“Iron ore Deadlock : Breaking the Logjam” 7th September, 2013 1

Karnataka & its attraction With 5% of the country’s population contributes to 6% of GDP, 7% of fixed capital & 13% of India’s exports Nature’s bounty…. Industrial growth story…. Softer development…. Leader in Gold & Felsites 78% vanadium ore 74% Magnetite iron ore 42% tungsten ore 38% asbestos 33% titaniferous magnetite 30% limestone, 25% granite 22% manganese ore & many more Leader in IT services 2nd in hydro electric projects 3rd in renewable energy Hub for automotive majors Horticulture products 2nd largest milk producer 45% of raw silk production 20% national garment Single largest steel manufacturing unit Leader in education sector Bangalore - Science capital of India Highest number of polytechnic & engineering institutes Peaceful work culture Vibrant bureaucratic setup Infrastructure Business Leaders Bangalore - Science capital of India with 8 reputed research centers

Reserves (In Billion Tons) Iron Ore Reserves Karnataka is endowed with rich deposits of iron ores; with approximately 9.03 billion tonnes or about 36% 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 40 Million tons Steel Capacity based on the available resources.

Present Scenario of Karnataka Steel Industry Represents 25% 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.

Iron Ore Production - Karnataka PERIOD In MTPA 2009-10 43.16 2009-11 37.88 2011-12 13.19 2013-13 9.30

Iron Ore – Chronology of events 29/07/11 Hon’ble SC suspended Mining & Transportation of Iron ore in Karnataka 02/08/11 Ministry of Steel through MoEF informed to Court that Steel Industry based on Iron Ore from Karnataka needs appox. 30 MTPA iron ore from Karnataka. 05/08/11 SC allowed NMDC to operate its two mines to provide 12 MTPA iron ore 23/09/11 SC allowed e-auction of 25 MT Medium & Low grade stock 13/03/12 CEC submitted report on survey by joint team with respect to categorization and R&R plan 13/04/12 SC capped the production at 25 MMT from Bellary & 5 MMT from Chitradurga / Tumkur 29/08/12 CEC submitted report for implementation of R&R and resumption of mining operations in category ‘A’ 03/09/12 SC allowed resumption of mining operations in 18 leases of category ‘A’ 15/02/13 CEC submitted report regarding resumption of mining operations in balance category ‘A’ & category ‘B’ mines 18/04/13 SC approved the following: Resumption of mining operations in balance category ‘A’ & category ‘B’ Cancellation and allocation of category ‘C’ mines through auction Grant of fresh mining leases in accordance with law

Status of reopening of mines in Karnataka “A” & “A1”-Category Mines: In Sept’2012, Hon’ble SC allowed opening of 18 “A” Mines & 12 “A1” mines with capacity of 7.84 MTPA out of which only 8 mines with 3.77 MTPA capacity have resumed operations and offered material for industries through e-auction. “B”-Category Mines: In April’2013, Hon’ble SC allowed opening of 34 “B” Category Mines with capacity of 8.34 MTPA where as 3-leases have resumed operation with 1.33 MTPA capacity till date. However, material offered to industries is only from 1 lease with capacity of 0.96 MTPA.

Lack of resource & its impact….. Fe in input: reduced from 60% to 48% Al2O3 increased from 4.5% to 11% Mn in ore increased from 0.2% to 1.7% 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….

Iron ore availability as of now (MTPA) Short-term Measures Iron ore availability as of now (MTPA) There is a shortfall of 16.27 MTPA iron ore. Immediately following measures should be taken: Sale of Sub-grade stock 6 - 8 million tons which can help another 3 months. Sold approximately 1.5 million tons so far. Balance quantity to be expedited in Sept ‘13. Opening of balance “A”, “A1” & “B” Category Mines by doing the needful like speedy renewal of mines & approving Forest Clearances; potential for 7 million tons.

Medium Term Measures Iron ore availability after opening of “A”,”A1” & “B” Category Mines (MTPA) *NMDC production will decrease to 7 MTPA from currently 9 MTPA *Combine capacity of all “ A”,“A1”& “B” category mines will be 10 to 12 MTPA against R&R approved capacity of 16 MTPA due to issues like litigation, renewal, clearances in some mines. There will be a shortfall of 11-12 MTPA iron ore. Therefore following measures should be taken: State Government should prepare Auction scheme and get it approved from Hon’ble SC. In the mean time State Government should appoint agencies like KPMG, E&Y to prepare Auction Mechanism. Auction of “C” Category Mines.

Medium Term Measures (Contd.) Iron ore availability after opening of “A”, “B” & “C” Category Mines (MTPA) There will be a shortfall of still 6 MTPA iron ore even after opening of “C” category mines. Therefore following measures should be taken: On 18th April, Hon’ble SC has allowed to allocate new leases in Karnataka. Allocation Mining leases like Ramandurga, Haddinpade etc. steel producers who have set up their facilities will be critical.

Breaking the Logjam Sale of Sub-grade of Iron Ore Opening of balance category ‘A’ & ‘B’ mines in a time bound schedule Cancellation and allocation of Category ‘C’ mines to industries Grant of fresh mining leases Existing value addition industry Mineral development policy Development of Iron Ore Mines in Western Ghats