A Project On Analysing Lam Coke In Mmtc

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Brief of the project My project is about the industry analysis of LAM (Low Ash Metallurgical) COKE (under NINL section) and expanding the scope of business of LAM COKE for third party business i.e. non MMTC companies with particular emphasis on reducing the logistics cost and supply chain integration practices. The project deals with the business prospectus in the LAM COKE (that is Exported or Imported).Because India has a very less amount of resources of LAM COKE to fulfil its requirement that’s why it has to import. MMTC has its own subsidiary KMCL (Konark Met Coke Limited).KMCL produces LAM COKE for production of Steel. Its marketing part is handled by MMTC. The project deals with the following headings:• Procurement Countries- from where LAM coke is imported and which are the countries which manufacture LAM COKE. • Quantity Analysis-Total amount of LAM COKE imported in India and what is the quantity MMTC has imported. • Specification of LAM COKE- Chemical composition of the LAM COKE. • Pricing Policy – how the pricing policy is determined by the Government for LAM COKE. _______________________________________________________________________________ 1 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

• The Traders or Importers. • SWOT Analysis. The analysis has its own limitations; the figures might not be accurate. It does not incorporate the returns in the form of margin earned from customers. MMTC generally uses back to back L/C (Letter of Credit) for import of LAM coke, so that it does not have in problem of payment. The FOB and CIF constraint is also not taken, i.e. it’s the general rule, when a party imports, it imports in CIF basis, so in that case MMTC has no to play (including High Sea Sale).

Corporate Mission As the largest trading company of India and a major trading company of Asia, MMTC aims at improving its position further by achieving sustainable and viable growth rate through excellence in all its activities, generating optimum profits through total satisfaction of shareholders, customers, suppliers, _______________________________________________________________________________ 2 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

employees and society. Corporate Vision Responsibilities beyond trading contributing to the welfare of communities in which it operates in a natural element of MMTC activities. Corporate Objectives 1. To be a leading International Trading House in India operating in the competitive global trading environment, with focus on "bulk" as core competency and to improve returns on capital employed. 2. To retain the position of single largest trader in the country for product lines like minerals, metals and precious metals. 3. To promote development of trade-related infrastructure. 4. To provide support services to the medium and small scale sectors. 5. To render high quality of service to all categories of customers with professionalism and efficiency. 6. To streamline system within the company for settlement of commercial disputes. 7. To upgrade employee skills for achieving higher productivity.

Metal and Mineral Trading Corporation deals in the following products. _______________________________________________________________________________ 3 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Minerals: Among minerals MMTC deals in the following items such as iron ore, magnesium ore, chrome ore, mud, chemicals, bauxite, talc gypsum, silica sand etc. MMTC’S mineral sale share only on FOB sales only. MMTC continues to be the largest supplier of Iron Ore, handling about 15% of India’s total exports. It exports iron ore to Japan, China, South Korea, and Middle East etc

Precious metals MMTC is India’s premier bullion trader. MMTC precious metals division is on to a range of activities such as imports, exports, and domestic retail trade. It is an authorized agency of Government of India for import of gold, silver, platinum, palladium, rough diamond, emeralds, rubies and other precious stones and supplies these items to the jewellers in India for domestic sales and exports. It is one of the custodians of the Diamond Plaza Customs Clearance Center in Mumbai. The company also operates an in-house assaying and hallmarking unit at New Delhi for testing purity of gold. MMTC has received Bureau of Indian Standards (BIS) certification for its assaying and hallmarking unit at Jhandewala Bagh, New Delhi. MMTC also has a unit in New Delhi for manufacturing its own brand of gold and silver _______________________________________________________________________________ 4 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

medallions since the year 1996 MMTC is India's Single Largest Trader of metals. It's metals division imports and exports Non-Ferrous metals, Industrial raw materials, Steel items, Pig Iron, Non Ferrous metals scrap and Iron and Steel scrap etc. MMTC's share of import in India's import of refined base non-ferrous metals in terms of value is about 20%. MMTC import items such as Copper, Aluminium, Zinc, Lead, Tin, Nickel, Antimony, Silicon, Magnesium, Mercury, Industrial Raw Materials, Noble metals and Ferro alloys, Pig Iron, Slag, Steel scrap, HR Coils, CRGO and Steel item. FERTILIZERS MMTC Limited is one of the largest importers of Fertilizers in India. It imports finished fertilizers, fertilizer intermediaries and fertilizer raw materials. AGRO PRODUCTS MMTC Limited is a global player in the Agro trade, with its comprehensive infrastructural expertise to handle agro products. MMTC Limited provides full logistic support from procurement, quality control to guaranteed timely deliveries of agro products from different parts of India through a wide network of regional and port offices in India and its contacts abroad. It trades in the items such as wheat, rice, maize, soya bean, sugar, edible oil and pulses

MMTC _______________________________________________________________________________ 5 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

COAL AND HYDROCARBON PRODUCTS Coal and Hydrocarbon is identified as one of the core areas of business for MMTC and Steam coal is identified as a thrust product for import. Coal and Hydrocarbon is identified as one of the core areas of business for MMTC and Steam coal is identified as a thrust product for import. BUSINESS REVIEW FOR 2006-07 MINERALS Despite the pressure of availability of ores for export, and constraint of infrastructure and logistics, MMTC maintained its leadership position in export of minerals through aggressive marketing efforts, enhanced customer focus tapping of emerging opportunities, especially in China. During the year 2006-07, South Korea, China and Japan were the key markets where MMTC exported minerals. Minerals group of the company contributed a turnover of Rs.27661.1 million during the year reaching the highest ever registered by the company in this segment. The said performance of the minerals group of the year 2006-07 includes exports of Rs.27384.91 million and domestic trade of Rs.276.19 million. In quantitative terms, the exports made by the group include 81.29 lakh tones of Iron Ore valued at Rs. 19012.19 million,1.72 lakh MT. of Manganese Ore valued at Rs. 408.81 million, 6.48 MT. of Chrome _______________________________________________________________________________ 6 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

concentrates valued at Rs. 5050.81 million and 4.03 lakh MT. of Chrome Ore valued at Rs. 2913.10 million.

MMTC Metals and Industrial Raw Material With robust growth witnessed in industrial & infrastructure sector leading to increased surge in demand for base metals and industrial raw material during the year 2006-07, the metals group of the company contributed Rs.18873.60 million to MMTC’s turnover during 2006-07 posting a noteworthy growth of about 22% over the previous fiscal. The contribution of the group comprised of export of Pig Iron and Slag produced by NINL-a MMTC promoted Iron & Steel plant worth Rs.5446.84 millions, import of Non-Ferrous Metals and Industrial Raw Materials worth Rs.8479.23 million and domestic trade of Rs.4973.53 millions including sales of Pig Iron produced at NINL worth Rs. 2779.86 millions. With projections of Industrial and infrastructure sector to continue being on upward trend, the prospects of MMTC,s growth seems to be optimistic. To avail of the emerging opportunities, the group has been realigning its strategies/ business model for further consolidation and tapping of new products/markets, focussing on its core products/markets, entering into its strategic alliances with producers of NFM besides improving further on customer relationship management , unrelenting focus on Institutional clientele and deeper market access.

MTC _______________________________________________________________________________ 7 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

The highlights of the performance during 2006-07 as summarized below.

_______________________________________________________________________________ 8 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

2006 – 2007 2005 – 2006

(Rs. In millions)

Exports 34131 29254 Imports 186074 117858 Other trade earnings 445 16512

Net sales / Trading earnings 233461 163934 Trading Profit 2497 2218 _______________________________________________________________________________ Profit Before Taxes 9 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

NEELACHAL ISPAT NIGAM LIMITED (NINL) Neelanchal Ispat Nigam Limited (NINL),a company promoted by MMTC Limited ,a US$1.5 Billion Golden Super Star Trading House of India, Industrial Promotion and investment Corporation of Orissa Limited (IPICOL) and MECON Limited is setting up an Iron and Steel Plant, with manufacturing capacity of 4,92,000 tonnes of Pig Iron, 2,76,000 tonnes of Billets and 3,00,000 tonnes of Wire Rods at Kalinga Nagar Industrial Complex ,village Duburi ,District Jajpur, Orissa. To meet the Coke and Power requirements of Neelanchal Ispat Nigam Limited, MMTC has promoted another Joint Venture Company namely Konark Met Coke Limited in collaboration with IPICOL and Orissa Mining Corporation (OMC), to produce 5,75,000 tonnes of Coke for Neelanchal Ispat Nigam Limited and 2,36,000 tonnes of Coke for sale in domestic and overseas markets. The capacity of Power Plant is 62.50 MW. Over the years MMTC has become the acknowledged market leader in facilitating export of Indian Iron Ore. Today, MMTC Limited is India’s largest exporter of minerals and ores, handling about one third of India’s total exports of around 15 million tonnes per annum. Neelanchal Ispat Nigam Limited (NINL) & Konark Met Coke Limited (KMCL) form part of MMTC’s strategic initiative of creating synergy between its minerals and metal trading activities. _______________________________________________________________________________ 10 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Neelanchal Ispat Nigam Limited represents a major investment by MMTC to develop captive supply sources of minerals and metal for enhancing exports and increasing domestic trading activities and at the same time realising greater value addition for Orissa’s vast mineral wealth. Besides, MMTC will, as the exclusive marketing agent, use its strength and presence in global markets to market all of NINL’s products in India and abroad. MMTC’s contribution as the main promoter starts with procurement of raw materials like iron ore and coal, to closely monitor the eventual manufacture and supply of finished products that meet the diverse requirements of end users for quality products . It will be our endeavor to work in tandem with consumer industries to provide them with a market savvy, innovative and flexible product mix and be in virtual control of the entire value addition chain.

KONARK MET COKE LIMITED (KMCL) Konark Met Coke Limited (KMCL) is setting up coke Oven Battery, By-Product Plant and Captive Power plant adjacent to NINL. Low Ash Metallurgical (LAM) Coke produced by KMCL will be sold to NINL for production of Iron & Steel and surplus Coke will be sold in domestic and overseas markets.

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Industry overview Global demand for LAM coke grew at an average annual rate of 6.4%, during 2000-06, as against global supply at a rate of 6% (avg. annual industry capacity utilisation being 85%) during the same period. 91% of the global demand was from markets situated in Asia, Europe and CIS during the said period. China is the World’s largest producer of LAM coke, but with rising domestic demand from steel industries, it has largely cut down its exports thereby resulting in acute shortage of coke availability. On the other hand, India features as the net importer of Met coke due to increasing economic activity and substantial thrust on infrastructure spending. Majority of Indian steel industries do not possess captive coke manufacturing facility and thus rely on imported coke to meet their requirement. World over, the demand supply gap is significantly growing, attracting more players to enter this segment to reap the benefits. However, players owning large technically-compliant manufacturing capacities, possessing strong linkages for raw material sourcing and adopting prudent financial policies can alone withstand the competition and grow consistently in the coke manufacturing segment. Power:- As per the Ministry of Power (MoP), GOI, the total installed capacity of electric power generating _______________________________________________________________________________ 12 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

stations was 1,35, 006.63 MW as on Jul. 31, 2007 in India. This total capacity consisted of 33775.76 MW (24.8%) hydro power based capacity, 86,935.84 MW (64.5%) thermal power-based capacity, 4120 MW (3.1%) nuclear power based capacity and 10175.03 MW (7.6%) from other sources (including wind). India is an energy deficit country. During July 2007, India December 2007 faced an energy shortage of approximately 7.9% of total energy requirements and 13.4% of peak demand requirements. The peak demand during 2006-07 was around 272 MW which is expected to be 320 MW in FY08, as per industry sources.

Prospects Future growth prospects of the company mainly depend on the successful completion of the IPO. The widening gap in demand supply of coke coupled with few players in this segment is likely to provide huge opportunities to the company. Additionally, backward integration in the form of coal mine acquisitions through group support is likely to extend synergy to its operations. **The coal and hydrocarbons business of MMTC mainly comprises Lam coke, coking coal and steam coal. MMTC is one of the largest importers of LAM COKE in India. LAM COKE is imported by MMTC for various customers like NINL, SAIL, RINL, KIOCL, and IDCOL and also for some private companies. _______________________________________________________________________________ 13 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

LAM COKE Low Coke

Ash Metallurgical (Met Coke)

Hard Coke is actually end product, commonly known as Low Ash Metallurgical Coke. It finds useful applications in steel plants, foundaries, blast furnaces, soda Ash manufacturing, Hindustan Zinc Ltd., Graphite industry & other chemicals. The raw material for making hard coke is Low Ash Coking Coal sourced mainly from _______________________________________________________________________________ 14 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Australian, Chinese USA coal mines.

and

PRODUCT SPECIFICATION (NINL) Product Specification - LAM coke

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

MC max)

(%

Ash max)

(%

VM max)

(%

S (% max) M-40 min)

(%

M-10 max)

(%

CRI min)

(%

CSR min)

(%

1 12.5 1 0.55 _______________________________________________________________________________ 82 16 1

MMTC 4, India Exchange Place, Kolkata-

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

PRICING POLICY While price (per unit) of ‘primary commodities’ such as, agricultural products and minerals is observed to be determined by the market forces of demand and supply, the price of ‘manufactures’ is determined /administered by firms based on teh average /marginal cost to accommodate profits. The margin of ‘mark-up’ in turn, depends on the degree of monopoly is thus able to charge a higher margin of mark-up compared to a competitive firm. If a public sector has a monopoly in supply ,it may fix its price at the level that will maximize the mark –up as well as the gross profits .that may not ,however ,happen since the government may intervene to moderate the price in the interest of consumers or the user industries .In general ,the governments fix/administer the price in the interest the price of goods (and services) being produced by public sector entities based on (a) The true costs of goods and services, (b) Cross subsidization between one group and another or between one sector and another, (c) Below the costs if that can stimulate demand under conditions of excess/ unutilized capacity, (d) Differential prices norm for peak and off-peak demand and (e) Different prices /multi-tariffs to include discounts for purchase of larger volumes or for various other incentives. _______________________________________________________________________________ 17 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

The public sector enterprises in India have had to work under the price regime, for goods and services produced by them, administered by the Government. Paradoxically, while these central public sector enterprises had to avail the government approval for fixing their prices, they have been price takers for the inputs they utilised for their respective outputs. As such, if the output prices were not raised and the inputs cost went up, this led to losses to these enterprises. Better capacity utilisation meant larger losses to the enterprises. This situation was reviewed in the wake of post- 1991 economic liberalisation. With the dismantling of administered price mechanism there after the price of products and services of these central public sector enterprises are now determined on economic grounds and by the market forces. The paragraph will briefly discuss the policies of LAM COKE by the public sector enterprises. The central Government was empowered under the CCO (colliery control order), 1945 read with the Essential Commodities Act, 1955 to fix the grade wise and colliery wise prices of coal. The pricing of coal has been completely deregulated after the Colliery Control Order, 2001 notified w.e.f 1st January 2000 rescinding the Colliery Control Order, 1945. Under the Colliery Control Order, 2000, the Central Government has no power to fix the prices of coal and coal companies themselves are competent to fix grade–wise prices of coal produce by them based on economic grounds. The extant pricing policy in regard to coal supply to power and other sectors is under _______________________________________________________________________________ 18 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

examination of the Government. In respect to coking coal and LAM COKE imported from abroad, Importers are free to determine their selling prices in the domestic market without any restrictions.

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Coal Reserves - All Grades of Coal.

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Coal reserves-Low grade coal.

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

• The 20 largest countries measure by size of coal reserve. Coal Production and Consumption

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Coal Production per region over time: Asia Pacific has experienced a big increase in coal production over the last four years as the regions GDP has grown strongly - with economic expansion in China.

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Coal Consumption per country - China's consumption has fluctuated with it's GDP growth and dominates the global consumption profile. The USA's coal consumption has also expanded. Russia and Germany consumption has decline as deep coal mines have closed and been replace by natural gas for power generation (Germany's gas production has declined leaving it increasingly reliant on imported gas from Russia and Holland). Not surprisingly, coal production mirrors consumption quite closely because of high transport cost - the only significant exception is Australia, which has huge open cast coal mines in eastern Australia close the coast, which can be shipped efficiently to global markets. At one time in the 1980s, the UK imported significant quantities of Australian coal even though the UK has coal mines, because it was cheaper to import this open cast coal from the other side of the globe. _______________________________________________________________________________ 24 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

COAL INDUSTRY OF INDIA Coal mining in India dates back to the 18th century, however the regulatory framework for this industry was conceived in 1923. In 1972-73, the Indian government nationalised the coal industry, primarily to develop the sector, since it was considered of strategic importance for rapid industrial development. Coal India Ltd (CIL) was incorporated as a holding company for seven coal producing subsidiaries and a planning and design focussed institute. It is engaged in mining from a total of 495 working coal mines which account for nearly 88 percent of total production. Coal Industry highlights: • •

•

•

•

India is the third largest producer of coal in the world. Coal is one of the primary sources of energy, accounting for about 67% of the total energy consumption in the country. India has the fourth largest reserves of coal in the world (approx. 197 billion tonnes.). Coal deposits in India occur mostly in thick seams and at shallow depths. Non coking coal reserves aggregate 172.1 billion tonnes (85 per cent) while coking coal reserves are 29.8 billion tonnes (the remaining 15 per cent). Indian coal has high ash content (15-45%) and low calorific value.

_______________________________________________________________________________ 26 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM •

•

•

•

With the present rate of around 0.8 million tons average daily coal extraction in the country, the reserves are likely to last over 100 years. The energy derived from coal in India is about twice that of energy derived from oil, as against the world, where energy derived from coal is about 30% lower than energy derived from oil. As of 2003, India has 19 coal washeries (total capacity:27.2 million tonnes per annum) of which 15 are owned by CIL. The use of beneficiated coal has gained acceptance in steel plants and power plants located at a distance from the pithead. Energy and Environment 27 November 2006, Forbes magazine China Recoverable 126,214.7 million Coal Reserves short tons Coal 2,156.4 million Production short tons Coal 2,062.4 million Consumption short tons

India 101,903.2 million short tons 403.1 million short tons 430.6 million short tons

Production India has huge untapped potential for underground mining with extractable reserves upto a depth of 600 metres. Currently mining is done predominantly by open cast methods to exploit the 64 billion tonnes of proven reserves situated within a depth of 300 metres. Lower operating and production _______________________________________________________________________________ 27 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

costs, greater percentage recovery and a higher output per manshift compared with underground mining are some of the advantages presently associated with open cast mining in India.

External trade Presently, India is not a major exporter of coal and essentially caters to the demands of neighbouring countries like Bangladesh, Nepal and Bhutan. However, there are no restrictions on coal exports under the existing Export-Import Policy of India. India imports small quantities of low ash-content coal principally for use by steel plants, which blend it with Indian coal. Import duties are low and are expected to be lowered further.

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Challenges in the Coal industry Focus points • Producer rationalisation - impact on the workforce and on global market structure • Sustainable development - measuring and improving social impacts • Climate change - dimensions of the employment challenge

Producer rationalisation Rationalisation trend facilitated by buyers overplaying their hand •

• Cost in jobs: 30% cut from 26,200 in 1996 to 18,850 in 2000 • Some rebound to 21,100 at end 2002 • Pricing and margins are now more rational, but achieved the hardest way Takeover and mergers have occurred right across the mining industry globally; it is conventional wisdom that this is a _______________________________________________________________________________ 29 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

response to tight margins and intense competition in commodity markets. In the case of coal, there was a long standing practice of buyers’ cartels which had historically kept prices at a level which would keep marginal produces hanging on. They also engaged in collusive subsidised investment practices to induce new market entrants. All with the aim of ensuring diversity of supply and that long run prices would be below where they would be if normal supply and demand had operated. Producer rationalisation now means that the big players make rational market decisions. They have low debt levels and will only produce and sell coal where they make a reasonable margin. It was the union view that rational market pricing could have been achieved by cooperation amongst the sellers to combat the collusive buying practices

The Sustainable Development challenge Mining not sustainable by definition, but can contribute positively to sustainable development •

• Mining must result in a net improvement in capital - can be a mix of social, economic, environmental _______________________________________________________________________________ 30 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

• Fossil fuels have more of a problem than other minerals but note the campaign against gold I now turn to the challenge of sustainable development. The extraction and use of a non-renewable resource is by definition unsustainable in the long term. (In the case of coal, the very long term as known reserves will last hundreds of years.) But the mining industry has to learn to live with the fact that it can never present itself as a “sustainable industry”. Nevertheless, it can find a role as a positive contributor towards sustainable development. Mining can produce and support goods and services that contribute to a society’s progress towards sustainability. At the abstract level the key concept here is that a mine must not just result in net profits for the company, but must produce an overall net improvement in capital. That capital can be in a variety of forms conventional economic, social and environmental. A mine that produces net profits for shareholders at the cost of great environmental harm clearly does not result in a net improvement in capital. Coal and fosssil fuels that are “used up” rather than being transformed into another product clearly face a greater challenge than other minerals, but the principle is the same. It is worth noting here that green groups involved in mining campaigns currently seem to hate gold more than coal. Their early success can be measured in moves by some US states to ban acid leaching in gold mining. And the green groups argue that all the gold the world will ever need has already been produced and just needs to be released from bank vaults.

MMSD/GMI/ICMM _______________________________________________________________________________ 31 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

• Mining Minerals and Sustainable Development process - a 2 year consultation and research exercise funded by major mining companies through the Global Mining Initiative • New peak body - International Council on Mining & Metals • Social impacts of mining the key challenge; not the environment Now for some newish acronyms which, if you don’t know them, just show you haven’t been watching the sustainable development debate in the mining industry. The Mining, Minerals and Sustainable Development process concluded in May 2002 with a conference in Toronto, Canada. Roughly half the attendees were CEOs and top management of mining companies and the other half were “stakeholders”: indigenous people, NGOs and unions. It was a 2 year consultation and research project funded by around 17 major mining companies on a joint basis - because they recognised that their individual efforts were not reducing the threats to their industry and to individual projects. There were some amazing statements made by CEOs there. For example that the current industry could not possibly fund the cost of fixing the thousands of unrehabilitated minesites around the world. Pretty amazing for an industry as a whole to say it can’t cover its known liabilities. _______________________________________________________________________________ 32 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Rio Tinto chief Robert Wilson also said that mineral prices would have to rise if the mining industry was to meet community expectations of it. This was an acceptance that current competitive prices do not adequately reflect all the social and environmental costs of production. One immediate result of the project has been the ICMM - the International Council on Mining and Metals - a new global peak body for mining and minerals processors. It has an explicit focus on sustainable development. Social impacts • Crisis of legitimacy caused by declining employment and reduced social spin-offs • Problem compounded by poor industry progress on recognition of human rights • Banks and SRI investors shying away from mining because of social and environmental risk • The industry is fighting a desperate rearguard action In Australia and across the world, the mining industry seems to face mounting problems in its interactions with indigenous people, with mining communities and with its workforce. But in the developing world it is fairly clear that the major mining companies face escalating problems. With mining communities it’s a simple problem of the benefits drying up as the jobs have gone. The big companies have minimised their spin-off benefits and local communities _______________________________________________________________________________ 33 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

have been punished. As a result their willingness to tolerate the noise, dust, coal trains, coal trucks and the general problem of very large holes in the ground has diminished. When the coal industry invests something like $2 million to $3 million per permanent job created it looks like poor value for money to a mining community. Workforce issues in SD • Engagement as stakeholders • Recognition of core human rights in the workplace (8 ILO minimum standards) – Esp. (in Australia) freedom of association and right to collectively bargain • Working hours and practices that enable family, community and cultural life So what does this mean with respect to mineworkers? It means recognising that they are stakeholders with their own separate interests. That they are not just a factor of production that can be fully aligned with the interests of the company. It means an end to the current widespread practice of management speaking on behalf of their workers and investment analysts accepting that. It reminds me of nothing so much as white slave owners from the American deep south speaking on behalf of their slaves. _______________________________________________________________________________ 34 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

I speak here of the core labour rights standards of the International Labour Organisation which have been endorsed by most nations as fundamental to respect and dignity at work. The right to join a union, the right to collectively bargain, freedom from child and forced labour, equal pay for equal work, and non-discrimination in the workplace. Not big things surely, but there is widespread non-observance of them in the mining industry. It’s not so bad in the coal sector, but in metal mining it is a real problem. It is already the case in Europe that most major wood products retailers will only purchase wood that has been produced under observance of core labour standards. Unsustainable hours

% of employees working more than 49 hours p.w. _______________________________________________________________________________ 35 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

This chart shows how much workers in the mining industry are suffering under long working hours. Almost 44% of mine workers work more than 49 hours per week - a higher proportion than any other industry. And this chart understates the problem. In metal mining, which is poorly unionised, something like 85% of all workers work 12 hour shifts, and a high proportion of them work such shifts for 7 or 14 days in a row. A common roster in the mining industry is now 14 days of 12 hour shifts followed by a week of rest. That works out at an average of 56 hours per week over the year. These hours are unsustainable in the long term. What happens right now is that in mining sectors where the hours are longest there is high turnover. In gold mining where the average hours are about the highest, labour turnover can reach 50% per year. What this means is that young people are leaving the industry before the fatigue levels kill them. The mining industry is relying on an endless stream on young people to “use up” and throw away. That they can currently find these people doesn’t justify the practice. To my mind this is “mining” the workforce. It is unsustainable use of labour. Climate change • Not a problem controllable at the site or company or even industry level • The coal industry needs to accept the scientific consensus _______________________________________________________________________________ 36 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

• Goal must be to avoid arbitrary, non proportional targeting of coal, and to support the most efficient methods for GHG Reduction The issue of climate change is part of the sustainable development challenge but it is by far the most difficult for coal. Mining companies might well lift their game on social impacts of mining, and they already do reasonably well on environmental management of mine sites, but with climate change the problem is in the impacts of final use of the product. Not directly a mine site or mining company controllable issue. It is even difficult for the industry to address, as the impacts arise at the point of use - principally in power generation. We have to accept the scientific consensus that climate change is a real threat, despite the presence of contradictory evidence and despite the fact that the scientific community has a bit of a vested interest in climate change research.

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Employment Projection, Coal industry, High Productivity

The prospects for coal mining jobs are pretty grim anyway. If everyone in the mining industry gets pushed onto 12 hour shifts for 7 days at a time like some companies want then another 30% of jobs will go.

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

CONCLUSION India's coal demand is expected to increase manifold within the next 5 to 10 years due to the completion of on-going coal based power projects, and demand from metallurgical and other industries. Demand for coal has been rising at an annual rate of 6 per cent since 1992-93 and CIL and its subsidiaries will be unable to meet the projected demand alone. The investment needed to bridge the gap----400 million tonnes, between the level of production in the public sector (290 million tonnes in 1995-96) and the projected demand of 690 million tonnes (2009-10)----is estimated to be US$ 18 billion. The public sector corporations----are expected to increase their production by about 250 million tonnes by 2009-10, subject to their making an additional investment of US$ 8-10 billion. The balance requirement of 150 million tonnes will have to be met by imports in the short run and by new investments in the long run. With the advent of the economic reforms, government controls regarding pricing and distribution have been relaxed and a new coal policy permitting private sector participation in commercial coal mining has been announced. The National Steel Policy projected that production in India will increase from 38 million tons in 2004-05 to 100 million tons by 2019-2020, marking a compound annual growth rate (CAGR) of 7.3 percent per annum. Even while this policy was being prepared, experts felt that it was a conservative estimate _______________________________________________________________________________ 52 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

and within a year or two, this projected growth rate had almost lost relevance. Today, everyone is dreaming that India will produce 200 million tons by 2020, provided the country successfully tackle all the problems. The eastern India states of Jharkhand, Orissa, Chhattisgarh and West Bengal, where the iron mines are located, have got the biggest amount of investment. On the western front, states like Gujrat and Karnataka also have some big ticket investments and in the south, there are Tamil Nadu and Andhra Pradesh. In both the southern states, the existing players, SISCOL (JSW) and Vizag Steel (RINL) respectively are increasing capacities. Jharkhand and Orissa have attracted the biggest investments and the best companies too. They have multinationals like Arcelor Mittal, Posco and Sinosteel, and domestic giants like Steel Authority of India Ltd. (SAIL), Tata Steel, Essar and JSW. Big names are queeing up at Chhattisgarh too. SAIL, RINL and NMDC have joined hands for green field projects. MMTC West Bengal may not have any iron ore, but being located next to the iron ore belt, has attracted good investment. JSW and Bhushan are setting up plants. SAIL is rebuilding the IISCO, the country’s oldest plant, into modern integrated unit. Massive investments are already being announced. This apart, Corporate groups have already expressed their interest in entering the steel industry. White goods major, _______________________________________________________________________________ 53 MMTC 4, India Exchange Place, Kolkata1

Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

Videocon, belonging to Venugopal Dhoot, has signed a MOU with the West Bengal government for setting up a 3-million ton plant steel and India’s non-ferrous giant, Sterlite, after the successful acquisition of Sesa Goa Ltd., now wants to set up a 5-million ton unit in Orissa’s Keonjhar district. Meanwhile, as investors were drawing up their plans and hunting for sites, an unwanted competition grew between the states. It is not new but this one grew ugly. States having mineral resources were against giving it to units located outside their boundaries. The myopic leadership of these states is busy creating hurdles to stop the outflow of resources but hardly concentrated on creating a world class infrastructure which would make them the natural choice of the entrepreneur. Maybe it is high time that these states realise that cooperation, rather than unhealthy competition, is the need of the day. MMTC If these steel industries established then there would be much more requirement of Lam coke .On the whole, the scenario of LAM Coke is buoyant and booming. More adjectives could have been added to this picture, if the other side of the coin was not looked into. M

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

BIBLIOGRAPHY

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Vi jay Ku mar Ch att erj ee PG DM-I B, II TTM

THANK YOU

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