Kudremukh Iron Ore Company Limited case analysis

1. Kudremukh Iron
Ore Company
Limited

2. 1969 -NMDC mining lease
1985- The government of Karnataka declared Kudremukh region as a
National Park under the Wildlife (Protection) Act of 1972
July 25,1999 - KIOCL lease expires, temporary work permit granted
1995-2001- Showdown between NGO Wildlife First and KIOCL
Oct 2002 -SC passes its judgment

3. 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 ?

4. • 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

5. • 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

6. 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?

7. • 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

8. 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?

9. • 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 spot

10. 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?

11. • 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

12. Prepared by :-
1. Tarini
2. Soochna
3. Shubham
4. Abhishek
5. Mudita
6. Vishal
7. Jaskirat