Abstract The factors which are assuming considerable importance in cost effective decision making of operation of any industrial enterprise are in the order of significance liability, safety and environmental conditions. Hence, preventive maintenance (PM) optimisation is providing wide opportunities and challenges to everyone involved in all aspects of operation of industrial enterprise. Reliability centred maintenance (RCM) methodology offers the best available strategy for PM optimisation. It incorporates a new understanding of the ways in which equipment fails. In this paper, the concept of RCM has been applied to steel melting shop of a medium scale steel industry. By systematically applying the RCM methodology, failures, failure causes and effects on the system are analysed. To preserve the system function, PM categories are suggested for various failure modes in the components such as (1) time directed (2) condition directed (3) failure finding (4) run to failure. Features of predictive maintenance of a medium scale steel industry are deduced through this paper in a rather generalised form.