locations and dates of acquired TISCO’s collieries are Bhelatand, Jharia, 1 Jan. 1910, Malkera-Choitodih, Jharia, 1 May. 1913 Jamadoba, Jharia, 1 Jan. 1917, Pits 6 and 7, Jharia, 1 Jan. 1917, Digwadih, Jharia, 1 Jan. 1917, Ovirampur, Raniganj, 18 May 1917, Sijua, Jharia, 17 Feb. 1918, and Purusottampur, Raniganj, 11 Sep 1918 (Simmons 1977).

According to Morris, the Tatas’ success in securing a cheap and reliable mineral supply was one of the most important factors in the successful development of TISCO (Morris 1983, p. 588).

C. M. Weld, Progress report on iron and steel manufacture in Central Provinces of India, 1903, Weld Papers, File A 24, TSA.

Ibid.

Ibid.

PWR.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Padshah to R. D. Tata, 28 July 1905, Padshah Papers, Box 2. The 40,000 sterling pounds mentioned was about equivalent to Rs. 600,000 in 1905. We have no information on the surnames of “Ardeshir and Bejonji,” although we may assume them to have been leading figures at Tata Sons.

Alex Sahlin, Report on conditions in India favouring a Swadeshi Iron Industry as found during a 10 weeks visit, January–April 1908, Kennedy Papers, Box A47, TSA. Alex Sahlin was the partner of Julian Kennedy, who had advised J. N. Tata during his US visit, in the firm of Julian Kennedy, Sahlin and Company Limited headquartered in Pittsburgh with a branch in Brussels (Harris 1958, p. 166).

Bahl also notes that TISCO revised the original design for the works by modifying the capital requirements due to a shortage of funds. Based on confidential files of the Department of Commerce and Industry, Bahl has shown that TISCO unofficially enquired at the Secretary of the Geological Survey Office in India whether “the Government would be willing to take about 50 lakhs of Rupee-worth of 5% debentures in TISCO, in case they failed to raise the money in the open market” (Bahl 1995, p. 76), to which the Government replied in the negative, although TISCO offered to place a representative of the Government on its board of directors.

Alex Sahlin, Report on conditions in India favouring a Swadeshi Iron Industry as found during a 10 weeks visit, January–April 1908, Kennedy Papers, Box A47, TSA.

Ibid.

ART, 1906/07.

How the Tatas constructed the industrial centre at Kalmati, now Jamashedpur, is an interesting subject although we do not study it in detail here. See, for instance, Dutta (1977).

ART, 1907/08 and 1908/09.

ART, 1911/12.

Ibid.

The facts presented below on capital funding was originally published in Nomura (2014).

Godrej to Padshah, 14 September 1906, Padshah Papers, Box 3, File 1, pp. 1–2, TSA. Bahl also quotes this letter (Bahl 1995, pp. 72–3).

ART, 1911/12. The investment made by the Maharaja Scindia of Gwalior, who “advanced a large part of the necessary working capital” in 1911, was a boon for the company in its initial operations (Morris 1987, p. 143).

Annual Reports state that the capital raised by the company by 1907/1908 and 1908/1909 came to Rs. 6.6 million and Rs. 9.7 million, respectively (ART, 1907/08 and 1908/09). According to the Annual Report of 1908/09, the board of directors of TISCO was composed of D. J. Tata, Thakore Sahib of Morvi, A. J. Bilimoria, Sassoon David, J. Cowasji Jehangir, Vithalds Damodher Thackersey, Gordhandas Khattau, Fazulbhoy Currimbhoy Ebrahim, Narottam Morarjee Goculdas, M. A. Tana and P. D. Pattani.

According to Johnson (1966), the Parsi community purchased 36% of TISCO’s share capital in 1911, adding that the community still held 26% of the shares, even when contribution by the House of Tata is excluded. The significance of Parsi network communities for industrial investment has been considered to be the result of limited informational asymmetries between members of the community (Gupta 2014, 2016, pp. 72–3). Moreover, there is a view assuming that Parsis are people with a preference for investment, on which Chandavarkar has cast doubt, stating, “it would be misleading to assume that entrepreneurial behaviour can be understood exclusively in terms of community. Business in Bombay often cut across these primordial lines. Vanias invested in the carrying trade of Parsis and Khojas (Chandavarkar 1994, p. 58)… The development of a Parsi enterprise demonstrates rather more clearly that their acceptance of greater risks in the export trade or factory industry was largely a function of their narrowing options elsewhere” (p. 59).

The share capital of TISCO increased by only Rs. 100,000 over the 24 years after 1927/28.

In this chapter, we use information from the initial period of company formation in addition to information from the later colonial period. The use of information from the later period to describe corporate structure in initial phase of TISCO business is justified because of basic continuity in the framework of the company’s corporate structure throughout the colonial period.

ART, 1908/09 and 1931/32.

When the separation of ownership and management is present, a principal-agent problem may develop between shareholders and managers (Amatori and Colli 2011, Chap. 10; Lamoreaux et al. 2009, Chap. 3), a problem that was not seriously experienced by TISCO during the colonial period.

List of minutes forwarded to the chief accountant of Jamshedpur, 13 Feb. 1941, General Managers’ Correspondence (GMC) Papers, File 176 part 2, p. 334, TSA.

Datta (1990, p. 47) calls directors with Mahajan origins “prestige directors” based on Brimmer’s definition.

The facts presented below on voting rights was originally published in Nomura (2014).

Minutes of the meeting of the board of directors of TISCO on 15 August 1918, Minutes of the Meeting of the board of directors of TISCO Papers No. 2, Box 509, p. 93, TCA.

We have no evidence on proxies entrusted to the House of Tata or to other directors of TISCO.

Minutes of the meeting of the board of directors of TISCO held on 18 November 1924, Minutes of the Meeting of the board of directors of TISCO Papers No. 4, Box 509, p. 68, TCA, Pune. Table 3.2 shows that Tata Sons purchased their second preference share after 1924, presumably in response to Jehangir’s criticism.

Tata Sons to D. J. Tata and R. D. Tata, 28 July 1905, Company’s Formation Papers, File 1, TSA.

List of subjects to be taken up by the directors at the Sakchi (renamed as Jamshedpur in 1919) Meeting, December 1918, GMC Papers, File 95 pp. 264–5, TSA.

Markovits also noted the busy business life of directors (Markovits 1985, pp. 15–6).

For the features of the managing agency contract, see, for example, Nomura (2014).

Notes regarding Tata Ltd. London, 14 October 1924, Tata Sons Limited Papers, File Tata Limited London, TSA.

Because we lack sufficient organizational details, we will refrain from drawing any definitive conclusions; however, there is the impression that Tata Sons had a organization similar to a multi-divisional, decentralized managerial structure (M-form) or holding managerial structure (H-form), according to business history terminology. The features of these forms are explained by Cassis. “(In the interwar period,) this new (M-form) structure, which appeared in the United States in the 1920s in such firms as General Motors or DuPont, was decentralized and consisted of autonomous divisions, each of them corresponded to the firm’s main product lines and responsible for the various functions previously found in the multifunctional (U-form) structure…. In the meantime, other organizational structures continued to exist or to co-exist with others. In France, for example, holding companies controlling dense networks of crossed ownerships and interlocking directorships proved a flexible structure facilitating cooperation, financing, and technological transfers while saving managerial resources” (Cassis 2009, pp. 183–4). Interestingly, Bird and Heilgers, one of the leading UK managing agents in colonial India, also had a corporate structure similar to the M-form. (Nomura 2014). In any case, we will leave categorization of the organizational setup of managing agents such as Tata Sons open to future analysis.

Peterson’s career seems to indicate that Tata Sons employed individuals with Government connections, as noted by Markovits, who found that Tata Son’s employing ex-government officials to be a lobbying channel to the Government. Such a hiring strategy was of mutual interest to both the company and the Government as dominant suppliers and purchasers of iron and steel in the Indian market, and placed the Tatas in an advantageous position vis-a-vis other Indian industrialists (Markovits 1985, p. 27). In addition to Peterson, the Tatas employed several other British ex-officials and businessmen, such as S. K. Sawday, R. H. Mather and Frederick James, all of whom probably maintained close ties with the Government (Bagchi 1972, p. 198).

TSA at Jamshedpur stored these lists regularly from the early 1910s until the beginning of the 1930s.

Extract from the minutes of the meeting of board of directors on 2 August 1919, GMC Papers, File 99, pp. 116–7, TSA.

Padshah to Perin, 29 May 1908, Padshah Papers, Box 1 File 3, TSA.

Tata Sons to Woolsey, 11 December 1912, GMC Papers, File 46A, pp. 97–100, TSA.

Ibid.

Even these checks were irritating to the second general manager, Woolsey. After writing the letter of criticism, Woolsey resigned (Woolsey to Tata Sons, 26 September 1913, GMC Papers, File 51 part 2, pp. 52–5, TSA).

Tata Sons to Woolsey and Darlington, 12 June 1913, GMC Papers, File 49, pp. 189–91, TSA. The letter also stated, “The General Manager should submit to the board for their consideration and sanction a schedule of maximum and minimum salaries attached to all covenanted posts.”

“The proposed new post of General or Chief Accountant will be under the supervision of the General Manager but the appointment or dismissal of that officer will be in the Board’s hands (Tata Sons to Woolsey, General Manager of TISCO, and Darlington, 12 June 1913, GMC Papers, File 49, pp. 189–91, TSA).

The facts presented here on foremen and millhands was originally published in Nomura (2010).

Keenan, General Manager, to Saklatvala, chairman of board of directors of TISCO, 18 February 1935, GMC Papers, File 169 part 1, p. 296, TSA.

“Staff Training Department Break New Ground,” Supervisors’ News Letter, vol. 5, no. 5, 1960, pp. 7–8, TSA.

To be more precise, it was skilled and semi-skilled workers who were supervised by foremen directly, while unskilled workers, who occupied a small portion of the workforce at the fifth tier, were placed under the supervision of contractors. More details are provided in Chaps. 5 and 7.

As will be examined in detail in Chap. 5, these workers basically received relatively higher, and more attractive, wages during the 1910s compared to workers at other modern business corporations, such as railway companies and the Bombay cotton mills.

Please refer to the final paragraphs of Sect. 2.​4 in Chap. 2 for a description of the “jobber” system in India.

For example Morris states, “In neither of these enterprises [TISCO and the railway companies] did we find the jobber [sub-foreman or overseer] developing the special power he developed in Bombay [cotton mills]” (Morris 1965, p. 131), adding later on, “the management [of TISCO] never found itself forced to give to its low-level jobber equivalents the basic responsibilities for the administration of its workforce. The ramshackle discipline appropriate in Bombay mills…was never feasible in Jamshedpur, and it never appeared” (ibid., p. 209).

Chandavarkar notes that also in the case of Bombay cotton mills, timekeepers were at a similar management level as foremen or jobbers (Chandavarkar 1994, p. 305).

Handwritten memo from Bilimoria to Tata Iron and Steel, 19 January 1914, GMC Papers, File 52, p. 55, TSA.

Tata Sons to Wells, General Manager, 24 February 1912, GMC Papers, File 43 A, pp. 268–9, TSA.

Archival evidence cited by Bahl (1995, p. 130) also indicates that TISCO employed an indirect labour management system. “Foremen and others of that class, who held the power in their hands to give jobs, knew well enough how to make the best of the institution and to obtain financial benefits whenever new men were given jobs. It was, therefore, not unusual to find some of them dismissing existing hands and recruiting new hands for monetary consideration. These foremen were responsible for recommending the promotion of their subordinates which gave them further power to exploit the labourers.” Original Source: Proceedings of the Department of Industry (Labour), July 1921, L-941(2), NAI.

According to Gospel, indirect labour management systems were also employed at iron and steel manufacturers in the United States, Britain and Germany during the second half of the 19th and the beginning of the 20th century, but were gradually replaced by new systems. “Slowly, however, different arrangements developed. Large firms, such as Carnegie and US Steel in the United States, Krupp in Germany, and Schneider in France, substituted their own foreman for internal contractors, began to recruit more systematically, trained workers internally on the job but usually not through apprenticeship systems, and developed employment hierarchies and some of the welfare arrangements… (notably housing, workmen’s compensation, sick pay, and pensions)” (Gospel 2009, p. 428).

In the case of colonial India, the influence of foremen over labour management was not exclusive. Basu, for instance, describes in his case study of jute mills at Calcutta that a foreman “had to tread on rather precarious ground, divided between workers’ grievances, managers’ demands, and the needs of allies such as burrababus [lit. “big bosses,” in this context influential figures both in the workplace and in town life]” (Basu 2004, p. 10). See also Chandavarkar (2007). Chapters 5 and 7 will show that such limited authority existed at TISCO during the 1920s and formed the basis for labour unrest during that decade.

The facts presented here was originally published in Nomura (2010).

The report clarifies the origins of 28,674 TISCO workers throughout the 1930s according to province: Assam 215, Bengal 3,473, Bihar 9,089, Bombay 524, the Central Provinces 3,974, Indian States (& Nepal) 1,579, Madras 1,999, Orissa 2,740, Punjab 1,948, United Provinces 2,694, North West Frontier Provinces 322, and outside India proper 117 (TISCO 1938).

While several case studies have described the social backgrounds of lower managerial staff of colonial India’s manufacturing sectors, such as foremen at cotton mills and jute mills (Chakrabarty 1989; Chandavarkar 1994; Basu 2004), there are few studies clarifying their occupational and educational background. Datta (1990) is an exception, showing that some foremen were engineering graduates or diploma holders.

Detailed information on these 71 “old” (i.e., veteran, long-time) employees is provided in Nomura (2010, pp. 125–45).

According to Bear, Kharagpur was constructed between 1898 and 1900 as “an important intersection between Kolkata and the lines that travelled south to Orissa and west to Chattisgarh on the new Bengal Nagpur Railway” (Bear 2007, p. 4). A large workshop for the overhaul of locomotives, freight cars, and passenger cars was constructed in the town in 1904, transforming Kharagpur into a major industrial town of east India. Kharagpur workshops became an important source of labour for TISCO throughout the first half of the 20th century, while Kharagpur workshops also supplied labour movement activists in the 1920s.

Datta also notes the significance of the railway industry as a source of skilled labour for TISCO, stating, “the Company had had no difficulty obtaining this force [of skilled labour during the early 1920s],” although he does not suggest that such experience was required for entering the fourth tier (Datta 1990, pp. 27–8). We agree with Datta’s view at least up until the mid-1910s, although we question the idea that such labour was readily available during the 1920s. To the contrary, a lack of skilled labour is clearly indicated by TISCO’s decision to establish a full-scale academy specializing in iron and steel industrial technology in 1921, in an attempt to fill the void. For more details on that school, see Chap. 5.