By Chitra Ramaswamy


In an exclusive interview to Resource Digest, K RANGANATH, chairman and managing director, KIOCL, is candid in vocalizing his views on the issues faced by the company following a Supreme Court’s order for the closure of mines at Kudremukh in January 2006.

What is your take on the position of the company as you see it at present?

KIOCL is a Government of India Enterprise with Mini Ratna Status established in 1976 to mine, process the magnetite iron ore available in Western Ghats. The project was brought in force with due diligence and deliberations with involvement of various statutory institutions. The area covering the mining lease was later declared as National Park under the enactments released during 1990’s. The same has resulted in the closure of mining related activities at Kudremukh.

It is claimed that the mining operations here will endanger the ecological system in times to come. What is your take on this?

Yes. This is something that has been published. Let’s take a broad view, out of the 21 billion tons of iron ore reserves in India, around 9 billion tons is locked in Western Ghats which will be in the public eye for tapping within couple of decades to come.
Kudremukh iron Ore Mines was, a project conceived with more scientific and state of art technology and was practiced keeping in view ecological and environmental issues in concern. The project has been executed, operated and even closed without violating any rules and regulations of the land.

If KIOCL has caused any kind of harm to the environment, flora and fauna because of its mining operations, definitely anyone can pull us up and take whatever action as warranted. But when we have done nothing wrong, don’t paint us black!

So what is the way out as you see it?

More stringent measures are required in view of the area being declared a National Park. Let the Government take a more rational and objective view of the situation and allow the ore to be mined at a higher cost than it is being done at present. This is not property that we have inherited, it is property borrowed from the future generation. So let us add value to it and give it back to the future generations by adopting technology and other measures that will allow us to take the ore out, while maintaining the ecological system in and around the National Park.

Yes, but are you not already doing all this and more?

Yes, True. That is the whole gist of the problem. KIOCL faced closure of its mines and concentrator complex despite being environmentally clean. There was no dust/ noise pollution even within a kilometer radius from the mines, thanks to the Eco Friendly technology being used. Even the concentrated ore was being pumped from Kudremukh to our Pellet Plant at Mangalore through a specially designed 67 Kilometers underground pipeline in the slurry form. During the monsoons, minewash from every part of the mines was collected in two pollution control dams and only filtered and clean water was allowed to flow down. No Flora and Fauna was destroyed and there were no environmental/ Health hazards surfacing. As regards endangering wild life, we had seen only a few birds, bisons and deer in the mine lease and no harm has been done to their habitat.

However, if as claimed, there is wildlife here, we can even fund to State Forest Department for safe guarding the wildlife.

But did the Government not look into all these aspects prior to the amendment to the environmental law that declared the region a National Park, the consequent allegations that your mining operations were harming the ecology and the subsequent Supreme Court order closing your mines?

In late 1990’s and early 2000 eco- environmentalism had gained prominence and acquired importance. In response to a petition raised by NGOs in this background, Hon'ble Supreme Court ordered for closure of the mines. However, within the legal framework and set of rules and procedures laid down by Government, it's time to re-visit and re-look into the Kudremukh case and an appropriate decision has to be taken.

We have the examples of Panna Diamond Mines of M/s NMDC and Bauxite Mines of M/s Vedanta Group Sterlite Industries in this regard.

A re-visit or re-look into the Kudremukh case would then imply conducting a fresh study and analysis of the issue and submitting the report to the Supreme Court. Yes?

Yes. A study has been done. The limiting factor according to us is that if we conduct a study on our own and submit the report to the Hon’ble Supreme Court, it would be looked as biased and doctored. However, to have acceptance, we have to get these studies conducted and reported by independent agencies.

But re-opening the mines is in the interests of the nation, of the government. So does the onus for conducting a fresh study not lie with the government?

Yes. The time has come for the Government to initiate an independent study or an NGO to take the lead and conduct an impartial study. A bio-study can be conducted in the region over a period of 2-5 years that includes every season and then ascertain the factors, ecology changes which may occur due to mining activity and recommend for measures to be undertaken by an operating company to make mining operations economically and ecologically viable. After that, any approved agency be it KIOCL, NMDC, or any other organization, should be allowed to ore the mines. I do not say that the mines have to be unlocked for us, for KIOCL. Open up the mines for the country.

Alternatively, KIOCL being a responsible corporate citizen is also ready to submit a report after conducting a study of the scenario. Let the report be subject to an unbiased scrutiny by a neutral body before taking a call on re-opening the mines, I see these as way forward.

What is stopping such a study from being conducted?

The mines closed in January 2006. The three-year period since then, has been too small a time for the Government to act and it is looking into various aspects of the issues. Meanwhile, Supreme Court decisions have also come in other cases which will enable and facilitate the Government to take an objective view.

Government too is reviewing the issue and we are also following it up. Only patience till things happen would be advisable.

Three years have already elapsed. What is the kind of time frame you are looking at within which things are likely to fall in place to allow for a concrete decision on the mines' reopening?

Three years have gone by but at least the thinking process is there. Supreme Court itself gave a favourable decision in the Panna Reserve Forest. Sterlite too got the clearance after compensating for mining in the forest area. So, we may also find a way out and this may take another 4-7 years because the study itself has to be conducted over a minimum period of three years.

But what happens to your pellet plant in Mangalore for this period of time? How are you going to source your ore and on what terms?

Yes, sourcing the iron ore from a source other than the captive mine to the pellet plant is resulting in increased cost of production. Presently, we are procuring the ore from Donimalai and Bailadila mines of NMDC under long term agreements. However, we have utilized the lean period for overhauling of machinery, plant maintenance and also process modifications. We are planning to sustain in the market and bounce back when prices improve.

We hear that your engineers did some brilliant work, modifying your present filter technology to make use of hematite ore also?

That is true. I must really congratulate and put on record the technical expertise of my plant people for being able to migrate from magnetite ore processing technology to processing of hematite iron ore fines in pellet making in a record period. Secondly, for processing of hematite iron ore fines suitable for pellet making, environmental friendly wet grinding technology has been adopted.

What about your Blast Furnace Unit (BFU) in Mangalore and the DISP production that you propose?

Nowhere in the country is a BFU profitable as it is in our Mangalore venture. BFU should have a value addition and we have already identified DISP for the purpose. It would have a capacity of one lakh tons. Once the project is approved, 20 months from then, our plant should be commissioned. Once this plant comes up, BFU will become a viable unit on its own. So I see no reason why the panic button needs to be pushed. Until 2008, KIOCL had not incurred any loss. In fact, even in 2008, we made a minimal profit and also paid minimal dividend.

Can you tell us something about your proposed plan for setting up a joint venture steel plant?

Our plan was proposed for setting up the joint venture steel plant. We require investment and technical knowhow for that. After due diligence, we are planning for integrated steel plant of 1.5 MTPA capacity in the beginning with a capacity expansion plan for 15 MTPA . Here, we want to be minor share holder partner and expect counterpart to mobilize rest of the capital and technical knowhow. Being Government organization we would also enjoy the control over the main clauses and objectives of the joint venture.

What is the kind of investment you envisage in establishing this plant and how do you propose to finance it?

We expect an investment of approximately Rs 7,500 — Rs 10,000 crores. If investment is going to be Rs 7,500 crores, with a debt-equity ratio of 1:2, Rs 2,500 crores will be the capital required and Rs 5,000 crores will be raised in the market as a loan. Our share will be 26% of this while 74% would be private investment, that is our real equity will be around Rs 625 crores. And we have the resources for this amount which will be KIOCL’s share capital. Having said that, if we envisage a debt-equity ratio of 1:3, this amount will come down further. KIOCL being a debt-free company, there will be no difficulty in raising the required loan from our shares in equity.

If the other party is having the technical knowhow and will also invest 74% (the major chunk) of the whole, why would they want to enter into a partnership with KIOCL?

First of all, KIOCL is a mining company and has pellet plant and we can supply pellets to the joint venture steel company at a negotiated special price. Also, KIOCL is Mini Ratna and EOU status. Through KIOCL, major equipments and other facilities can be procured for the JV with many benefits. Thirdly, KIOCL has a captive berth at its Mangalore plant, which can be utilized for exporting steel products.

Being a mining company, KIOCL can do the mining for the Joint Venture at cost. With all the facilities extended within the ambit of laws, it makes sensible synergy for investors to join hands with KIOCL at any share.

Are you looking for private partners or PSUs also in forging this joint venture?

KIOCL is open to anyone who has the knowledge in this field. Our only condition is that this plant should come up in Karnataka because our plant is here. So it will strengthen our case for getting a mine for our pellet plant that is established here. Since the ore too is in Karnataka, it makes no sense to spend on transport cost and have the steel plant located elsewhere in the country.

Coming back to your closed mines at Kudremukh, what is the employment situation necessitated by this closure?

We have two situations here: (1) the permanent mine closure at Kudremukh and the temporary stoppage of work at the Mangalore pellet plant. I would really put it on record the co-operation of the employees and the Union for holding hands with the management and taking us around the bend. If the same situation had arisen in other companies in other parts of the country, things would have gone out of control. I am grateful to the unions, employees and local leaders for staying with the management. I am proud to say that in the last quarter century we have not even lost a single man-day due to strikes or lockouts, and even in the more recent time inspite of the mines closure. From our part, the management too has not curtailed any of the employees’ benefits. Till 2008, our pellet plant was supporting all the establishments.

We have given our employees 3 options: (1) To remain with us and be prepared for a transfer when we move to a new mining area elsewhere, within or outside Karnataka, when we obtain the rights for mining there. (2) Take VRS with a handsome monetary package (3) Part ways with the company if we ourselves are left with no option but to close down.

I personally went to the mines at Kudremukh and explained all this to the employees, thanking them for having shown their solidarity with us. Around 40% of them opted for VRS. Around 100 employed are involved with maintaining our equipment, plant, Lakya Dam and other things, and in pumping the water down. 200 odd people are there and I will try to accommodate them at other mine sites because I have no intention of sending anyone home, unless they want to leave.

What about the support staff — the employees not directly involved in the mining activity?

Some of them have opted for VRS. We have retained some of them and if anyone is fit for getting re-training, we'll train them and employ them in appropriate departments. Should I open office in Orissa we would require several of these personnel like steno, telephone operator, office superintendent, et al. So they are welcome to come and join us at any of our sites.

You were trying to work out some proposals with OMDC (Orissa Mineral Development Corporation) and other plants. Have they been concretized?

Yes, we are trying to work out something with OMDC. They have three blast furnaces which are at present making a loss. They want to go in for expansion and value addition but are constrained by the lack of funds which is something that we have. So if we join hands, KIOCL will put in the funds, and they will pitch in their equipments and also make use of some small mines that they have. Apart from OMDC, Orissa Mining Corporation (OMC) also has a lot of mines. So if we go in for a tripartite agreement involving OMDC, OMC and KIOCL, we could put up a value addition plant, KIOCL being the financier and the mining expert for it. That would be a win-win situation for all three of us. We've had discussions and have set up a working group and are hopeful of a positive move.


What is the time frame you would put for the concretization of the proposal and construction of the plant to begin?

Probably another six months or so.

What about acquiring mining rights in other mines of Karnataka, like Ramanadurga and the one at Tumkur?

We are trying to get some lease. The State government wants us to put up a value addition plant in order to be allotted the mines. This is the reason we are going in for the steel plant. Once the steel plant comes up, we will be stronger. The State has already allotted us Chikanayakanahalli mines that has 10 million tons deposit and this will sustain us for three years. Overall signs are positive. It's merely a question of having some patience and wait for the clouds to pass.

How far is the move to promote eco-tourism venture at the Kudremukh township, on track?

Yes, this should take off once we have worked out certain costs since the project is likely to involve an expenditure of around Rs 300 — Rs 500 crores. We plan to enter this venture in partnership with M/s Jungle Lodges and Resorts ltd., to develop the concept in phases over a period of five to six years.