Indian Power Shortage is Achilles Heel of the Ferroalloy Industry. Power Shortages are due to lower generation, Non - Availability of Thermal Coal results in further shortage. The Electric Transmission Grid is Collapsing and rising prices of fossile fuels leads to inevitable rise in power cost : will ferroalloy industry remain profitable ? Nuclear Power in India remains Controversial. India to see 6.7% shortage this fiscal •In 2012-13, the energy shortfall touched 8.7 per cent while peak shortage reached 9 per cent. •Overall, energy shortfall is expected to be 70,232 million units, resulting in a deficit of 6.7 per cent this fiscal. •The requirement would be 10,48,533 million units whereas the availability is pegged at 9,78,301 million units. •Transmission constraints between Northern-North Eastern-Eastern-Western - Southern Regional Grid restricts flow of power. •The strains on India’s electricity network brutally exposed last summer when the grid collapsed for the best part of two days across north India - the world’s biggest power cut. Thermal Coal supply by Coal India severely restricted – mines not expanded in time to take care of explosion in demand from the power sector. •Overpricing of coal & poor coal quality of coal supplied by Coal India •Mine stoppages due to flooding etc lead to severe seasonal shortages. •Imported coal from Indonesia – rising coat and decreased availability. Restrictions on foreign ownership of coal mines & export of thermal coal – how long will the party last? •60% of power generated in India comes from burning coal. Isn’t over dependence on thermal coal for power a dangerous situation? •Many delayed projects due to lack of coal …. Despite abundant reserves of coal, India faces a severe shortage of coal - India isn't producing enough to feed its power plants. •Coal India, is constrained by primitive mining techniques and is rife with theft and corruption; Coal India has consistently missed production targets and growth targets. •Poor coal transport infrastructure has worsened these problems. •Most of India's coal lies under protected forests or designated tribal lands. Any mining activity or land acquisition for infrastructure in these coal-rich areas of India, has been rife with political demonstrations, social activism and public interest litigation. Presentation ends with Ways out of the Crisis.

1. Ferroalloys
Powerless in India ?
9 July 2013 / Prabhash Gokarn
1
National Conference on Energy Engineering,
Analysis, Audit & Management
Narula Institute of Technology
July 8-10, 2013

2. 9 July 2013 / Prabhash Gokarn
The presentation is an amalgamation of author’s own views and
thoughts.
Tata Steel does not necessarily subscribe to the views and thoughts
expressed in the presentation and should not be held responsible for
the same.
Disclaimer
2

3. 9 July 2013 / Prabhash Gokarn
Outline of Presentation
Sl No Content Slides
1 Basic Statistics 6
2 Power Generation : Sources 4
3 Power Demand Breakup 5 & 6
4 Power Generation in India 8 - 10
5 The Indian Ferroalloy Industry – Prospects 11 - 19
6 FerroAlloys – Importance of Power 20
6 Indian Power Shortage is Achilles Heel of the Ferroalloy Industry 21
7 Power Problems 22-28
8 Impact on the Indian Ferroalloy Industry 29
3

4. 9 July 2013 / Prabhash Gokarn
Annexures
Sl No Content Page
1 Inputs to Steel Making 33
2 Inputs to Steel Making – Cost 34
3
80% of Ferroalloys go into Steelmaking
35
4 Rising Proportion of Steel is Made in India 36
5 Steel Use & Economic Growth 37
6 Indian FerroAlloy Industry 38
4

5. 9 July 2013 / Prabhash Gokarn
INDIAN ELECTRIC POWER
SITUATION
PART - 1

6. 9 July 2013 / Prabhash Gokarn
Basic Statistics
India Power Situation :
Installed capacity : 1.37 GW in Aug1947
: 156 GW in Jan 2010
: 257 GW in Jan 2013
Current Average growth in electricity demand
: 10% CAGR
India is world’s 5th largest electricity producer
Per capita energy consumption : 778 kWh (2013)
6

7. 9 July 2013 / Prabhash Gokarn
Electricity Statistics
Sector MW %age
State Sector 86,343.35 40.77
Central Sector 62,963.63 29.73
Private Sector 62,459.24 29.49
Total 2,11,766.22
Fuel MW %age
Total Thermal 141713.68 66.91
Coal 121,610.88 57.42
Gas 18,903.05 8.92
Oil 1,199.75 0.56
Hydro (Renewable) 39,416.40 18.61
Nuclear 4,780.00 2.25
RES** (MNRE) 25,856.14 12.20
Total 2,11,766.22 100.00
7

8. 9 July 2013 / Prabhash Gokarn
Power Generation : Sources
Captive,
32, 12%
Utility,
225, 88%
Captive & Utility
8

9. 9 July 2013 / Prabhash Gokarn
Power Demand
• India's industrial demand accounted for 35% of electrical power
requirement, domestic household use accounted for 28%, agriculture 21%,
commercial 9%, public lighting and other miscellaneous applications
accounted for the rest.
• The electrical energy demand for 2016–17 is expected to be at least 1392
Tera Watt Hours, with a peak electric demand of 218 GW.
• The electrical energy demand for 2021–22 is expected to be at least 1915
Tera Watt Hours, with a peak electric demand of 298 GW.
9

10. 9 July 2013 / Prabhash Gokarn
Power Demand Break up
10
Industrial
35%
Domestic
Household
28%
Agricultur
e
21%
Public
Lighting
9%
Others
7%

11. 9 July 2013 / Prabhash Gokarn
11
PowerGenerationinIndiaisGrowing

12. 9 July 2013 / Prabhash Gokarn
12
Power in India is mostly coal based

13. 9 July 2013 / Prabhash Gokarn
Why Power Demand is Rising Fast
• India's manufacturing sector is growing faster than in the past
• Domestic demand is increasing rapidly as the quality of life for most
Indians improve
• About 125,000 villages are getting connected to India's electricity grid
• Currently blackouts and load shedding artificially suppresses demand;
could this be soon a thing of the past?
Source : Powering India: The Road to 2017". McKinsey. 2008.
13

14. 9 July 2013 / Prabhash Gokarn
FERROALLOY INDUSTRY
IN INDIA
PART - 2

15. 9 July 2013 / Prabhash Gokarn
Ferroalloys
• Used for manufacture of all steels and accounts for 8%(for plain carbon steel) to
30%(for stainless steel) of steel making cost.
• Ferroalloys are used in the production of steel (as deoxidants, for refining and for
alloying).
• The principal functions of alloying steel is for increasing its resistance to corrosion
and oxidation, improving hardenability, tensile strength, high temperature
properties (such as creep strength), wear and abrasion resistance, etc.
• Bulk Ferroalloys (viz. Ferro Manganese, Ferro Silico Manganese, Ferro Silicon,
Ferro Chrome, etc., manufactured through Submerged Arc furnaces).
• Ferroalloy manufacturing is power intensive
15

16. 9 July 2013 / Prabhash Gokarn
Ferroalloy Manufacture needs Electricity
Sl No Ferro Alloy Electricity Needed
1 FerroChrome 4300 kWh/MT
2 Ferro Manganese 2800 kWh/MT
3 Silico Manganese 4200 kWh/MT
4 Ferro Silicon 9000 kWh/MT
…and lots of it!!
16

17. 9 July 2013 / Prabhash Gokarn
Indian Ferroalloy Industry
17

18. 9 July 2013 / Prabhash Gokarn
18
Indian Ferroalloy Industry : Growing At Over 12% CAGR

19. 9 July 2013 / Prabhash Gokarn
19
Exports from India Growing over 20% CAGR

20. 9 July 2013 / Prabhash Gokarn
20
Significant Growth in Domestic Demand for Ferroalloys

21. 9 July 2013 / Prabhash Gokarn
21
Leading to Projected Increase in Ferroalloy Production

22. 9 July 2013 / Prabhash Gokarn
22
1 Ability to immediately scale up :
•Large Capacity for Ferroalloys
•Industry currently operating at 60% of rated capacity
•New capacities coming up - near ports (Vizag, Haldia).
2 Location near high growth regions:
•Freight advantage in markets such as China, Korea and Japan compared to
Ukraine, Kazakhstan and South Africa
•Short sailing time, freight advantage
3 Cost Advantages over China:
•Domestically sourced LG & MG Mn Ore available for blending with imported HG
Mn Ore.
•Power, labour and inland freight costs comparable to China.
Ferroalloy Industry : Advantage India (1)

23. 9 July 2013 / Prabhash Gokarn
23
Ferroalloy Industry : Advantage India(2)
4. Backward linkage to Ore:
Chrome Ore - Indigenous Chrome ore of high grade quality available
Manganese Ore – Low and medium grade Manganese ores abundantly available
but need to be sweetened by import of high ore.
5 Reductants :
Coke : Increasing use of indigenous coke/coal for ferro alloy making has helped
the industry to mitigate the high cost of imported LAM Coke. Slowing GDP growth
in China has prompted the Chinese government to withdraw Export Tax on Coke.
6 Rising domestic consumption of ferroalloys :
The projected ~8% growth in carbon steel and ~10% growth in stainless steel
production augurs well for the ferroalloy industry in India.

24. 9 July 2013 / Prabhash Gokarn
24
Ferroalloy Industry : Importance of Power

25. 9 July 2013 / Prabhash Gokarn
IMPACT OF THE
INDIAN POWER SHORTAGE
PART - 3

26. 9 July 2013 / Prabhash Gokarn
Indian Power Shortage is Achilles Heel of the Ferroalloy Industry
• Power Shortage due to lower generation
• Non - Availability of Thermal Coal resulting in further shortage
• The Electric Transmission Grid is Collapsing
• Rising prices of fossile fuels – inevitable rise in power cost : will ferroalloy
industry remain profitable ?
• Nuclear Power in India – Controversial
• Transmission & Distribution Losses – who pays ?
26

27. 9 July 2013 / Prabhash Gokarn
27
POWER SHORTAGE
Indiatosee 6.7% shortage this fiscal
• In 2012-13, the energy shortfall touched 8.7 per cent while peak shortage
reached 9 per cent.
• Overall, energy shortfall is expected to be 70,232 million units, resulting in
a deficit of 6.7 per cent this fiscal.
• The requirement would be 10,48,533 million units whereas the availability
is pegged at 9,78,301 million units.
• Transmission constraints between Northern-North Eastern-Eastern-
Western - Southern Regional Grid restricts flow of power.
• The strains on India’s electricity network brutally exposed last summer
when the grid collapsed for the best part of two days across north India -
the world’s biggest power cut.

28. 9 July 2013 / Prabhash Gokarn
306.2
82.4
66.6
63.9
38.2
India
Nigeria
Bangladesh
Congo
Tanzania
POWER SHORTAGE
People WithoutAccess To Electricity, Mn
Source : FT 31-May-13
28

29. 9 July 2013 / Prabhash Gokarn
29
POWER SHORTAGE
Non - Availability of Thermal Coal
• Thermal Coal supply by Coal India severely restricted – mines not expanded
in time to take care of explosion in demand from the power sector.
• Overpricing of coal & poor coal quality of coal supplied by Coal India
• Mine stoppages due to flooding etc lead to severe seasonal shortages.
• Imported coal from Indonesia – rising coat and decreased availability.
Restrictions on foreign ownership of coal mines & export of thermal coal –
how long will the party last?
• 60% of power generated in India comes from burning coal. Isn’t over
dependence on thermal coal for power a dangerous situation?
• Many delayed projects due to lack of coal ….

30. 9 July 2013 / Prabhash Gokarn
30
Delayed Indian Industrial Projects
Source : FT 31-May-13
Power
51%
Metals
20%
Roads
18%
Oil & Gas
7%
Mining
3%
Others
1%
Where is the coal?

31. 9 July 2013 / Prabhash Gokarn
• Despite abundant reserves of coal, India faces a severe shortage of coal - India
isn't producing enough to feed its power plants.
• Coal India, is constrained by primitive mining techniques and is rife with theft
and corruption; Coal India has consistently missed production targets and
growth targets.
• Poor coal transport infrastructure has worsened these problems.
• Most of India's coal lies under protected forests or designated tribal lands. Any
mining activity or land acquisition for infrastructure in these coal-rich areas of
India, has been rife with political demonstrations, social activism and public
interest litigations.
Coal Problems ....
31

32. 9 July 2013 / Prabhash Gokarn
• Poor pipeline connectivity and infrastructure to harness India's abundant coal
bed methane and shale gas potential.
• The giant new offshore natural gas field has delivered less fuel than projected.
India faces a shortage of natural gas.
• Hydroelectric power projects in India's mountainous north and northeast regions
have been slowed down by ecological, environmental and rehabilitation
controversies, coupled with public interest litigations.
• India's nuclear power generation potential has been stymied by political activism
since the Fukushima disaster in Japan.
• Average transmission, distribution and consumer-level losses exceeding 30%
which includes auxiliary power consumption of thermal power stations, etc.
Other Problems of the Power Sector
32

33. 9 July 2013 / Prabhash Gokarn
Power has the greatest impact on FerroAlloy
Production Cost
…..and India has the highest power cost
33

34. 9 July 2013 / Prabhash Gokarn
THE POWERLESS
FERROALLOY INDUSTRY OF
INDIA
PART - 4

35. 9 July 2013 / Prabhash Gokarn
35
FerroalloyIndustry–PowerlessinIndia?
Power Cuts
Reduces Production
– increases cost
UNEMPLOYMENT

36. 9 July 2013 / Prabhash Gokarn
Ways Out
• Renewal Power Generation : Wind, Solar, Tidal : Power generation from
renewable sources worldwide will exceed that from gas and be twice that from
nuclear by 2016
• Hydraulic fracturing technology and shale gas production – applications in
India?
• Coal Bed Methane and power from low rank coals, semi coals etc.
• Energy Conservation : better technology, more efficient furnaces, reduction in
transmission losses
36
Pillars of
Energy
Management
Renewable energy
Energy Conservation
Planning Awareness &
Capacity Building
36

37. 9 July 2013 / Prabhash Gokarn
37
is there light at the end of the tunnel?

38. 9 July 2013 / Prabhash Gokarn
ANNEXURES
PART - 5

39. 9 July 2013 / Prabhash Gokarn
Annexures
Sl No Content Page
1 Inputs to Steel Making 33
2 Inputs to Steel Making – Cost 34
3
80% of Ferroalloys go into Steelmaking
35
4 Rising Proportion of Steel is Made in India 36
5 Steel Use & Economic Growth 37
6 Indian FerroAlloy Industry 38
39

40. 9 July 2013 / Prabhash Gokarn
Inputs to Steel Making
40

41. 9 July 2013 / Prabhash Gokarn
Inputs to Steel Making - Cost
41

42. 9 July 2013 / Prabhash Gokarn
80% of Ferroalloys go into Steelmaking
42

43. 9 July 2013 / Prabhash Gokarn
Rising Proportion of Steel is Made in India
43

44. 9 July 2013 / Prabhash Gokarn
Steel Use & Economic Growth
44

45. 9 July 2013 / Prabhash Gokarn
45
Indian FerroAlloy Industry

46. 9 July 2013 / Prabhash Gokarn
4
Investment in Sustainable Energy
46

47. 9 July 2013 / Prabhash Gokarn
4
Investment in Low Carbon Growth
47

48. 9 July 2013 / Prabhash Gokarn
48