“Regulatory Reforms for Adequate Availability of Natural Resources for Manufacturing” JSW STEEL LTD – JANUARY, 2014 1

Manufacturing : Soaring & growth phase….. And the Butterfly soars….. To fuel further growth & nectar….

Present Scenario – Manufacturing in Karnataka The share of Secondary sector i.e. Manufacturing in Karnataka has fallen from 29.1 % to 28.3% of GDP to from 2005 Growth of Manufacturing Industry has a direct co-relation with the employment generation. The share of Manufacturing in Maharastra and Gujarat is higher in comparison to Karnataka even without having the enough mineral resources. The data indicates the scope of growth of Manufacturing Industries in the State.

Present Scenario of Karnataka Steel Industry Represents >20% of Country’s Steel Production Iron Ore Requirement 32 MTPA Acute Shortage leading to production cut Sponge Iron Industries : 70% Mini Blast Furnace : 50% Integrated Steel Plant : 30-35% Both revenue and job losses Cap of 30 million ton Iron Ore production has constrained the growth opportunity of the Manufacturing Sector in Karnataka.

Impact on Employment Productivity of Steel Industry in India – 196 tons / man-year Stoppage of Steel Production – 16 million ton Loss of Direct Employment – 80,000 approximately Loss of Indirect Employment – 800,000 (assuming 10 indirect employment are generated against each direct employment )

Iron Ore Reserves & Revenue The state government receives huge tax revenue from the steel industry. Income from Steel Production * Steel Production (MT) Price of Steel Taxes (15%) Total Taxes (Rs. Crores) 16 40,000 6,000 9,600 Karnataka is endowed with rich deposits of iron ores; with approximately 9.03 billion tonnes or about 41% of India’s estimated total haematitic and magnetitic iron ore resources Type of iron ore Reserves (In Billion Tons)   Proved Probable Total Reserves Remaining Resources Total Resources STD111 STD121 STD122 Hematite 0.39 0.03 0.11 0.53 0.62 1.15 Magnetite 0.20 0.02 0.22 7.66 7.88 Total 0.60 0.13 0.75 8.28 9.03 Note 1: STD111 Proven reserves certified by GSI Note 2+3: Est from boreholes in mine not certified There is a potential to build 100 Million tons Steel Capacity based on the available resources.

Impact On GDP Contribution of Iron and Steel Industry to GDP – 2% Weight of Iron and Steel in the Index of Industrial Production – 6.2% Karnataka Steel Industry with more than 20 million ton production capacity represents 25% of the steel production of the country With 25% of Steel production going out of the system GDP will be negatively impacted by 0.5% which mounts to $8.5 billion

Impact On Railways Material Movement for each ton of Steel production – 4 tons Total Material Movement for 16 million ton of Steel Production- 64 million tons Material Movement through Railways – 80% of total Stoppage of 16 million ton Steel Production would lead to revenue loss of approx Rs. 4,000 crores to the Railways Loss to the road transport will be additional

Present Status of Iron Ore Mining Operations Source Total Mines In Operation No. of Mines Production (in MT) Category ‘A’ and ‘A1’ 44 11 5.12 Category ‘B’ and ‘B1’ 69 4 3.62 NMDC 2 9.00 TOTAL 115 17 17.84 ‘5’ Mining Leases cleared by Monitoring Committee - Yet to resume operations (Qty.: 0.85 MTPA)

Lack of resource & its impact….. Fe in input: reduced from 60% to <50% Al2O3 increased from 4.5% to 10% Impact: Very high slag rate operations Equipment in SMS deteriorating Productivity reduced Uncertain future but hope remains About 10 lakhs jobs impacted Operations of steel and other plants is on brink of defeat….

Manufacturing Growth - Stalled

Mines Awaiting Lease Renewal Mining Lease/plan Clearance pending A A1 B Approved by IBM No of Mines 1 4 Approved capacity (MMT) 0.008 1.060 0.658 Applied for Renewal by lessee   1.048 Pending with Lessee 2 0.425 0.806 0.276 Total 3 5 12 0.433 1.866 1.982 20 4.281

Forest Clearance pending Mines Awaiting Forest Clearance Forest Clearance pending Quantity in MMTPA A A1 B Pending at District Level No of Mines 1 2 8 Approved capacity 0.008 0.310 1.203 Pending at State Level 4 0.380 0.642 0.779 Pending at Central Level   1.076 0.35 Total 13 0.388 2.028 2.332 23 4.75

Proposal Steel Industry whole heartedly support: Clamp down on illegal mining Conservation of environment Optimum exploitation of iron ore in the national interest Reclamation & Rehabilitation of environment as suggested by CEC The huge investment & employment to the people of India & economic interest of the nation warrant continuous iron ore supply to the domestic steel industry To discourage export of Iron Ore and Pellets The long term solution for conservation of environment and optimum exploitation of minerals is CAPTIVE MINING FOR VALUE ADDITION

Suggestions – Way Forward Clearance of Mines Lease renewal Forest clearance – Temporary working permission Auction of ‘C’ category mines Grant of fresh lease for value addition / captive consumption Sustainable development approach Smooth transfer of land Setting up single window clearance for various licenses Enterprise friendly incentive schemes