KIOCL: The horse is set to gallop again

December 31, 2005 was a red-letter day for environmentalists in Karnataka. It was on this day a landmark judgement of the Supreme Court of India was implemented in totality, bringing down curtains on three-decade long iron ore mining by public sector mini ratna mining company KIOCL Ltd (formerly Kudremukh Iron Ore Company Limited).

KIOCL’s mining operations, carried out at Kudremukh in Chikkamagaluru district, one of the 16 most eco-sensitive biological hotspots in the world, came to a screeching halt and led to a big struggle for the company’s survival.

The closure of captive mines for KIOCL came at a time when there was a huge demand for the company’s high-grade iron ore pellets in the global market, especially in China which was building massive infrastructure for the Olympic games in 2008.

In 2005-06, the profit-making PSU under the Ministry of Steel witnessed a steep 50.4% drop in total sales at Rs 1,232 crore compared to Rs 1,853 crore in the previous year. Its net profit too declined 45% during the year to Rs 356 crore from Rs 649 crore in the previous year.

Unperturbed by the closure of captive mines, the 100% export-oriented PSU continued its operations at a lower capacity by sourcing the key raw material from another public sector mining company, NMDC Ltd from its Donimalai mines in Ballari district. At the same time, it applied to the Karnataka government for allocation of mineral reserves in Ballari and Tumakuru districts.

The troubles for the company were not over. In 2010, KIOCL faced another setback when the Karnataka government banned iron ore mining and exports. The Supreme Court upheld the government move in 2012 and restricted the usage of iron ore produced in the state only for value addition and banned exports.

As a 100% export-oriented company having India’s largest iron oxide pellet plant with a capacity of 3.5 million tonnes per annum (MTPA) and a blast furnace unit to manufacture 2.16 lakh tonnes of pig iron per annum at Mangaluru, KIOCL yet again turned its eyes towards NMDC for sourcing up to 3 MTPA iron ore from their Bailadila mines in Chhattisgarh through a long-term agreement. Despite sourcing the raw material from about 1,700 kms via road, rail and ship, the company not only survived in the business but also made small profit barring a couple of years.

Genesis of mining in Kudremukh

KIOCL Ltd, a flagship company under the ministry of steel, was granted a 30-year mining lease in 1969 over 3,703 hectares of forest land in the Western Ghats of Chikkamagaluru district to extract iron ore. It commenced mining and beneficiation of iron ore in 1976 and exported iron pellets to Iran initially and later to Japan and China.

KIOCL has achieved 64% capacity utilisation at its plant and produced 2.23 MTPA pellets in 2018-19.

Long-term vision

The company, which is operating without captive mines for 14 years now, got a reprieve two years ago. The government of Karnataka notified the Devadari iron ore mine in Sandur taluk of Ballari district in January 2017 for captive consumption of iron and manganese ore.

“We have recently received approval for our mining plan by the Indian Bureau of Mines (IBM) and the public hearing has been completed successfully. We have approval for production of 2 MTPA iron ore and setting up of 2 MTPA crushing, conveying and beneficiation plant. We are now waiting for the approval from the Ministry of Environment and Forests (MoEF&CC), which is expected within two months,” M V Subba Rao, Chairman and Managing Director, KIOCL told DH.

The company expects to commence mining in Ballari by 2021 which will ensure the raw material security for the next twenty years. KIOCL will be investing Rs 2,000 crore to develop Devadari mines and set up beneficiation plant and related infrastructure.

Until then, in order to ensure higher raw material supply, KIOCL is planning to import very high-grade (66% Fe) iron ore from Sweden’s Champion Mines. It has already floated tenders for import of 120,000 tonnes per annum. It is also talking to mines in Brazil for import of half a million tonne iron ore per annum. With this additional quantity of imported ore, KIOCL aims to achieve its MoU target of 2.4 million tonnes in 2019-20 as well as achieve 100% capacity utilisation in the next two years, Subba Rao explained.

For the year ended March 2019, the net profit and sales turnover stood at Rs 111 crore, showing a growth of 37% and Rs 1,828 crore, a growth of 15% respectively. It is aiming at a total revenue of Rs 2,500 crore in FY20. The company also aims to become a Maharatna company in the next five years by undertaking several expansion and modernisation programmes. It aims to spend around Rs 3,500 crore on its new initiatives. It currently has a cash reserve in excess of Rs 1,500 crore.

Backward and forward integration

In order to make the blast furnace unit viable, the company has envisaged projects for setting up of 1.8 lakh tonne per annum non-recovery coke oven plant with 10 MW cogeneration power plant as backward integration. It has also planned to set up a 2 lakh TPA ductile iron spun pipe (DISP) plant as forward integration.

The company is also setting up a 2 million tonne per annum capacity pellet plant to produce high fluxed BF grade pellets in a joint venture with another Steel Ministry undertaking RINL at Vizag. The entire produce will be consumed by RINL blast furnaces. The project, estimated to be completed in 24 months from the date of placement or order on the main technological package supplier, will see an investment of Rs 1,033 crore.