MUMBAI | May 20, 2015: Vedanta India's new chief for the iron ore business has his task cut out. Kishore Kumar, who was moved from Africa to Goa three months back, has been asked to bring back the "lost glory" of the business, which was once one of the biggest cash generating arms of the mining conglomerate.
Vedanta's iron ore production in Goa was completely shut down in 2012 following the investigation into the Goa's mining scam. The business, which made a profit of more than Rs 2,000 crore in 2012 and Rs 4,000 crore a year before, has already lost three years of business in a commodity up cycle Mining is expected to resume by end of this year in Goa, but within a tight regulatory mining limit and rules. Costs have soared while iron ore prices have plummeted.
"Our priority is to bring back the lost glory of Sesa Goa," Kumar told ETin his first interview after taking charge of business in February. "Lot of discussions are there with stakeholders; right from employees, suppliers, contractors to barge operators and truck operators." Vedanta's iron ore business was earlier known as Sesa Goa before the mega merger in 2013.
Kumar wants to cut down the cost of mining iron ore to at least 20% to below $20 a tonne against $25 a tonne spent before the mining ban, and to do that, he has begun discussions with stakeholders to figure out ways to cut costs. Regarding employees, Kumar said some have chosen for separations and voluntary retirements, while many have been redeployed at other mining businesses of the conglomerate Vedanta has started negotiations regarding a voluntary retirement scheme for its workers in Goa, according to two people familiar with the matter, who did not want to be named. The company has offered to pay workers 45 days of pay for every year they have worked with the company.
Unions have demanded 75-90 days of pay. Kumar has been known for taking tough decisions regarding layoffs and restructuring the struggling business of Konkola Copper Mines in Zambia. He gained notoriety for his announcement two years back to fire 1529 workers, which was later retracted after the Zambian government threatened to revoke the company's mining licence. He was the CEO of Vedanta Base Metals: Africa, Ireland & Australia before moving to Goa.
"We have to manage costs of doing business and also manage all issues beyond us. Our scale of operation is absolutely zero. So how do we bring back the scale that India used to have?" said Kumar, who is hoping the mining limit of 20 million tonne will be raised.
Kumar is also looking to raise the quality of iron ore produced in Goa, given the China market for low grade iron ore no longer exists. With the fall in iron prices to almost half, good quality ore is available from Brazil, Australia and South Africa at attractive prices.
"You also have to play the scale game, bring up the quality. You know Goa is a low grade iron producer. We have to raise our grades to 56-58% ferrous content. That is where we will be able to bring our costs down. Should government allow us to raise scale and volumes, we will certainly be very comfortable," Kumar said.
Vedanta has a small iron ore operation of 3 mt in Karnataka as well, which too was affected by the mining ban in the state.
(Source: http://economictimes.indiatimes.com/)