FY15 proves to be worst year for KIOCL

Capacity utilisation at its pellet plant in Mangaluru falls to 23%; seeks mining assets under amended MMDR Act, 2015

 

The public sector steel ministry undertaking KIOCL Limited, which operates an iron oxide pellet plant at Mangaluru in Karnataka, has seen capacity utilisation drop to 23 per cent in 2014-15, its lowest in recent years. As against the installed capacity of 3.5 million tonne per annum, KIOCL has produced 784,000 tonnes in the just-concluded financial year, about 54 per cent lower compared to 1.710 million tonnes in the previous year.

KIOCL has maintained a ‘Very Good’ rating from the ministry for the last four years. In FY15, its perform-ance hit a record low mai-nly due to lack of raw mate-rials and falling prices of iron ore and pellets in both the domestic and internatio-nal markets. Its capacity utilisation in the previous year was 49 per cent and 36 per cent in 2012-13.

“Ever since we stopped mining in 2006 following the Supreme Court direction, we have been sourcing iron ore from NMDC’s Bailadila and Bacheli mines in Chhattisgarh. The ore is tra-nsported to Mangaluru through rail and sea routes spanning over 2,300 kms and the logistics cost is very high compared to our sale price,” KIOCL Chairman and Managing Director Malay Chatterjee said.

The cost of pellet production works out to Rs 7,000 per tonne as against the sale price at Rs 5,000 per tonne in Eastern India. “We cannot continue to produce and sell below the market price. We have managed to run our pellet plant only for 93 days. Unless we are sure of low-cost raw material, it does not make sense to produce and sell pellets,” Chatterjee said.

In 2013-14, the plant ran for 190 days and in 2012-13, it worked for 144 days. Its sales fell 58 per cent to 679,000 tonnes as against 1.61 million tonnes in the previous year.

In addition to high logis-tics cost, the company is for-ced to pay a distance-based charge by Railways, leading to export unviability. It also has to pay a 5 per cent export duty on pellets.

In terms of financial performance, KIOCL has repor-ted a profit before tax of Rs 10 crore in 2014-15, a decline of 83.7 per cent over Rs 61.40 crore reported in the previous year. Its turnover declined 59 per cent to Rs 628.62 crore compared to Rs 1,532 crore in the previous year.

Having struggled for alm-ost a decade without its captive mines and failing to sec-ure mines in the state of Karnataka, KIOCL has now approached the government of Karnataka to reserve some mining area under the new MMDR Act, 2015.

“Under the Section 17 a 2 (A) of MMDR Amendment Act, there is a provision to reserve suitable areas bearing iron ore to public sector companies. We have requested the Karnataka chief minister to allot us mines under this Section. We have requested the ministry of steel to help us in this regard,” Chatterjee told Business Standard.

He said the company has identified four iron ore areas in Ballari district of Karnataka for reservation of mining lease in its favour. It has identified 840 hectares in Block No.13/1 of Ramanadurga iron ore deposit, 107 hectares in Kumaraswamy range, 475 hectares in Block No.17 of Karthikeshwar village and 305 hectares in part of Block 13/2 in Devadari Range.

“We have requested the ministry of mines to direct the Karnataka government to reserve and allot mining leases in these areas. We are hopeful of securing some mines under the new act which will help us to stay in the business,” Chatterjee added.