Kudremukh Iron Ore Company Limited

Kudremukh Iron Ore Company Limited case analysis

1. Kudremukh Iron Ore Company Limited

2. Question 1 What should the government/KIOCL do with the massive investments of Rs.3,000 crores that are fixed assets of the company(building ,offices, various other facilities etc)? Who is going to bear all of these losses? What would become of some of the investments recently made? How does one fix responsibility for these decisions that have been made in the past, especially since those who took these decisions of aggressive investment were government officers and have retired in the recent past ?

3. The losses should be shared by both the government and the KIOCL as permission was taken earlier from the Forest department for these investments The government should help KIOCL in locating to other place for the mines. It should also help KIOCL in getting necessary minerals from other mines, so that they can process and can fulfill their commitment The recent investments made by the company cannot be recovered. The option left is to import ore from outside, rather than mining, and transport it to its pallet plant to manufacture steel The upbeat market trend and high steel prices in the domestic as well as international markets was favorable

4. The relocation of the plant will cause all the highly qualified manpower to opt out of the job. There would be technical difficulties in obtaining the same quality of iron ore, transportation of iron -ore to the pellet plant The company knew that it had an initial mining lease of only 30 years and a temporary permit thereafter, so it should have taken decisions accordingly. Since the decisions of aggressive investment made by the retired government officials cannot be reverted, the company should have thought this earlier to have avoided the mistake The company in partnership with the government should take initiatives in the area to make for its losses

5. Question 2 The company has entered into long term contracts with international buyers for the supply of iron-ore concentrate and pellets. Not honoring these commitments would result in payment of heavy penalties. Further ,the production line of these customers would be affected owing to non-supply of pellets. Who is answerable to them?

6. The company was aware of the initial mining lease of 30 years, so should have made commitments accordingly KIOCL should have used the temporary permit period to fulfill the existing commitments rather than adding the new ones In the next 3 years span, KIOCL should try and complete all the existing commitments so that it does not affect the production line of the customers The government should make necessary arrangements to provide iron ore to the company so that it can manufacture pellets to fulfil their orders But in the long run, violating commitments would create a negative image of the company and affect its credibility

7. Question 3 Closure of the company would result in a loss of 12500 jobs and difficult times for the workers and their families. Who is to be held accountable for their job losses? What would befall the children who are at the various stages of their education ?

8. Since KIOCL is a PSU, the company should provide similar if not better opportunities to their employees as well as to their family The government should try its best to find the ideal location for mining and give incentives to the current employees to relocate The government should provide subsidies to KIOCL for establishing a new plant in an alternative location The government should make efforts in providing financial support to the new unit. One way to do this can be converting the land to an eco tourism spo t

9. Question 4 Since the mid sixties, successive Governments at the center have been pro-development, aggressively pursuing industrial growth. Ecology and environment are but recent concerns. Establishment of KIOCL ,predates this period. Why are we judging yesterday with today’s standard? Is environment such an overpowering issue that government can give a go-by to massive public investments and loose one of its star companies? If environment is so important, why should KIOCL alone pay such a heavy price for the protection of environment and not the private mines, some of which are causing massive devastation in various parts of the country?

10. Irrespective of the time the contention is brought forth, the damage to the environment should be mitigated in whatever way possible Government plays the role of a regulator and it needs to make sure that there is a balance created in the economic, social and ecological spheres It has capacity to bare economical loss in order to save the environment Since KIOCL is a public sector undertaking its ownership lies with the government. It lacks the financial and political backing which the private mines enjoy. Due to which KIOCL was singled out

11. Prepared by :- Tarini Soochna Shubham Abhishek Mudita Vishal Jaskirat