“Regulatory for Adequate Availability of Natural Resources for Manufacturing” JANUARY, 2014 1

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

Lack of resource & its impact….. Fe in input: reduced from 60% to 55.5% Al2O3 increased from 4.5% to 5.4% 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….

Flight of butterfly stalled… What happens to growth, happiness and further metaphorsis…

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.

PRESENT SCENARIO –MANUFACTURING IN KARNATAKA The share of Secondary sector i.e Manufacturing in Karnataka has fallen from 29.1 % to 26.6 % 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. Source : CMIE, IBEF of 2010-11

IRON ORE RESERVES AND 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 15 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 amounts to $8.5 billion (at factor cost)

Impact on Employment Productivity of Steel Industry in India – 196 tons /manyear 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 )

Impact On Railways Material Movement for each ton of Steel production – 4 tons (Including Finish Product) Total Material Movement for 16 million ton of Steel Production- 64 million tons Material Movement through Railways – 60% of total Average Revenue of Railway per ton of Material – Rs 550 per ton Stoppage of 16 million ton Steel Production would lead to revenue loss of Rs 2000 crore to the Railways Loss to the road transport will be additional

Impact on Banks and Lenders Investment required for per ton of Steel Capacity – Rs 40000 Total Investment for 16 million ton Steel Capacity – Rs 64000 Crore Debt : Equity – 2:1 Total Debt – Rs 42500 Crores Shut down of these steel plant will make the Rs 42500 crores Non Performing Assets and can destabilize the Indian Banking Industry

Impact of suspension of Iron ore mining in Karnataka India is a net steel importer and suspension on mining of Iron Ore in Bellary-Hospet will lead to the closure of 24% of Indian steel capacity as the iron ore from Goa can’t be used & logistics for sourcing iron ore from Orissa & Chattisgarh do not support. Such closure of Mining operation will lead to following ripple effects: -Higher inflation due to shortage of steel -Additional Forex loss to tune of $12 billion per year -Negative impact on GDP to tune of $8.5 billion per year -Unemployment of more 80,000 directly & several lacs indirectly -Loss to the Ex-chequer to tune of Rs.9,500 Cr per year -Loss to the Railways to the tune of Rs.2,500 Cr per year -Impact on Banking system to the tune of Rs.50,000 Cr

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. The iron ore export should be discouraged across the country for the conservation of environment and optimum exploitation. Our forests and environment should not be allowed to degrade for the growth of steel industry of other countries. The long term solution for conservation of environment and optimum exploitation of minerals is captive mining.

Source Total Mines In Operation No. of Mines Production (in MT) Category ‘A’ and ‘A1’ 44 11 5.20 Category ‘B’ and ‘B1’ 69 3 1.30 NMDC 2 9.00 TOTAL 115 16 15.50

Forest Clearance pending R & R prepared - Mines Not in Operation 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 2.656 Total 14 0.388 2.028 4.638 24 7.054

R & R prepared - Mines Not in Operation 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   5 3.338 Pending with Lessee 2 0.425 0.806 0.276 Total 3 13 0.433 1.866 4.272 21 6.571

Conclusion Grant of fresh lease of value addition Sustainable development approved Smooth transfer for land Setting up single window clearance for various agencies Clearance of Mines Lease renewal Forest clearance – Temporary working permission Auction of ‘C’ category Enterprise friendly incentive schemes