DIRECTORS’ REPORT

To the Members,

The Board of Directors have pleasure in presenting the 38th Annual Report of the Company for the year ended March 31, 2014 alongwith the Audited Statement of Accounts, Statutory Auditor’s Report and Review of Accounts by the Comptroller and Auditor General of India.

Financial Results:                                                                                                                                                            (Rs. in crores)

The Register of Members and Share Transfer Books will remain closed from September 02, 2014 to September 06, 2014 (both days inclusive) for the purpose of the dividend and Annual General Meeting.  

Physical Performance :

Non availability of captive IIron Ore mines and banning of mining operations in the State of Karnataka has forced the Company to source Iron Ore from NMDC Bailadila, Bacheli mines in Chattisgarh. As a result, the Company has incurred huge logistics cost. Further, levy of distance based charge by Railways has made the export unviable thus depriving it from exporting pellets.

The Company is continuing its efforts to regain its lost export market and further expand its market base. In FY 2014, 42 shipments of Pellets with around 1.420 Million tonnes were sold through New Mangalore Port as compared to 24 shipments in FY 2013. The balance 0.195 million tonnes of Pellets were sold through Road.

(ii) Pig Iron and Auxiliary

The operation at the Blast Furnace Unit continues to remain under suspension since 05.08.2009. As a way forward the Company is intending to lease out the unit to the interested party. In this aspect a global tender has been floated.

The details of last five years including current year production target as against actual achievement and sales performance depicted at Table 1 & Table 2.

Table : 1 (Production)

 PP: Pellet Plant,               PI: Pig Iron                                   (Qty. In million tonnes)

(Installed capacity of Pellet Plant is 3.500 million tonnes / annum and Pig Iron is 0.216 million tonnes / annum).

Table : 2 (Sales)

                                          Qty: in Million Tonnes,   Value:

 (Note: Pig Iron includes Auxiliary)

Market Scenario:

During 2013, Global Steel Industry maintained its upward trend with an annual increase of 3.01% to 1,606 million tonnes as compared to 1,559 million tonnes produced in 2012. The growth came mainly from Asia and Middle East while production in all other regions decreased in 2013 compared to 2012. China remained the leading producer in crude Steel by producing 779.0 million tonnes during the year 2013 with an increase of 7.5% compared to 2012, contributing 48.5% of global output.

India, with a production of 81.2 million tonnes retained its position as the fourth largest producer. Japan (110.6 million tonnes) and USA (86.9 million tonnes) also retained their positions as second and third largest steel producers.

The Indian Steel sector had a difficult year as low economic growth and poor performance of automotive and infrastructure sectors kept the Steel demand stagnated. The apparent steel use grew by just 1.7% from 72.4 Kg to 73.7 Kg. This is still very low compared to Chinese per capita use of 700.2 Kg.

The global Steel scenario is expected to improve in 2014. Demand growth is anticipated to grow by 3.3%. The developed economies are expected to render positive growth and Steel demand is likely to pick up as automotive and construction sector are showing signs of growth.

[Source: World Steel Association]

Pellet Industry scenario :

The Pellet prices in China market are anticipated to remain under continuous pressure. However, stricter pollution norms being put in place by the Chinese Government is expected to reduce usage of sinter and increase usage of pellets. Hence some improvement in pellet premium over Iron Ore fines is expected during 2014.

It is reported that the installed pellet production capacity in India is expected to cross 90 million tonnes by the end of current financial year. This will further aggravate the pellet market within the country which is reeling under severe pressure due to surplus supply situation of pellets & putting pressure on Pellet prices.

During the year under review, impediments faced by miners in Karnataka, restrictions on mining in Goa and Odisha resulted in reduction of Iron ore availability and sent confusing signals to the market leading to temporary hike in Pellet prices. However this hike has been nullified by import of high quality pellets at highly competitive prices. With Government imposing 5% export duty on Pellets during January 2014, the oversupply situation in domestic market has worsened and pellet prices are on a downtrend.

However, Steel Plants are likely to increase usage of pellets in their production process to reduce pollution and increase productivity. Moreover, there is expectation that, infrastructure, real estate and automobile sectors would improve their performance during FY 2014-15 thus generating better demand for Steel, thereby improving the demand and prices of Pellets in the year FY 2014 -15.

Status on Distance Based Charges (DBC)

SWR & ECoR have levied Distance Based Charge on KIOCL through Rates circular 36 of 2009 dated 01.06.2009 on Iron Ore transported by rakes for manufacture of Pellets and its subsequent exports. However, the same is not applicable for  transporting of Iron Ore for manufacture of Steel and its subsequent Exports.

Aggrieved by this, your Company filed writ petition before the Hon’ble High Court of Karnataka and Odisha, challenging the imposition of DBC by Railways. Both the Courts heard the matter and granted stay the operation of Para 5 of the Rates Circular No.36/2009 subject to condition that 50% of the demand excluding penalty is to be deposited with Railways. Your Company complied with the directive of Hon’ble Courts.

Rating of KIOCL VIS-A-VIS MoU Targets

The Company has been signing the Memorandum of Understanding (MoU) every year with its Administrative Ministry i.e., Ministry of Steel, Govt. of India. MoU for FY 2014-15 was signed on 25.03.2014, with a production target of 2.25 million tonnes of Pellets for achieving “Excellent” rating along with thrust on holistic growth encompassing customer satisfaction, HRD, R&D, Corporate Social Responsibility and Sustainability.

Performance of KIOCL for the year 2012-13 has been rated as ‘Very Good’ with MoU Composite score of 1.75 which is highest after closure of captive mine from 01-01-2006. The MoU evaluation for 2013-14 is under finalisation.

Formulation of Corporate Plan (Vision 2022)

Corporate Plan is an outcome of strategy formulations process involving analysing the organisation’s external and internal environment and arriving at strategies to achieve the goals and objectives in tune with the mission & vision of the Company. The plan expresses strategies, milestones and desired outcome for the Company. The Company had a well laid down Corporate Plan until the mine was in operation.

Subsequently, the activities have undergone a sea change due to which the Company could not project its future plan through a formal process. Now, since many of the initiatives taken in the past are falling into shape, it has been decided to formulate a Corporate Plan through a Vision 2022 document aligning its term in a year with Govt. of India’s 13th Five year Plan. The document is under formulation in consultation with a reputed consulting firm and is likely to be finalised by mid of 2014-15.

Study and evaluate viability and sustainability

Survival & sustainable growth is the biggest challenge for any corporate sector in this competitive world. The corporate sector is required to take effective measures so as to de-risk the challenges. In case the Company is not able to cope up with the changing times, it will automatically perish. The Company being a part of system is no exception to it and has been gliding through difficult time ever since the closure of captive mine. The Company has been making earnest efforts for acquiring an alternate mine to provide itself a new lease of life. The situation has aggravated further with the changing Govt. policies and imposition of new & varied types of duties and taxes, which make the products uncompetitive and thus losing foothold in the course of time. This has been realised by the Board as well as the Ministry of Steel. To address this issue, a mandate has been given to a reputed international consulting firm to conduct a comprehensive study and evaluate viability and sustainability of the Company. The agency is required to take the current situation covering the economic condition etc. and would also hold dialogue with its key stakeholders. The study is under progress. Once the report is submitted, the Company will analyse the same holistically and would take appropriate steps, for its long term sustenance and creation of value to stakeholders.

Disposal of Plant & Machinery at Kudremukh

During the previous year, the Company initiated the process for disposal of Kudremukh Mining & Beneficiation equipment “as a package and as is where no complaint basis” after being accorded the necessary approval. The site has been handed over for dismantling & removal. As per contract, the agency is required to remove the sold equipments and vacate Kudremukh area within a period of two years from the date of handing over by end March 2016.

Taking over Possession of Mines at Kudremukh 

The mining operation at Kudremukh was stopped as per the directions of Hon’ble Supreme Court vide its verdict dated 30.10.2002. Further, the Hon’ble Supreme Court vide its judgment dated 15.12.2006 directed that, the Ministry of Mines, Government of India, shall designate an officer to take over possession of the mines.  In compliance to the same, Ministry of Mines, Govt. of India vide letter dated 07.02.2014 nominated Regional Controller of Mines (RCOM) IBM, Bangalore as the designated officer to take possession of Kudremukh mines. Consequent to this, a meeting was organized by RCOM for finalizing the formalities of taking over possession of Mines followed by mines visit. The handing over of possession of Kudremukh Iron Ore mine formalities was completed on 03.04.2014.

Modernisation & Expansion Programme

Technological up-gradation and addition/modification/replacement of its capital assets are essential to maintain market competitiveness and meet the challenging need of customers. The market is becoming increasingly competitive, making it imperative for the Company to make determined efforts to bring about substantial improvements in production, techno-economic parameters and profitability. In this direction, the following initiatives have been taken:

Improving availability of grinding system by installing alternative system to primary screens

The availability of grinding system was often affected due to breakdown of primary screens, as there was no alternative system to the primary screens. In addition, the size fractions of the incoming Ore fines vary to a larger extent. The -0.5 mm fraction Iron Ore fines received from Donimalai area varies between 10-20%, whereas the same fraction in the Iron Ore fines received from Kirandul area and from M/s SAIL varies to 30-40%, which requires more screen area for efficient screening. If all the 40% of -0.5 mm fraction is taken directly to the filtration system without further grinding, the filtration and Pelletizing process gets affected by very low Blaine number.

Therefore, it was decided to have an alternate screening system in addition to the primary screens. After studying various possibilities, a new conveyor from the tail end of the weigh feeder has been erected to receive the material from tail end by operating the weigh feeder in reverse direction. The expenditure incurred for this study and required modification of the system was Rs. 12 lakhs. With the introduction of alternative system to primary screens, the option of wet screening for softer Ore continues to exist, the down time of the ball mill is minimized and there is a considerable cost saving due to the reduction in power consumption as the primary screen will not run during dry screening. The system is under operation.

Study on reducing the diameter of the rollers of DDRS to achieve better screening efficiency of green balls and in turn improve the Physical properties of Pellets in terms of size and good finishing.

DDRS equipment is installed at the feed end of the Indurating furnace in the Pellet making process, to screen the oversize (+16 mm) and under size (-9 mm) green balls and to feed only the green balls in the range of 9 mm to 16 mm dia to the Indurating furnace. It is observed that during the actual process of screening, some amount of undersize Pellets gets into the furnace and some quantity of correct size gets into recirculation system due to inadequate green ball screening. At present the Company is using 108 mm dia rollers in the top and bottom decks with 16mm opening in the top deck and 9 mm opening in the bottom deck.

It is envisaged that by decreasing the diameter of the roller, there will be increase in the number of rollers in the upper and lower decks. A study has been carried out and it has been proposed to use 89 mm diameter rollers in place of 108 mm rollers which will improve the efficiency of the screen by 17.2% and the physical property of the Pellets will improve along with better shape and finishing of the green balls.

Study and implementation of improving the Die Ring Life of Grinding System (Lime+ Coke) in Pellet Plant.

The Bradely mill installed in LCG plant is used for grinding Lime stone and Coke fines together. The capacity of the mill is 30T/H. The mill is installed with three rollers and a die ring, supplied by OEM that is made of Manganese Steel material and cost is around Rs. 13.50 lakhs. The life of the ring used to be 1-2 months. Acordingly, the study has been carried out and it has been decided to use Hi-chrome die ring. The cost of die ring is less and the life obtained is better when compared to the other die rings. The total expenditure towards study and implementation was Rs. 20 lakhs. The grinding system is in operation with Hi-chrome die ring (Lime+ Coke) in Pellet Plant.

Bulk Material Handling and Railway Siding Facilities :

For receipt & mechanized handling of Iron Ore and other raw materials received through Railway wagons and their storage and conveying it to Pellet plant Unit and Blast Furnace Unit, it is proposed for setting up a permanent railway siding and bulk material handling system at about 3 kms from the Company’s Pellet plant at Baikampady industrial area, Mangalore. The estimated cost would be Rs. 303 crores. Based on the project report, major portion of the land required for creating the infrastructure has already been acquired through M/s Karnataka Industrial Area Development Board (KIADB) and other private sources.

In original DPR, there was a diamond crossing. From the safety point of view, Indian Railways are not allowing any diamond crossing for the railway tracks. Hence the Consultants, have re-surveyed the area available and have furnished the revised layout plan. Based on the revised track alignment, Company has initiated necessary action for procurement of additional stretch of land from KIADB. The Company is pursuing the matter with local KIADB office, Mangalore for transferring the extent of land measuring 8.185 acres for the Railway Siding Project.

Business Diversification

Opening up of O & M Vertical

NMDC is setting up a Beneficiation Plant of 1.89 million tonnes per annum capacity and a Pellet Plant of 1.2 million tonnes per annum capacity at their Donimalai premises and these plants are likely to be commissioned by Sept.-Oct, 2014. In these plants, NMDC proposed to utilize the unused slime material from their tailing dam and converting them into Pellets. Keeping the expertise available with the Company in having successfully operated a state of art beneficiation plant of 7.5 million tonnes per annum capacity and also operating a Pellet Plant of 3.5 million tonnes per annum capacity, the Company has submitted its proposal to NMDC offering its expertise for the operation & Maintenance contract for an initial period of 3 years. O&M contract will help the Company to gainfully utilize its experienced manpower. The contract is expected to be awarded shortly.

Project Management Consultancy (PMC) 

The Company has a strong brand image with its dedicated fleet of highly skilled and committed workforce, that helps in countering the challenging needs with new strategies, ardently keeping pace with today’s fast changing business scenario. The Company backed with its ability, outstanding performance, highly skilled & committed workforce, fully computerized offices, latest design software, integrated project monitoring wing etc. and rich legacy has diversified and would like to emerge as a leading Project Management Consultant. The Company has empanelled the Architects and other Consultants for carrying out the PMC work.

Strategic Alliance - MOU with M/s Andhra Pradesh Mineral Development Corporation Limited (APMDC) and Rashtriya Ispat Nigam Limited (RINL)

The Company continued to give impetus towards taking new business initiatives by entering into Memorandum of Understandings (MOU’s) with various CPSEs & State PSEs for its long term strategic objectives for mining, setting up of beneficiation plant and Pelletisation plant. In this direction a Tripartite MoU among M/s. KIOCL, M/s.APMDC and M/s.RINL was signed on 22.06.2013 for exploration and exploitation of Nemkallu Iron Ore deposit in Ananthapur Dist., of Andhra Pradesh. The project is to undertake the activity of exploration and exploitation of Nemkallu Iron Ore deposit by M/s APMDC and M/s. KIOCL jointly, setting up of beneficiation and Pelletisation plants by the Company and supplying 50% Pellets to RINL on cost plus basis.

APMDC and the Company jointly completed Survey & Investigation work for boundary demarcation, contour survey, geological investigation, mapping and preparation of detailed prospecting plan.

Govt of Andhra Pradesh on 18.02.2014 forwarded the proposal to Ministry of Mines, Govt of India for prior approval under Section 5(1) of MMDR Act 1957 for grant of PL in favor of APMDC.

The proposal is listed with Ministry of Mines, Govt of India and the same is under process. Director, Mines and Geology also forwarded the “Form A” for forest clearances to PCCF, AP on 22.01.2014 for carrying out the prospecting work. Permission for undertaking exploratory drilling is being examined by Divisional Forest Officer, Anantapuramu, Andhra Pradesh. The process for exploration work is under progress.

MINING LEASES FOR IRON ORE DEPOSIT      

To secure Iron Ore for its Pellet Plant, the Company has submitted various mining lease applications to Govt of Karnataka (GoK). Chikkanayakanahalli Iron Ore mining lease is already recommended by the GoK and the Company is in the process of obtaining various statutory clearances to commence the mining operation. The Company is also putting efforts to get Ramanadurga Iron Ore deposit and ‘C’ category Iron Ore mining leases. Mining lease applications of the Company are under different stages of processing by GoK.

The Company has also submitted mining lease applications for Iron Ore in the States of Odisha, Jharkhand and Andhra Pradesh. The same is being pursued with highest authorities for early clearance.

Environmental Management

The Company has been accredited with ISO 14001-2004 Environment Management System. The Company is committed towards the upkeep of cleaner environment and ecology and has taken up various initiatives on the environmental front and is continuing its efforts in this direction. Some of the new initiatives and efforts on environmental management and pollution control measures during the year are as under :-

Ø Installed mist type water sprinklers for a length of 120 meters at the entrance of shed I & II to reduce fugitive dust during raw material handling. It is proposed to commission similar kind of sprinklers in Pellet plant area in FY 2014-15.

Ø Concreting of road for an additional length of 125 meters where Iron Ore fines are transported.

Ø Spreading environmental awareness amongst school children through Green Nurturing programme. This awareness programme has already been initiated in four Govt. Schools. Initiatives such as water supply systems, water storage tanks, provision of water purifiers, upgradation of toilets, plantation, gardening in school premises, supply of SS meals plate, supply of plate racks, supply of gardening tools and dust bins and providing awareness programme on Personnel hygiene.

Ø MOU has been signed on 11.01.2014 to develop “Kudremukh Tree Park” for the conservation of rare and endangered plant species of Western Ghats at Pilkula, Mangalore in association with Dr. Shivaram Karantha Pilkula Nisarga Dhama as our commitment to development of green belt and conservation of wide variety of plants at an estimated cost of  Rs. 52 lakhs spread over 3 years.

Ø Treated effluent (from STP) is totally consumed in the plant/recycled.

Safety 

Workers participation in Safety Management System is ensured by formation of area wise Safety Committees, which meets at regular intervals. Safety inspections are carried out regularly by the safety Officer along with Safety Committee members. Safety points are discussed in the Safety meetings held once in three months and suitable actions are taken for implementation of the shortfalls, if any.

Training programmes are also conducted to inculcate safety consciousness. Refresher training covering their areas of working, First Aid Training, Fire Fighting, Awareness programme on Quality, Environmental, Occupational Health & Hazards, Vigilance Awareness, Sustainable Development, Technical and Personality development are being conducted. 

At the Mangalore unit, National Safety Day & Safety week is celebrated from 4th to 10th March every year. National Safety Flag hoisting, competitions on Safety poem, Safety slogan & Drawing in Hindi, English & Kannada languages are conducted bring out safety awareness among employees.

Public/Staff Grievance Redressal

The Company has framed a well defined grievance procedure evolved under the Code of Discipline from it’s very inception. Since its introduction, the Scheme has been working satisfactorily without any complaints. Grievances received have been redressed to the satisfaction of the aggrieved employees.  With respect to public grievance, as and when any complaints are received from the public, necessary remedial action, if any, is taken by the Company immediately.

Complaints/grievances other than the staff grievance are categorised into customer/ consumer complaints/grievances from the Contractors, NGOs/ General Public etc. The respective project heads are empowered to dispose off the grievances concerning their areas and the general public. Linkage has been provided to Centralized Public Grievances Redressal & Monitoring System (CPGRAMS) with effect from 01.05.2011.

Where women employees are concerned, the guidelines laid down by the Hon’ble Supreme Court in the matter relating to sexual harassment of women in work place are strictly followed.

The grievances received and disposed off by the Company are reported to the Administrative Ministry on a monthly basis. The guidelines laid down by the Government of India in this regard are being followed. The Government also reviews the subject matter periodically.

The Second Administration Reforms Commission in its 12th report “Citizens Centric Administration” – the Heart of Governance recommended the organization to be made transparent, accountable and citizen friendly through making citizen charter more effective and mandatory. It also makes all Responsibility Centre to have Citizen Charter. Based on the above recommendation, a Public Service Delivery (SEVOTTAM) has been created for assessing and improving the quality of services delivered to the citizens. The system also involves the identification of the services delivered, quality service, its objective, improvement of quality, using innovative methods for developing business process and more informative with the help of information technology. The same is also available in Company’s website.

Implementation of Official Language Policy 

The Company follows the directives issued by the Department of Official Language, Ministry of Home Affairs for Progressive use of Official Language from time to time. Hindi training, Cash awards, increments are given as per the Government directives and Hindi Workshops, Orientation programmes are conducted to create awareness, impart knowledge and encourage the employees to work in Hindi.

The Company is Convenor of Bangalore Town Official Language Implementation Committee (Undertakings) and conducts regular meetings and Joint Hindi Fortnight programmes for all Central PSUs in Bangalore.  His Excellency Dr. Hansraj Bharadwaj, Governer of Karnataka was the chief guest for the 1st half yearly meeting of Bangalore Town Official Language Implementation Committee (Undertakings) held on 29.07.2013. Shri Arun Kumar Jain, IAS, Secretary (OL), Ministry of Home Affairs, New Delhi graced the Meeting.

The Company had organized Joint Hindi Month for Town Official Language Implementation Committee (Undertakings) members between 16.09.2013 to 23.10.2013. 9th issue of "Deepika" brought under TOLIC banner was released at "Hindi Kavya Gosthi" held on 28.03.2014.

Quality Control - ISO 9001: 2008

The Company’s Quality Management System is certified under ISO 9001:2008 International Standard by M/s DNV. This Certificate is valid upto 08.11.2015. 

Visits by Parliamentary Committees

During the year, the following Parliamentary Committees held discussions with the senior officials of the Company during their visit :-

Ø Standing Committee on Labour visited Bangalore on 07.06.2013 and interacted with trade unions of KIOCL on Safety, health and social security followed by discussions with senior officials of KIOCL on issue of ‘Deployment of Contract/Casual workers/Sanitation workers for perennial jobs’.

Ø The Third Sub-Committee of the Committee of Parliament on Official Language headed by Prof. Alka Balram Kshatriya, Hon'ble MP (Rajya Sabha) inspected the Official Language Implementation of Mangalore Unit on 04.07.2013.

Ø Parliamentary Committee on Coal & Steel visited Mangalore on 25.10.2013 to discuss with representatives of Ministry of Steel/KIOCL the production of Iron Ore and safety management.

Manpower Profile 

As on March 31, 2014, the Company had 957 employees on rolls comprising of 310 Executives including Non-Unionised Supervisors (32.3%), 647 Non executives (67.7%). During the year,  no recruitment has taken place in any of the grade except one Executive (OBC Candidate) was re-instated in pursuance to Hon’ble Court order.

Table : 3 shows the number of SCs, STs, women employees, Ex-servicemen and PwD as against the total number of employees in different Groups on rolls of the Company as on 31.03.2014.

Table : 3

The Company ensures compliance under the Persons with Disabilities Act, 1995.  Suitable provision/modification is made in the working place to meet the requirements of such persons with disability.

Industrial Relations and Employees Welfare 

The Industrial Relations situation remained peaceful and cordial during the year. Adequate facilities for education, health, accommodation and recreation were in place. Various bipartite fora have been functioning satisfactorily.

Human Resource Development

Human resources is the key asset in the organization. The objective of Human Resource Development is to build a vibrant learning organisation that meets the challenges for its growth & business goals. A series of initiatives were taken in this direction by the Company, viz:-

Ø Various in-house training programmes were organized for Executives and Non executives to enhance their skills.

Ø Nomination of employees for various seminars and conferences conducted at different locations. 

Ø During the year training was imparted for 3924 man days.

Award/Accolades 

In recognition of the varied initiatives, the Company was conferred with several awards and accolades during the year. Some prominent awards received are as under :-

Ø The Company has been conferred with Indira Gandhi Rajbhasha award for the year 2011-12 for outstanding achievements in implementation of official language. The award was presented by his Excellency, President of India Shri Pranab Mukherjee to our CMD & TOLIC Chairman.

Ø The Company has been conferred with Rajbhasha trophy for progressive use of Official language in the Company. The award was presented by Hon’ble Minister of Steel.

Ø Indian Institute of Materials Management, Bangalore conferred KIOCL with “Corporate Excellence Award in Supply Chain Management” for implementation of good supply chain management practices.

Ø Ten employees of the Company were honoured under the category “Achievement award for Artisans & Supervisors” at CIDC’s 6th Viswakarma Awards 2014.

Vigilance

“Preventive vigilance” has been the thrust area of Vigilance Department all these years and the same has received focussed attention during the year. A climate of preventive vigilance was generated to sensitize officials at all levels about the ill effects of corruption and malpractices. Regular Structured Meeting is being conducted with the management. The Vigilance Department of KIOCL is certified under ISO 9001-2008 conforming to the Quality Management System.

Vigilance Awareness Week was observed from 28th October 2013 at all the locations/ offices of KIOCL Limited.

As per the guidelines by the Department of Public Enterprise & CVC on Corporate Governance, Company had adopted Fraud Prevention & Whistle Blower Policies for prevention / detection / reporting of any fraud that is detected or suspected and fair dealing of matter on the subject.

Implementation of new Public Procurement Policy for MSEs

The Company has adopted a Micro & Small Enterprises (MSEs) policy for MSEs sector, in line with the Government of India guidelines as per MSMED Act 2006. The following benefits are extended for the MSEs as per Govt. Guidelines:

Ø The Company has identified 75 items out of 358 items from Micro and small enterprises, which have been reserved for exclusive purchase from them;

Ø MSEs are given tender documents free of cost and are exempted from payment of earnest money deposit (EMD);

Ø Exemption from submission of security Deposit.

Ø In tender, participating MSEs quoting price within price band of L1+15% shall also be allowed to supply a portion of requirement by bringing down their price to L1 price in a situation where L1 price is from someone other than a MSE and such MSE shall be allowed to supply up to 20% of total tendered value, where as 16% on MSE and 4% on MSE (owned by SC/ST). In case of more than one such MSE, the supply shall be shared proportionately.

Table 4  depcits the target set by your Company for implementation of Public Procurement Policy for MSEs: 

Table 4 :

(Rs. in crores)

Director’s Responsibility Statement

Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Board of Directors report that:

Ø In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any.

Ø Accounting policies have been selected and applied consistently and the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company in the end of the financial year and of the profit or loss of the Company for that period.

Ø Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and preventing and detecting fraud and other irregularities

Ø The Annual accounts have been prepared on a ‘Going Concern’ basis.

Board of Directors

During the year under review, following changes took place in the Board of Directors of your Company

Appointment:

i)   Shri Vinod Kumar Thakral, IAS, Additional Secretary & Financial Adviser, Ministry of Steel has been appointed as Part time official Director w.e.f 31.05.2013 in place of Shri EK Bharat Bhushan; 

ii)  S/Shri S Manoharan, PK Bajaj and Dr. S Raghunath are appointed as part time Non-official Directors of the Company w.e.f 05-07-2013 for a period of 3 years.

iii)   Shri N Vidyananda has been appointed as an additional Director designated as Director (Production & Projects) w.e.f  01.11.2013.

iv) Dr. BK Sahoo has been appointed as part time non-official Director of the Company w.e.f 31.01.2014 for a period of 3 years.

Cessation:

i)   Shri EK Bharat Bhushan, Special Secretary & Financial Adviser, Ministry of Steel has resigned from the Directorship of the Company w.e.f. 29.04.2013 consequent to his appointment as Chief Secretary, Govt. of Kerala.

ii)    Shri K Subba Rao, Director (Production & Projects) ceased to be a Director of the Company on attaining the age of superannuation on 31.10.2013.

iii)   Shri K Narasimha Murthy, Part-time non-official Director of the Company has resigned from the Directorship of the Company w.e.f 31.05.2013.

Board of Directors place on record their deep sense of appreciation of the valuable services rendered as well as advice and guidance given by S/Shri EK Bharat Bhushan, K Subba Rao and K Narasimha Murthy.

Statutory Audit

Pursuant to Section 619(2) of the Companies Act, 1956, the Comptroller and Auditor General of India have advised to appoint M/s Sundaram & Srinivasan, Chartered Accountants as Statutory Auditors of the Company for the year 2014-15.

Statutory Auditors Report, Comments of C&AG and Management’s Reply

The Statutory Auditors Report on Accounts of the Company for the financial year ended     31st March 2014 alongwith Management’s replies thereto are annexed. The Comptroller & Auditor General of India (C&AG) vide its letter dated 16.06.2014 has given “NIL” comments on the accounts of the Company for the year ended 31st March 2014 under Section 619(4) of the Companies Act, 1956. Copy of the same is annexed to the report.

Cost Audit

Pursuant to Section 233B of the Companies Act, 1956, the Company carried out an audit of cost records of Pellet Plant and Blast Furnace Unit. The Company appointed          M/s Giridhar Ramakrishnan & Co., Cost Accountants, Bangalore as Cost Auditor, with due approval of the Central Government, to audit the cost accounts of the Company for FY  2013-14.

The cost audit report for the financial year 2012-13 was filed with the Ministry of Corporate Affairs on 09.09.2013. The Cost Audit Report for FY 2013-14 is under finalization and will be submitted to the Ministry of Corporate Affairs within the prescribed period.

Corporate Governance

The Company is committed to achieving the highest standards of Corporate Governance. Accordingly, the Board functions as trustees of shareholders and seeks to ensure that the long term economic value for its shareholders is achieved while balancing the interest of all stakeholders.

A separate section on Corporate Governance standards followed by the Company, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is enclosed as an Annexure to this Report.

A Certificate from the Practicing Company Secretaries, M/s. SNM & Associates, conforming compliance with the conditions of Corporate Governance as stipulated under Clause 49, is attached to this Report.

Right to Information 

Under the Right to Information Act, 2005, the Company has set up an exclusive Right to Information Act outfit to provide information and bring transparency. As per the requirement of the RTI Act, the Company has nominated Public Information Officers and Appellate Authorities in all its 3 locations (Corporate Office & Plant/Mine Site) to provide information to the applicants. During the financial year 2013-14, Company received 55 RTI applications as per the provisions of the Act. All these applications were disposed off as per the provisions of the Act.

Energy Conservation

Energy conservation day was celebrated on 19.12.2013 at Mangalore by the energy conservation cell of Pellet plant unit. Prizes for various competitions like Quiz, Slogan writing in Kannada, Hindi and English languages were distributed during the celebration. The electricity consumption per tonne of Pellet production in kwh was lower during the year as compared to the previous year. Electricity consumption per tonne of Pellets production in kwh (including grinding) during 2013-14 was 62.56 kwh as compared to 66.56 kwh during the previous year.

Energy Audit

Energy audit has been completed by M/s Petroleum Conservation Research Association (PCRA). Based on the recommendation, the following Energy Conservation measures have been implemented.

i)   CB 72 Motor downsized from 22 KW to 16 KW.

ii) By pass conveyor CB-86 D2 (11KW) introduced to avoid running of Screen-III (Banana Screen) and CB-86 D Conveyor. This has resulted in reduction of load of (55 KW + 11 KW) Screen III and 86 D Conveyor. Net load reduction is 55 KW.

iii) As a measure to reduce cost of power, the Contract Demand (CD) with MESCOM has been increased to 32 MVA from 18 MVA. Until this increase, complete plant load was drawn from Captive Power Plant and MESCOM thus there has been overall reduction in power cost by almost 50%.

iv) 30 nos. 96 W LED street light fittings replaced in place of 250 W HPSV fittings, 40 nos. 24 W LED well glass fittings replaced in Conveyor galleries in place of 70/80 W SV fittings at PF, 16 W LED fittings have been put in place of 80 W fittings in reclaimers 01 & 02 chutes thus saving 3 units per day, 64 W LED street light fittings are being replaced in Pellet plant area in place of conventional HPSV fittings.

v) The direction of Conveyor CBR1 (37 KW) has been reversed and related modifications carried out to bypass roll press sequence resulting in reduction of 120 KW load.

vi) Capacity of CBG 2033 reduced from 18.5 KW to 7.5 KW resulting in a load reduction of 11KW.

R&D, Technology Absorption, Adaptation and Innovation

Information relating to Technology Absorption, Adaptation and Innovation, R&D and foreign exchange earning & outgo to be disclosed in Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 is given at Annexure-I.

Application under Trade Mark Act, 1999

The Company is widely known for its brand name “Kudremukh” with “horse insignia”, hence the brand and reputation are its intangible assets. Even after the closure of Kudremukh mine for nearly a decade, it still remains in the memory of our valued customers. To capitalise its brand value, the Company has decided to register the same under the Trade Mark for all its marketing & service portals. Necessary application has already been before the competent authority under the Trade Mark Act, 1999 and the same is under consideration.

Particulars of Employees

No employee has drawn a remuneration of Rs. 60 lakhs or more per annum or Rs. 5 lakhs or more per month during the year 2013-14 under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Amendment Rules, 2011.

Acknowledgement

The Directors gratefully acknowledge the support, co-operation and guidance received from the Hon’ble Minister for Steel, the Secretary, Ministry of Steel and other officials of the Ministry of Steel as well as other Ministries of the Government of India, Government of Karnataka, Andhra Pradesh, Odisha, Jharkhand and all other departments/agencies of Central and State Government in all the endeavours of the Company.

The Directors acknowledge the support extended by the valued and esteemed customers, shareholders, stakeholders and suppliers for their support and co-operation.

The Directors also appreciate the continued and dedicated efforts put in by all the employees to overcome many challenges faced during the year.

                           For and on behalf of the Board of Directors

        (Malay Chatterjee)

                                                    Chairman-cum-Managing Director

Date : 31-07-2014

Place :  New Delhi
ANNEXURE-I

FORM – B

DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION AND R & D ACTIVITIES

RESEARCH AND DEVELOPMENT ACTIVITIES

C.  FOREIGN EXCHANGE EARNINGS & OUT GO

The Company has not earned any foreign exchange during the year as there was no export of Pellets. Total outgo in Foreign Exchange on account of imports, payment towards technical services, etc., amounted to about US$ 15.52 million.

As a socially conscious corporate, KIOCL is contributing significantly towards community development in and around its project sites to ensure that people living in the vicinity of our projects, especially the tribal communities in the surrounding areas, are benefited directly and indirectly through the various development projects. KIOCL is undertaking CSR activities primarily in the state of Karnataka near its project offices which are situated in Bangalore, Mangalore and Kudremukh based on individual / organizational requests received. KIOCL has undertaken CSR activities in and around its project / liaison offices in other States also.

The scheme of Corporate Social Responsibility (CSR) has been evolved in KIOCL right since its inception. The Company is committed to operate in an economically, socially and environmentally sustainable manner, while recognizing the interest of its stakeholders. The aim of CSR policy of the Company is to identify and to lend a helping hand to the SC/ST/underprivileged and economically weaker sections of the society and to contribute for their growth and development.

As an integral part of the society, KIOCL is moving forward by achieving the objectives of its social responsibility. The Company has supported innumerable social initiatives primarily on villages within the radius of its project sites in areas like Education, Community Development, Promotion of Art, Culture & Sports, Health Care and Spreading of environmental awareness (by plantation etc) among school children.

During the year, the existing Policy on CSR & Sustainability of the Company was integrated and aligned with the DPE guidelines. The corporate systems and processes were strengthened with the formation of a CSR & Sustainable Committee of the Board by the Board of Directors and a Company level internal committee’s constituted at Unit level to provide direction and oversee the CSR initiatives of the Company. The CSR Budget for 2013-14, keeping in view of DPE guidelines was fixed at Rs. .93 lakhs (3% of PAT of 2012-13). The CSR & Sustainability expenditure incurred by the Company was Rs..227 lakhs, which exceeds the MOU annual “Excellent” Target of Rs..109 lakhs. The highlights of the area-wise CSR activity details are as under:-

Community Development:

Projects undertaken in this area were assistance provided for pure drinking water facility to Anganawadi centers in Ananthapur District, Andhra Pradesh; financial assistance for AC Roof sheet to Shri Krishna Anganawadi and Rangamandira Renovation Committee, Mangalore.

Environment:

Support was provided for development of Tree Park for the conservation of rare endangered and threatened species of Western Ghats at Pilikula Nisarga Dhama, Mangalore; financial assistance extended for Green Nurturing programme at Schools, Mangalore; Financial assistance to BGS School, Mangalore for Vermicompost Bin.

Medical/Health Care:

Under this initiative, the Company has donated an Ambulance to Govt. Hospital, Chikkanayakanahalli, Tumkur District.

Contribution to Prime Minister/Chief Minister Relief fund:

The Country has witnessed worst ever natural calamities during the year 2013. First, in the Himalayan states of Himachal Pradesh and Uttarakhand which were hit by torrential rain and cloudbursts on 14-17 June 2013, recording the highest rainfall in 20 years in a three-day period, triggered landslides and flash floods in multiple locations in these states. With no warning and time to evacuate, there have been large number of casualities and caused much distress among inhabitants and the many pilgrims. Following the disaster, with the few roads cut-off and bridges connecting key towns having collapsed pilgrims and tourists were stranded in the area. Public infrastructures such as roads and vital bridges, houses and administrative buildings, schools and health centers, have been badly damaged. The disaster has crippled the lives and livelihoods of a very large number of impoverished, rural people. 

The Company has contributed Rs. 50 lakhs including Rs. 24.35 lakhs voluntarily contributed by the employees to “Chief Ministers Relief Fund – Uttarakhand” for relief and rehabilitation activities in the flood affected areas of Uttarakhand State.

The very severe cyclonic storm “PHAILIN” devastated Odisha on 12-13 October, 2013 resulting in huge loss of public and private property.

As the largest evacuation efforts in the country's recent history helped keep casualties to the minimum. Yet most of the casualties were caused by wall collapse, uprooted trees and in floods.

The Company contributed Rs.100 lakhs to the “Chief Ministers Relief Fund for relief and rehabilitation activities in the Cyclone affected areas of Odisha”.

Annexure – II

CORPORATE GOVERNANCE REPORT

COMPANY’S PHILOSOPHY

The Corporate Governance Policy of KIOCL rests upon the four pillars of Transparency, Full disclosures, Independent monitoring and fairness to all.

The Company believes that conducting the business in a manner that complies with the Corporate Governance procedures and code of conducts, exemplifies each of our core values and positions us to deliver long-term returns to our Shareholders, favourable outcomes to our customers, attractive opportunities to our employees and making the suppliers our partners in progress & enriching the society.

The Company has set itself the objectives of expanding its capacities and becoming more competitive in its business. As a part of its growth strategy, the Company believes in adopting the ‘best practices’ that are followed in the area of Corporate Governance across the country. The Company emphasizes the need for full transparency and accountability in all its transactions, in order to protect the interest of all its stakeholders.

The Board considers itself as a trustee of its shareholders and acknowledges its responsibilities towards them for creation and safeguarding their wealth.

The following good governance practices have been put in place in KIOCL:

Ø Code of Conduct for Board level and below Board level employees;

Ø Risk Assessment and Minimization Policy & Fraud Prevention Policy;

Ø Integrity Pact;

Ø Whistle Blower Policy;

Ø Compliance of applicable Laws, Rules & Regulations;

Ø Accuracy and transparency in disclosures regarding operations, performance and financial position;

Ø Conduct, Discipline and Appeal Rules for Employees;

BOARD OF DIRECTORS

Composition of the Board

KIOCL being a Government Company, appointment/nomination of all Directors is done by the President of India, through the Ministry of Steel. Articles of Association of the Company stipulate that the number of directors shall not be less than five and not more than thirteen. As on 31.03.2014, there are eleven Directors on the Board comprising of four whole time Directors including Chairman-cum-Managing Director, two Non-Official Part Time Directors who are Government Nominees and five Independent Directors. Chairman being Executive Chairman, one more Independent Director Post is vacant pursuant to clause 49 of Listing Agreement of Stock Exchanges and DPE guidelines on Corporate Governance. The members of the Board are from diversified backgrounds and have varied expertise and considerable experience in the respective fields.

As on the date of the Report, the composition of the Board of KIOCL is not in conformity with Clause 49 of the Listing Agreement and DPE guidelines on Corporate Governance.

Board Meetings and Procedure

The Board of Directors plays the primary role in ensuring good governance and functioning of the Company. The meetings are governed by a structured agenda. All the agenda items are backed by comprehensive agenda notes, containing all the vital information, so as to enable the Directors to have focused discussion at the meeting and to take decision. All the relevant information as enumerated in Annexure IA to clause 49 of the Listing agreement and Annexure – IV of the guidelines on Corporate Governance for CPSE’s issued by DPE is placed before the Board. The agenda and agenda notes are circulated to all the Directors in advance of each meeting of the Board of Directors. Where it is not practical to send the relevant information as a part of the agenda papers, the same is tabled in the meeting. The presentation covering the Company’s performance, operations and business strategy are also made to the Board.

The Board also reviews periodically the compliance status of all the applicable laws. All the decisions are taken after detailed discussions by the Board Members at the meetings. The members of the Board have complete freedom to express their opinion and have unfettered and complete access to information in the Company.

The Company has a formal system of follow-up, review and reporting on action taken by the management on the decisions of the Board and Sub Committees of the Board. The Company presents a comprehensive Action Taken Report of the previous meetings to the Board of Directors at the ensuing Meeting of the Board of Directors. Matters of urgent nature are approved by the Board by passing resolutions through circulation.

No. of Board Meeting

The Board met Five times during the financial year on 15-05-2013, 25-07-2013, 07-11-2013, 05-12-2013 and 11-02-2014. The maximum time gap between any two meetings was less than four months. The Company passed one resolution through circulation.

Directors’ attendance Record and Directorships held

As mandated by Clause 49, none of the Directors are members of more than ten Board-level Committees nor are they Chairman of more than five Committees, in which they are members. The composition of Board of Directors during 2013-14 is given in Table 1.

Table 1: COMPOSITION OF THE BOARD OF DIRECTORS

Notes:

# Only Audit Committee and Shareholder Grievance Committee considered

* Nominees of Govt. of India

1.  Ceased to be Director w.e.f. 31.10.2013 consequent upon attaining the age of superannuation.

2.  Appointed as Director (P&P) w.e.f. 01.11.2013.

3.  Ceased to be Director w.e.f. 29-04-2013

4.  Appointed as Director w.e.f.31.05.2013.

5.  Ceased to be Director w.e.f.31.05.2013 due to resignation.

6.  Appointed as Director w.e.f  05.07.2013.

7.  Appointed as Director w.e.f. 30.01.2014.

Code of Conduct

In pursuance to SEBI and DPE guidelines, Code of Conduct as applicable to Board level and below Board level i.e. one grade below Board level up to General Manager Cadre is in existence. The same is also available on the website of the Company i.e. www.kioclltd.com. The Code of Conduct is in alignment with Company’s mission and objectives and aims at enhancing ethical and transparent process in managing the affairs of the Company.

All the Board Members and Senior Managerial Personnel have affirmed compliance to the Code of Conduct. A declaration signed by the Chairman-cum-Managing Director affirming the compliance with the Code of Conduct by the Board Members and Senior Managerial Personnel of the Company is appended at the end of this report.

COMMITTEES OF THE BOARD

To enable better and focus more attention on the affairs of the Company, the Board delegated particular matters to Committee of the Board set up for the purpose. These committees prepare the groundwork for decision making and report at the subsequent Board Meeting. The following Committees are functioning as on date

Ø Audit Committee;

Ø HR & Remuneration Committee;

Ø CSR & Sustainable Development Committee

Ø Empowered Board Sub-Committee:

Ø Share Transfer Committee.

AUDIT COMMITTEE

The Company has an Audit Committee at the Board level functioning since 2000 with the powers and role that are in accordance with the erstwhile Section 292A of the Companies Act, 1956, Clause 49 of the Listing Agreement and DPE guidelines. The Committee acts as a link between the management, the Statutory Auditors, Internal Auditors and the Board of Directors to oversee the financial reporting process. The Audit Committee consists of two Independent Directors and one Functional Director. The Chairman of the Committee is an Independent Director. The majority of the Audit Committee members have accounting and financial management expertise. Director (Finance), Chief of Internal Audit & Statutory Auditors are the permanent invitees to the meeting. In addition, other Functional Directors except CMD, Senior Managerial Personnel are also invited to the Committee meetings to present reports on the respective items being discussed as and when required. Secretary acts as a Secretary to the Committee.

The Audit Committee observes and controls the financial reporting process of the Company with a view to provide accurate and proper disclosures. The Committee reviews the Internal Audit reports periodically as well as action taken report. The Committee also gives directions to the management in areas that needs to be strengthened. The recommendations of the Audit Committee is binding on the Board.

The Committee met five times in the financial year under review on 14-05-2013, 12-07-2013, 21-10-2013,   04-12-2013 and 04-02-2014. The time gap between two Audit Committee meetings is less than four months.

The Composition of the Audit Committee as on 31.03.2014 and the attendance of the members at the meetings are given at Table 2.

Table 2 : Attendance Record of Audit Committee Meetings

1.   Ceased to be the member of the Committee w.e.f. 31-05-2013.

2.   Appointed as member of Audit Committee w.e.f. 08-08-2013.

Powers of the Audit Committee::

The Audit Committee shall have full powers commensurate with its role & include the following:

Ø To investigate any activity within the Terms of Reference;

Ø To seek information from any employee;

Ø To obtain outside legal or other professional advice

Ø To secure attendance of outsiders with relevant expertise, if considered necessary;

Ø To protect whistle blowers.

Scope of the Audit Committee:

Ø Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.

Ø Recommending to the Board the fixation of audit fees.

Ø Approval of payment to statutory auditors for any other services rendered by the statutory auditors.

Ø Reviewing, with the management, the annual financial statements before submission to the Board for approval, with particular reference to:

-   Matters required to be included in the Director's Responsibility Statement to be included in the Board's report in terms of clause (2AA) of Section 217 of the Companies Act, 1956.

-   Changes, if any, in accounting policies and practices and reasons for the same.

-   Major accounting entries involving estimates based on the exercise of judgement by management.

-   Significant adjustments made in the financial statements arising out of audit findings.

-   Compliance with listing and other legal requirements relating to financial statements.

-   Disclosure of any related party transactions.

-   Qualifications in the draft audit report.

Ø Reviewing, with the management, the quarterly financial statements before submission to the Board for approval.

Ø Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems.

Ø Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.

Ø Discussion with internal auditors any significant findings and follow up there on.

Ø Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control system of a material nature and reporting the matter to the Board.

Ø Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern.

Ø To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors.

Ø To review the functioning of the Whistle Blower Mechanism.

Ø The Audit Committee shall mandatorily review the following information:

-   Management discussion and analysis of financial condition and results of operations.

-   Statement of significant related party transactions (as defined by the audit committee), submitted by management.

-   Management letters/letters of internal control weaknesses issued by the statutory auditors.

-   Internal audit reports relating to internal control weaknesses; and

-   The appointment, removal and terms of remuneration of the Chief internal auditor shall be subject to review by the Audit Committee.

-   Certification/declaration of financial statements by the Chief Executive/Chief Finance Officer.

Explanation: The terms "related party transactions" shall have the same meaning as contained in the Accounting Standard 18, Related Party Transactions, issued by The Institute of Chartered Accountants of India.

Ø To review the follow up action of the audit observations of the C&AG audit.

Ø To review the follow up action taken on the recommendations of Committee on Public Undertakings (COPU) of the Parliament.

Ø To provide an open avenue of communication between the independent auditor, internal auditor and the Board of Directors.

Ø To review and pre-approve all related party transactions in the Company. For this   purpose, the Audit Committee may designate a member who shall be responsible for pre-approving related party transactions.

Ø To review with the independent auditor the co-ordination of audit efforts to assure completeness of coverage, reduction of redundant efforts, and the effective use of all audit resources.

Ø To consider and review the following with the independent auditor and the management:

-   The adequacy of internal controls including computerized information system controls and security, and

-   Related findings and recommendations of the independent auditor and internal auditor, together with the management responses.

Ø Consider and review the following with the management, internal auditor and the independent auditor:

-   Significant findings during the year, including the status of previous audit recommendations

-   Any difficulties encountered during audit work including any restrictions on the scope of activities or access to required information.

Other Matters:

Ø The annual report of the Company shall disclose the composition of the Audit committee.

Ø The amendments made from time to time in the provisions of the Listing Agreement /Companies Act/DPE's Guidelines relating to the Audit Committee would also be applicable to the terms of reference of audit Committee.

HR & REMUNERATION COMMITTEE

In pursuance to the Listing Agreement of the Stock Exchanges & DPE Guidelines, HR & Remuneration Committee of the Company has been functioning in the Company. The Committee met once during the financial year under review on 22.03.2014.

The Composition of the Remuneration Committee and the attendance of the members at the meetings are given at Table 3.

Table 3 : Attendance Record of HR & Remuneration Committee Meeting

1.  Appointed as member of the Committee w.e.f. 08.08.2013

CSR & SUSTAINABLE DEVELOPMENT COMMITTEE 

In pursuance to the DPE guidelines, the Company has constituted CSR & SD Committee consisting of highly qualified and experienced members from various fields. The committee shall review and submit the recommendations on the proposal of CSR & SD to the Board. The Committee met thrice during the year under review on 12-07-2013, 18-11-2013 and 22-03- 2014.

The composition of the CSR & Sustainable Development Committee as on 31-3-2014 and the attendance of the members at the meeting are given at Table 4.

Table 4 : Attendance Record of CSR & Sustainability Committee Meetings

1. Appointed as member to the Committee on 08.08.2013.

2. Ceased to be a member consequent upon re-organisation of the Committee on 08.08.2013.

3. Ceased to be a member on 31.10.2013.

Emmpowered Board Sub Committee

In order to give additional comfort level to take a decision on any major capital investment which exceeds CMD’s delegated power and requires Board’s approval, to examine major proposal on Investment, Procurement, Contract and advise suitability to the Board to take decision by the Board and to approve the Un-audited/audited financial results (quarterly/year to date/annual) in the absence of Board meeting, as per clause 41 of the listing agreement an Empowered Board Sub Committee has been constituted. The committee shall review and submit the recommendations on the proposal. The Committee met thrice during the year under review on 14-05-2013, 12-07-2013 and 07-11-2013.

The composition of the Empowered Board Sub Committee as on 31-03-2014 and the attendance of the members at the meeting are given at Table 5.

Table 5 : Attendance Record of Empowered Board Sub Committee Meetings

1.   Ceased to be member on 31.10.2013.

2.   Appointed as member w.e.f.01.11.2013.

3.   Ceased to be a member w.e.f.08.08.2013 consequent upon reorganisation of the Committee.

4.   Appointed as member on 08.08.2013.

SHARE TRANSFER & INVESTOR GRIEVANCE COMMITTEE

A Share Transfer Committee & Investor Grievance Committee consisting of Senior Manager (F&A) and Company Secretary is functioning to look into all the transfers, transmissions, splitting and Issue of Duplicate Share Certificates & grievance matters etc. The action taken by the Committee is subsequently placed before the Board for ratification. There was no grievance from any of the shareholder during the year.

Securities and Exchange Board of India (SEBI) has introduced online compliant redressal system namely SEBI Complaint Redressal System (SCORES). During the year, no complaint was received through SCORES. As on 31.03.2014 no complaint is pending in SCORES.

REMUNERATION TO DIRECTORS AND POLICY

Being a Central Government Public Sector Enterprise, the appointment, tenure and remuneration of Directors are decided by the Government of India. The Government letter appointing the Chairman & Managing Director and other Functional Directors indicate the detailed terms & conditions of their appointment, including the period of appointment basic pay, scale of pay, dearness allowance, entitlement to accommodation etc., and it also indicates that in respect of other terms & conditions not covered in the letter, the relevant rules of the Company shall apply.

Details of remuneration paid to Whole Time Directors during the year 2013-14 are given at Table 6.

Table 6 : Remuneration Paid to Executive Directors for 2013-14

                                                                                                                                                 (Rs. in Lakhs)

*Part of the year

Non Official Part Time Government Nominee Directors are not paid any remuneration. They are also not paid sitting fees for attending Board Meetings. Independent Directors are paid sitting fee of per meeting of the Board and per meeting of the Committee of the Board attended. Details of sitting fees paid to the Independent Directors during FY 2013-14 are given at Table 7.

Table 7 : Sitting fee paid to Independent Directors for FY 2013-14

                                                                                          (In

*Committee includes Audit Committee, HR & Remuneration Committee, Empowered Board Sub Committee and CSR & Sustainable Development Committee.

None of the non-executive Directors had any pecuniary relationship or transactions with the Company during the year. The part time Government Directors are ex-officio appointees and their terms is co-terminus with the term of respective position held by them in Government at the time of appointment on the Company’s Board. The non-executive Independent Directors are appointed for a period of three years.

DIRECTORS SHAREHOLDING 

Shri Laxminarayana, Director (Finance) is holding 100 equity shares in the Company.

DISCLOSURES

a.  There was no material transaction with the Directors or the Management or their relatives that may have potential conflict with the interest of the Company at large.

b.  The Company has adopted all suggested items to be included in the Report on Corporate Governance as required under the listing agreement as well as Code of Corporate Governance issued by DPE.

c.  None of the Directors on the Board is a member of more than 10 Committees and the Chairman of more than 5 Committees, across all the Companies (Public Limited) in which he is a Director.

d.  There is no inter-se relationship between Directors of the Company, as per declarations received.

e.  There has been no instance of the non-compliance by the Company and no penalty or stricture is imposed on the Company by stock exchange(s) or SEBI or any statutory authority, on any matters related to capital markets during last three years.

f.   Whistle Blower Policy is in operation in Company w.e.f. 06.12.2012 in compliance with clause 49 II(F) of listing agreement.

RISK MANAGEMENT

As part of implementation of the guidelines on Corporate Governance issued by DPE, a Risk Assessment and Minimization Policy & Fraud Prevention Policy for drawing of appropriate risk assessment, management and minimization framework alongwith internal risk assessment framework, integrated and aligned with Corporate and operational objectives is already put in place in the Company. Same is being reviewed at periodical interval.

GENERAL SHAREHOLDERS INFORMATION 

Disclosure regarding appointment of Directors

The Company has provided brief resume(s) of the Directors seeking appointment at the ensuing Annual General Meeting, in the notice attached with the Annual Report.

Communications to Shareholders

The Company’s quarterly financial results, official news releases and other general information about the Company are uploaded on the Company’s website (www.kioclltd.com). The quarterly financial results of the Company generally published in the Financial Express (all editions) & Vijayavani, Bangalore Edition. Date of Board meeting to adopt financial results, date of Annual General Meeting and Postal Ballot etc are also published in News papers.

General Body Meetings

In the 37th Annual General Meeting, one special resolution was passed with respect to  commencement of new business u/s 149(2A) of the Companies Act, 1956 of Project Management Consultancy.

Financial Calendar

The Company’s financial year is from 1st April to 31st March.

CEO / CFO Certification

As required by clause 49 of the Listing Agreement, the CEO/CFO certification is appended as an Annexure to this Report.

Transfer of unpaid/unclaimed dividend amounts to Investor Education & Protection Fund

Pursuant to Section 205C of the Companies Act, 1956, dividend amount(s) remaining unclaimed and unpaid for a period of seven years, from the date they became due for payment, as required to be transferred to Investor Education & Protection Fund (IEPF) established by the Central Government.

Ministry of Corporate Affairs, Govt. of India through a Notification G.S.R.352(E) dated 10.05.2012 enacted the rules called as Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012. Subsequently Ministry of Corporate Affairs, through Circular No.17/2012 dated 23.07.2012 and Circular No.20/2012 dated 01.08.2012 issued the clarifications further to aforesaid rules. In compliance to the aforesaid rules, the Company has uploaded the complete information regarding unpaid and unclaimed amounts from the financial year 2010-11 onwards upto the date of AGM in the Ministry of Corporate Affairs website as well as in the Company’s official website. Prior period unpaid/unclaimed list year wise is also available at the Company’s website. Shareholders are requested to visit the site to know the status. Members are advised that no claim shall lie against the said Fund or the Company for the amounts of dividend so transferred to the said Fund.

Members who have so far not en-cashed their dividend warrants are requested to write to the Company/Registrar to claim the same, to avoid transfer to IEPF.

The Company has transferred unclaimed Dividend of amount upto the year 2005-06 to Investor Education & Protection Fund as set up by Government of India.

Annual General Meeting for the year 2013-14

Postal Ballot

During the current year, no approval of shareholders was taken through Postal Ballot.

Financial Calendar for 2014-15 (Tentative)

Book Closure

The Register of Members and Share Transfer Books of the Company shall remain closed from 02-09-2014 to 06-09-2014 (Both days inclusive).

Dividend Payment Date

Dividend will be paid within 30 days of declaration.

Dematerialization of Shares and Liquidity

The shares of the Company continue to be an eligible security in dematerlized form by CDSL and NSDL with ISIN No.: INE880L01014. As on March 31, 2014, 99.92% of the Company’s total paid up Capital representing 634,032,070 shares is in dematerialized form. In view of the numerous advantages offered by the Depository system, members holding shares in physical mode are advised to avail of the facility of dematerialization from either of the Depositories.

Market price Data

There was no trading reported at Bangalore and Madras Stock Exchange during 2013-14.

Performance in comparison to broad based indices such as BSE Sensex, CRISIL Index etc

Since the Company’s shares are not traded on a large scale frequently, its performance cannot be compared to broad based indices such as BSE Sensex, CRISIL Index etc. in the absence of price data.

Registrars and Transfer Agents & DP:     

M/s Integrated Enterprises (India) Ltd

Regd. Office: 30, Ramana Residency,

4th Cross, Sampige Road, Malleswaram,

Bangalore – 560003

Tel. No.: 080-23460815-81

Email id: alfint@vsnl.com

Outstanding GDRs/ADRs/Warrants

There are no outstanding GDR’s/ADR’s/warrant’s or any convertible instruments.

Listing on Stock Exchanges

The Equity Shares of the Company are listed on

Listing fees for the year 2013-14 has been paid.

Investor Correspondence

In order to facilitate quick redressal of grievance/queries, the investors and shareholders may contact the Company Secretary at under mentioned address for any assistance:

Company Secretary

KIOCL Limited

II Block, Koramangala,

Bangalore - 560034

Telfax: 080-25531525

E-mail/: bsecretary@kudreore.com

Compliance Certificate

As required under clause 49 of the listing agreement, the certificate from a practising Company Secretary pertaining to compliance of conditions of Corporate Governance is being annexed with the Directors Report.

This report duly complies with the requirements of Guidelines on Corporate Governance for CPSEs and covers all the suggested items mentioned in Annexure-VII of the Guidelines. The quarterly report on compliance with the Corporate Governance requirements prescribed by DPE are also sent to Administrative Ministry regularly.

Share Transfer System

The shares of the Company which are in compulsory dematerialised (demat) list are transferable through the depository system. Shares in physical form are processed by the Registrars and Share Transfer Agents, Integrated Enterprises (India) Limited and approved by the Share Transfer Committee. The share transfers are generally processed within a period of 15 days from the date of receipt of the transfer documents by the Company or its R&T Agent.

Registered Office  

KIOCL Limited

II Block, Koramangala,

Bangalore – 560034, Karnataka

Phone: 080-25531461-470

Fax: 080-25532153-5941

Website: www.kioclltd.com

Plant Locations

Pellet Plant and Blast Furnace unit is located in Dakshina Kannada District of Karnataka. Iron Ore Mine site and Beneficiation Plant is located at Kudremukh in Chickmagalur District of Karnataka which is stopped its operations with effect from 01.01.2006 following Hon’ble Supreme Court directives.

Shareholders Pattern as on 31.03.2014

NON-MANDATORY REQUIREMENTS

Besides the mandatory requirements as mentioned above, the status of compliance with non-mandatory requirements of clause 49 of the Listing Agreement is reproduced below:

MANAGEMENT DISCUSSION AND ANALYSIS

i)   INDUSTRY STRUCTURE AND DEVELOPMENT

The Indian Steel industry had a dismal year during 2013-14 due to poor performance of the infrastructure segment.  However, demand for quality Pellets remained firm due to restricted availability of Iron Ore, but this did not translate into better prices for Pellets as many new Pellet plants entered into the market resulting in over supply of Pellets and putting severe pressure on Pellet prices. The low prices resulted in restricted sale of our Pellets in domestic market during 2013-14. The issue raised by Railways regarding applicability of Levy of Distance based charges over and above normal freight on Iron Ore transported through Railway net work for manufacture of Pellets and subsequent export has made the sale of Pellets in International market unviable.  Export of Pellets has been stopped since September 2011.  However, these factors have not affected Production of Pellets during 2013-14.

Production and sale of Pellets during the financial year 2013-14 was 1.710 Million Tonnes and 1.615 Million Tonnes respectively.  Indian Pellet capacity is expected to cross 90 million tonnes by the end of 2014-15. Almost all the Steel manufacturers in private sector have commissioned their captive Pellet plants and the excess production from these plants may hit the market in the coming days.  However, DR grade Pellet is expected to maintain its premium continuously for ever.  

ii)        SWOT Analysis

In the changing environment, the Company has identified the following strengths, weakness, opportunities and threats:

Strength 

Ø Strong brand image for KIOCL Pellets in International market.

Ø Zero debt Company.

Ø Expertise in processing both Hematite & Magnetite ore.

Ø In-house R & D for continuous improvement in quality and capacity.

Ø Logistics –

-   Shore based Pellet plant with dedicated birth and automatic ship loading   facility. 

-   Private Railway Siding/Proximity to NH 66.

-   Established supply chain management.

Ø Captive Power plant.

Ø Experienced & Skilled Manpower.

Ø Proven track record and brand name in Iron Ore mining and beneficiation.

Weakness:

Ø No Captive mine since 01-01-2006.

Ø No beneficiation plant.

Ø Production units neither located at mine head nor consumption center. 

Ø   Dependence on NMDC for Iron Ore Fines.

Ø   High logistics cost for transportation of Iron Ore fines.

Ø   Imposition of DBC by Railways affects Pellet price.

Ø   Inability to accessing IOF due to ban in Karnataka for export of Pellets.

Ø   Thin margin due to severe competition. 

Ø   BFU with no forward & backward integration.

Ø   Levy of export duty on Iron Ore pellets.

Opportunities

Ø Diversification into O&M of Beneficiation / Pellet plants with available skilled manpower.

Ø   Activity in CN’Halli mines after boundary dispute is resolved for Forest clearance. 

Ø   Proposed allotment of Ramanadurga mines by GOK.

Ø   Exploration of Long term contract for procurement and sale.

Ø   Exploring new avenues in acquisition of mineral assets.

Ø   Proven track record and brand name in Iron Ore mining and beneficiation.

Threats

Ø Disputes/Delays in getting new mining leases.

Ø No priority for allotment of Rakes for Ore movement by Railways.

Ø Rapid expansion of Pellet production capacities.

Ø Imported Pellet and high grade lump at cheaper rates.

Ø Apprehensive about ban on export of Pellets getting extended to other parts of India.

iii)      PRODUCT-WISE PERFORMANCE

The production target vis-a-vis actual achievement during the last five years is given below:-

 PP: Pellet Plant,                  PI: Pig Iron                                (Qty. In million tonnes)

(Installed capacity of Pellet Plant is 3.500 million tonnes and Pig Iron is 0.216 million tonnes).

iv)           OUTLOOK

KIOCL is a zero debt Company and has a large Equity base with highly Technical manpower. Your Company is exploring the possibilities of diversifying into new areas of business such as acquiring new mining leases, setting up of beneficiation cum Pellet plants under JVs, O&M contracts with new Pellet plants, Project Management Consultancy etc.

The Company had initiated action for setting up of a permanent railway siding and bulk material handling system at about 3 kms from KIOCL’s Pellet plant at Baikampady industrial area, Mangalore for receipt & mechanized handling of Iron Ore and other raw materials received through Railway wagons and their storage and conveying to KIOCL’s Pellet plant Unit and Blast Furnace Unit. The total investment for this project as per the DPR    is estimated at crores. Major portions of land for creating infrastructure has already been acquired & Company has initiated necessary action for procurement of additional stretch of land from KIADB.

The Company is pursuing to enter into a contract with M/s NMDC, for Operation & Maintenance of their upcoming Beneficiation Plant and Pellet Plant at Donimalai. Efforts are on to get the contract and utilize the expertise available with KIOCL in operating the plants for mutual benefit of both the organisations.

The Company has signed an MOU with APMDC & RINL for exploration and exploitation of Nemkal Iron Ore deposit in Ananthapur District of Andhra Pradesh. APMDC and KIOCL jointly completed Survey & Investigation work for boundary demarcation, contour survey, geological investigation, mapping and preparation of detailed prospecting plan. Secretary (Mines), Govt. of AP has forwarded the proposal for prior approval under section 5(1) of MMDR Act 1957 to Ministry of Mines, Govt. of India for grant of PL in favour of APMDC.

To secure Iron Ore for its Pellet Plant, the Company has submitted various mining lease applications to Govt of Karnataka (GoK). Chikkanayakanahalli Iron Ore mining lease is already recommended by the GoK and the Company is in the process of obtaining various statutory clearances to commence the mining operation. KIOCL is also putting effort to get Ramanadurga Iron Ore deposit and ‘C’ Category Iron Ore mining leases. KIOCL’s mining lease applications are under different stages of processing by GoK.

The Company has also submitted mining lease applications for Iron Ore in the States of Odisha, Jharkhand and Andhra Pradesh. The same is being pursued with highest authorities for early clearance.

v)  RISKS & CONCERNS

The main risks and the areas of concern for the Company is non-availability of captive mines and increasing merchant and captive Pellet plant capacity. Continuous import of DR grade Pellets and lump ore at competitive prices by integrated Steel plants put pressure on Indian Pellet prices alongwith high logistic cost for raw materials.   The Company is exploring possibility to diversify into Contract Mining, Coal Mining, Project Management Consultancy, setting up of beneficiation and Pellet plants through JV etc which are yet to materialise. .

Due to un-economical price of Pig Iron, BF unit was shut down since 05-08-2009 and examining possibilities to offer BFU on long term lease or accept job work.

vi)      INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Internal Audit system is commensurate with the size and nature of the business of the Company.  The reports of the Internal Auditor are regularly placed before the Audit Committee for its review and further guidance.

vii)     FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

a) The Financial performance of the Company for the year 2013-14 in brief is furnished below:

                                                                         ( Crores)

b) Cash Flow information

An abstract of Cash Flow statement for the year ended on 31st March, 2014 is as under:                                                                                

viii)     MATERIAL DEVELOPMENT IN HUMAN RESOURCES/INDUSTRIAL RELATION FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company aims at providing motivation and growth opportunities for employees.  It also encourages them and creates an environment for best utilisation of their skills in achieving the Company’s objectives. Training and Development is the key word of HRD. The achievement during the year under report was 3924 Man days training for both Executives and Non-executives.

Industrial Relations situation remained peaceful throughout the year in all the establishments of the Company. Works Committees and Joint Plant and Shop Councils meet regularly and their discussions contribute towards improving industrial relations and resolving differences, if at all they arise.

The following table shows the total number of employees in different Groups on rolls of the Company as on 31st March 2014:-

Poaching of trained manpower at Kudremukh is a source of concern for the Company.

IX.     CAUTIONARY STATEMENT

Certain statements made in the management discussion and analysis report relating to Company’s objectives, projections, outlook, expectations and others may constitute ‘forward looking statements’ within the meaning of applicable laws and regulations. Actual results may differ from such expectations whether expressed or implied. Several factors could make significant difference to the Company’s operations. These include climatic and economic conditions affecting demand and supply, Government regulations and taxation, natural calamities over which the Company does not have any direct control.