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Following the blanket ban on iron ore mining in Karnataka and Goa, London-based billionaire Anil Agarwal’s Sesa Goa Ltd has started the process of deferment of salaries and moving employees to other group companies to cut down costs.
“The only means of protecting the company is by getting back the right to mine. Now the challenge is how to optimise the fixed cost and fund it,” Prasun K. Mukherjee, Managing Director of Sesa Goa, told Business Line .
Last October, the Supreme Court suspended mining in Goa. A similar ban is in effect in Karnataka. However, the apex court in September allowed 18 mines that were found not involved in any illegal activity, to operate.
COST and EMPLOYEES
Mukherjee said they have not axed any employee till now. “We have asked some employees, who don’t have regular work, to sit at home. This helps us cut costs on transport, canteen, etc. But they are already feeling the pressure. They are not getting overtime or production incentives. There are huge uncertainties.”
Before the ban on mining was implemented, Sesa Goa had employed nearly 4,500 people. Of these, about 800 were engaged in metallurgy, pig iron plant, coke and power business; 400 were engaged in mining in Karnataka, and 3,300 were posted in Goa. “In the last five-six months, about 300 people have been shifted to other group companies. In these companies, new recruitments have stopped,” the MD said. Some of the other group companies in India are Vedanta Aluminium, Sterlite Industries (India), Hindustan Zinc and Cairn India.
In addition, Sesa Goa has started deferment of 10-25 per cent of take-home pay every month for the managerial staff. For instance, if an employee’s take-home salary is more than Rs lakh a month, he is being paid 25 per cent less.
“After taking all austerity measures, we have a fixed cost of Rs 25 crore for the iron ore business in Karnataka and Goa, excluding the interest cost,” Mukherjee said.
Sesa Goa has debts of nearly Rs 4,000 crore as on December 31. The Vedanta Group company has a full-year mining capacity of nearly 14 million tonnes of iron ore from Goa, most of which is exported. In 2012-13, Sesa Goa’s offtake from Goa was around 3.7 million tonnes.
In Karnataka, it has the capacity to mine 6 million tonnes a year. However, it is capped at 2.3 million tonnes.
Sesa Goa hopes the mining ban on some of its Category-B mines in Karnataka will be lifted “shortly” and it can resume limited operations. Since exporting of iron ore from the State is not allowed, if the mines do start operating, they will have to sell through e-auctions.
EXPORTS
Currently, the miner has announced force majeure for exports. Sesa Goa feels that even if it starts exporting after the ban is lifted in Goa, it will be difficult to regain the lost market.
“It is very difficult, if not impossible, to get back the market, particularly sophisticated markets such as South Korea, Japan and Europe. The mills have changed their blending plans. It will be very difficult to supply to them from the first day,” said Mukherjee.
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