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Opportunity in adversity

KIOCL Ltd has many firsts to its credit in the iron ore industry. It is the first fully-integrated operation in India stretching right from the mines to the ports, pelletisation as a value-added product catering to the export markets.
CMD K Ranganath discusses future plans, areas of diversification
and export target

What prompted the formation of KIOCL and how much has it over the years contributed to its objective?

KIOCL Limited (formerly Kudremukh Iron Ore Company Limited), a flagship company under Ministry of Steel, came into existence on April 2, 1976. It was constructed on 4,605 hectares of land granted to KIOCL by the Karnataka government on mining lease. Of this, 900 hectares was dedicated for mining. Kudremukh means horse’s face in Kannada. It derives its name from the shape of the highest peak in the Aroli Gangamula range of the Western Ghats. Iron ore deposits, principally magnetite, were discovered here by late P Sampath Iyengar, a geologist with the then Mysore state in 1913. However, these deposits never gained importance due to low grade iron content of 38.5 per cent.

The development of Kudremukh Iron Ore Project assumed importance consequent to the development in techinques for beneficiation (to treat ore to make more suitable for smelting) of low grade magnetite ore into concentrate and pellets and a virtual revolution in the transport system of material in slurry form through pipeline with safety and clean environment. The mining and concentrator complex was commissioned for production in the early 80s. Since then, KIOCL has been consistently reaping profits and was accorded Mini Ratna Category-I status.
Another of KIOCL’s projects, Kudremukh Iron Ore Mine has an annual capacity to produce 22.5 million tonnes per annum of ROM and iron ore concentrate of 7.5 million tonnes per annum. The company completed the project in time without cost or time overrun. The company, started as a single product unit meant for a single customer, was thrown to the international competition due to the circumstances without any prop. The buoyant Kudremukh fraternity re-asserted itself in the form of a successful turnaround plan including, inter-alia, setting up of a pellet plant of 3.5 million tonnes capacity.

Since its inception, KIOCL has produced 109.50 million tonnes of concentrate and 52.97 million tonnes of pellets, also producing 0.34 million tonnes of pig iron, beginning 2001.

Employment generated directly was 2,474 while around 10,000 were indirectly employed in the company. KIOCL has paid dividend of Rs. 55,462.45 lakh till date. It is a “zero debt” company and has free reserves to the extent of Rs. 1,306 crore as on March 31, 2010. KIOCL’s net worth as on March 31, 2010 is Rs. 1,938 crore against a share capital of Rs. 634 crore. The company has also taken up all its diversification and modernisation plans with out any budgetary support from the Government.

The company has following manufacturing units and facilities at Mangalore, Karnataka:

<ul><li>Pellet plant with an annual capacity of producing 3.5 million tonnes of iron oxide pellets.</li>
<li>Blast furnace unit with an annual capacity of producing 0.216 million tonnes foundry grade pig iron.</li>
<li>Captive berth with mechanical ship loading facility.</li>
<li>Captive power plant.</li>
<li>Railway sidings. </li></ul>

The iron oxide pellets conform to international standards making them ideal for hi-tech steel plants anywhere in the world. As a result of adoption of latest production techniques and constant R&D efforts to improve quality, KIOCL’s products are the choice of quality-conscious consumers in Japan and China.

How has been the growth on export front in 2009-10 and what are your expectations this fiscal?

During the financial year 2009-10, KIOCL exported 4,81,105 metric tonnes of pellets, earning foreign exchange of $52 million. This constitutes 33 per cent of total sales during the year. However, it is 45 per cent lower than the exports during 2008-09. Since China is the major overseas market for KIOCL Pellets, exports are likely to be affected during the balance period of this financial year. Apart from the above, 15 per cent export duty levied on pellets would further weigh heavily on export sales realisation and puts KIOCL in a disadvantageous position in international market. However, KIOCL is making efforts to improve exports by exploring new markets like Vietnam, Australia, Malaysia etc.

What kind of technological prowess does the company possess that makes it stand out of its competitors?

KIOCL has technical expertise for having operated the first magnetite iron ore mine in India, beneficiating low grade iron ore into their fully integrated operations starting from mining till ship-loading of the product.

KIOCL takes pride to accomplish as stated below:
<ul><li>Production of iron oxide pellets through environment-friendly wet process with exclusively heamatite ore, a first-of-its-kind facility.</li>
<li>Establishment of pollution control dam to contain the tailings from concentrator complex.</li>
<li>According to National Remote Sensing Agency, there has been an increase in forest cover by 11.6 per cent.</li>
<li>Trendsetter with many firsts in the iron ore industry in India.</li>
<li>First to have fully integrated operations in India from mine to port and then overseas and domestic markets.</li>
<li>KIOCL had the first large-scale magnetite iron ore mine to low grade magnetite ore.</li>
<li>KIOCL was the first iron ore long distance slurry pumping operation in Asia with an eco-friendly underground pipeline spanning 67 km to transport solid in slurry form.</li>
<li>KIOCL was the first to introduce site mix slurry explosive, use of gas bag technology in iron ore mines and development of software package for “Blast Design Optimisation”.</li>
<li>KIOCL has a dedicated berth for loading its products with a telescopic shiploader system of 6,000 tonnes per hour capacity. </li>
<li>KIOCL has a 30 MW captive power plant at Mangalore to cater the plant needs.</li>
<li>The entire operation of the mines, beneficiation plant, pellet plant, port facilities and captive power plant is controlled through fully integrated computer control system.</li></ul>

What are KIOCL’s new projects in the offing?

<uL><li> Integrated steel plant in Karnataka: KIOCL is in the process of setting up of 5 mtpa capacity integrated steel plant along with the joint venture partner in Karnataka in which KIOCL will have 26 per cent stake. The JV partner has been identified through tender route and the process to initiate JV agreement is on. It is expected that all formalities will be completed by October 2010-end and a new company will be floated for the same. In the first phase, 1.5 million tonnes per annum integrated steel plant will be started with an estimated expenditure of Rs. 9,000 crore.</li>

<li>Chikkanayankanahalli iron ore project: Government of Karnataka had granted iron ore mining lease in Hombalghatta and Hosahalli villages of Chikkanayakanahalli Taluk, Tumkur district over an area of 116.55 hectares for iron ore. KIOCL has obtained mine plan approval and environment clearance for the project and waiting for forest clearance to commence the mining activities in the said area. KIOCL project in Hombalghatta and Hosahalli villages, Chikkanayakanahalli Taluk, Tumkur district will generate various direct and indirect employment opportunities in the area and lead to sustainable development of the area.</li>
<li>Ductile iron spun pipe plant: The company has planned to utilise the hot metal produced at the blast furnace unit for production of ductile iron spun pipe at Mangalore as a value-added product. The company is in the process of establishing one lakh ton ductile iron spun pipe plant at Mangalore. The estimated cost of the project is Rs. 300 crore.</li>
<li>3 lakh tonnes per annum capacity coke oven plant: Metallurgical coke, which is the vital raw material in the production of hot metal at the blast furnace, it has been decided to go for 3 LTPA coke oven plant at BF Unit, Mangalore. The estimated cost is around Rs. 338 crore including coke oven gas based captive power plant.</li>
<li>Ramanadurga Mines: KIOCL has requested the Karnataka government to grant long-term mining lease of entire area of 16.59 sq km of block 13/1, Ramanadurga iron ore deposit, Bellary district in favour of KIOCL Limited.</li></ul>

Why do you think the country needs to protect the industry against low level of iron ore reserve?

<ul><li>Intensive exploration throughout the country to search new iron ore bearing areas,</li>
<li>By utilising scientific and zero waste mining methods employing GIS, computerised mine planning and design etc, thereby conserve national mineral wealth.</li>
<li>Utilisation of low grade iron ore by adopting newer technologies for steel making, </li>
<li>Intensive investment in R&D activities in iron ore mining, beneficiation and steel sector,</li>
<li>Blending of low grade iron ore with high grade iron ore,</li>
<li> Incentive for setting up of value-added plant in the country</li></ul>

In terms of environmental hazards associated with such projects, what measures is the company taking to minimise or avoid it?

Occurrence of various minerals such as iron, manganese, copper, gold, aluminium etc in varying quantum and quality at different places depends upon several geological seismological factors. Ecosystem prevalent before mining operations can be restored to a great extent if timely precautions and measures are taken.

KIOCL has demonstrated that sustainable development and preservation of ecology and environment can go hand-in-hand. A master plan to take off the forestry and ecology and adequate pollution abatement measures was built into the mining project configuration, even before the project report was finalised. Working in harmony with environment, KIOCL has taken measures to maintain the ecological balance by building 100 m high earth fill dam across Lakya, a tributary of river Bhadra to prevent pollution. A comprehensive plan to protect natural flora of the region is being implemented in earnest. As part of the afforestation, the company has planted nearly 85 lakh trees in the lease area in association with Karnataka State Forest Department and Karnataka Cashew Development Corporation. There has been no impact on the rainfall and cloud formation. The average rainfall for the last 10 years at Kudremukh site is around 6,215 mm per annum.

M/s Neeri conducted studies at KIOCL while the company was operating its captive mines at Kudremukh and submitted a report stating that the impacts of mining on air, noise, land, water, biological and socio-economic environment was insignificant. The study on ecological changes conducted by NRSA, Hyderabad, indicated considerable improvement in the forest cover due to massive afforestation taken up by the company.

The company has taken following measures to protect environmental hazards:
<ul><li>Air quality and noise control management</li>
<li> Prevention of tailings generated during beneficiation process by constructing 100 m Lakya dam across river Lakya, a tributary of river Bhadra and only clean water was discharged though spillway. </li>
<li>Two mini dams were constructed in two valleys of ore body to contain the mine wash off during monsoon.</li>
<li>Quality of water monitored at the entry and outlet point once in a week during monsoon by the company apart from external agency periodically.</li>
<li>Attention of blast vibrations and noise levels at Kudremukh mine while mining was in operation.</li>
<li>Treatment plants for removal of oil and grease from wash water and release harmless effluent through dispension trench.</li>
<li>Desilting of pollution control dams and river beds.</li>
<li>Grass and Fern plantation in abandoned mining areas apart from planting local species. </li>
<li>Adoption of eco-friendly technologies for cleaner environment and economic benefit.</li></ul>

KIOCL is one of the industries that realised the importance of environmental and pollution control measures in its mine site right from the inception, even before the Environment Protection Act 1986 came into existence.

What steps are being taken by the company to better its human resource policies?

KIOCL Ltd has given high priority for human resources development to increase the effectiveness and efficiency of the employees on their job. Regular training programmes conducted for both executive and non-executive employees of the company in accordance with MoU signed by the company with the Ministry of Steel. The company has developed a training policy taking into consideration various factors like changes in technology, market structure, policy changes, training needs of the employees and changes in work processes. The company has provided a beautiful town park for the benefit of the employees for relaxation after duty hours.

A recreation centre and a club has also been provided. To keep employees and their dependents healthy, a 50-bedded hospital has been constructed in the township. Kendriya Vidyalaya, Girijyothi Convent School and Government Primary, High School and Junior College cater to educational needs of the students of the
township.

Transportation facility is provided to employees to go to their workplace and back, for family members to go to hospital and children for commuting to school and back. The company has successfully implemented the occupational health and safety management system (OHSAS) as per OHSAS 18001:2007.
To combat the attrition rate, KIOCL has been extending the welfare and safety amenities to employees. Employees are getting their revised pay scales and perks
regularly.

<div>Govt to move SC to revive Kudremukh

The government has said it will file a petition in the Supreme Court seeking permission to allow public sector unit Kudremukh Iron Ore Company Ltd (KIOCL) to lift the ore left in its mines in Karnataka, as well as to undertake underground mining in the same region.
The apex court had in 2005 ordered closure of the mines in the Western Ghats citing ecological hazard.

Interestingly, the Kudremukh fiasco has an uncanny resemblance to the recent government decision to disallow Sterlite Industries bauxite mining leases at Niyamgiri mountains in Orissa.

Sterlite may as well use the KIOCL as a precedent to push its own case.
“KIOCL was a flourishing company with very high level of efficiency and profitability,” said Virbhadra Singh, minister for steel.

“We want to go to the SC and file a petition so that the iron ore that is already mined and left on the ground can be lifted. Surely there is no ecological damage in that. It will meet the firm's ore requirement for full 3 years. Also we want underground mining to be allowed so that the company can be back on its feet and the resources fully utilised.”

The ministry of steel had last year proposed to merge KIOCL with PSU mining firm National Mineral Development Corporation through a share-swap. That proposal was however shot down by an expert committee under P Ganesan, former chairman of KIOCL, which found no synergies between the two firms. The export oriented KIOCL needs around 4-5 million tonnes of iron ore annually to produce 3.6 million tonnes of pellets and 2.16 lakh tonnes of pig iron. In 2009-10 its turnover stood at Rs. 992.72 crore with a net loss of Rs. 177.27 crore. </div>

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