A Study on Capital Budgeting of NMDC Kirandul

A Project Report Submitted in Partial Fulfillment of the Requirement for the Award of the
degree of

B.Com Hons. ACCA

Submitted By

Ankita Sahu
Reg.No: VU22MGMT0300029
(2022 – 2025)

Under the guidance of

Dr.G.V.K.Kasthuri
Associate Professor
HOD/Area Chair - Accounting & Finance Department

GITAM School of Business

GITAM (DEEMED TO BE) UNIVERSITY
Rushikonda

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 Visakhapatnam-530045.

Table of Contents

S.NO TOPIC PAGE NO

Chapter I: Design of the Study
1 Introduction & objectives of the study 04 - 13

Chapter II: Industry Profile

2 Introduction to Iron Ore Industry 14 - 19

Chapter III: Company Profile

National Mineral Development
3 20 - 38
Corporation (NMDC)

Chapter IV: Capital Budgeting

4 Concept of Capital Budgeting 39 - 45

Chapter V: Capital Budgeting in NMDC

5 Capital Budgeting in NMDC 47 - 54

Chapter: VI CAPACITY EXPANSION

6 Capacity Expansion of Project 55 - 65

Chapter VII: Financial Viability

7 Financial Viability Analysis 66 - 77
8 Financial Viability Summary 77 -78

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 List of tables
Table 2.1 Production Profile………………………………………………….………………………30
Table 2.2 Consolidated Balance sheet for FY 2022-23………………………………………………31
Table 2.3 Consolidated Statement of Profit & Loss for FY 2022-23………………………………...32

Table 2.4 Statement of Changes in Equity for FY 2022-23………………………………………………………………33

Table 2.5 Research And Development ………………………………………………………..………………………………….41

Table 3.1 Demand And Supply of Iron Ore…………………………………………………………………..…………………54

Table 3.2 Production data…………………………………………………………………………………………..………………….54

Table 3.3 Iron Ore Grades……………………………………………………………………………….……………………………..56

Table 3.4 Iron Ore Reserves………………………………………………………………………..………………………………...57

Table 3.5 Equipment’s…………………………………………………………………………………………………………………..59

Table 3.6 Cost of Production…………………………………………………………..…………………………………………….60

Table 3.7 Interpretations………………………………………………………………………………………………………………71

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 CERTIFICATE

This is to certify that the Internship Report entitled

“ A Study on Capital Budgeting of NMDC Kirandul ”

is a genuine and bonafide work prepared in partial fulfillment of the requirements of

B.Com Hons. ACCA degree of GITAM (Deemed to be) University, Visakhapatnam

was carried out by Mr./Miss. Ankita Sahu , Reg No.VU22MGMT0300029 under my

guidance and supervision.

Visakhapatnam

Date:
[Signature of Guide]

Dr.G.V.K.Kasthuri

Ankita Sahu 4
 DECLARATION

I hereby declare that the project work/Internship report entitled

“ A Study on Capital Budgeting of NMDC Kirandul

” is an original report submitted by me for the partial fulfilment of the award of degree B.Com

Hons. ACCA , GITAM Deemed to be University, Visakhapatnam and it is not submitted

anywhere either in part or in full for degree or post graduation of any university.

Place: Visakhapatnam
Date:
Signature of the student

Ankita Sahu
VU22MGMT0300029

Ankita Sahu 5
 CHAPTER - 1
Design of Study-Capital Budgeting

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Design of Study-Capital Budgeting

1. Introduction

Capital expenditure is outlay of cash for a project that is expected to produce a cash
inflow over a period of time exceeding one year. Examples of projects include
investments in property, plant, and equipment, research and development projects,
large advertising campaigns, or any other project that requires a capital expenditure
and generates a future cashflow.

Because capital expenditures can be very large and have a significant impact on the
financial performance of the firm, great importance is placed on project selection.
This process is called capital budgeting.

1.1Capital Budgeting – Definition

Capital budgeting (or investment appraisal) is the planning process used to

determine whether a firm's long term investments such as new machinery,
replacement machinery, new plants, new products, and research development
projects are worth pursuing. It is budget for major capital, or investment,
expenditures.

Many formal methods are used in capital budgeting, including the techniques
such as

 Accounting rate of return

 Net present value
 Profitability index
 Internal rate of return
 Equivalent annuity

These methods use the incremental cashflows from each potential investment or project.
Techniques based on accounting earnings and accounting rule are sometimes used - though
economists consider this to be improper - such as the accounting rate of return, and "return

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on investment." Simplified and hybrid methods are used as well, such as payback period and
discounted payback period

1) Accounting rate of return

Accounting rate of return, also known as the Average rate of return, or ARR is a financial
ratio used in capital budgeting. The ratio does not take into account the concept of time
value of money. ARR calculates the return, generated from net income of the proposed
capital investment. The ARR is a percentage return. Say, if ARR = 7%, then it means that the
project is expected to earn seven rupees out each rupee invested. If the ARR is equal to or
greater than the required rate of return, the project is acceptable. If it is less than the
desired rate, it should be rejected. When comparing investments, the higher the ARR, the
more attractive the investment.

2) Net Present Value

In finance, the net present value (NPV) or net present worth (NPW} of a time series of cash
flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the
individual cash flows. In the case when all future cash flows are incoming (such as coupons
and principal of a bond) and the only outflow of cash is the purchase price, the NPV is simply
the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central
tool in discounted cash flow (DCF) analysis, and is a standard method for using the time
value of money to appraise long-term projects. Used for capital budgeting, and widely
throughout economics, finance, and accounting, it measures the excess or shortfall of cash
flows, in present value terms, once financing charges are met.
The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or
discount curve and outputting a price; the converse process in DCF analysis - taking a
sequence of cash flows and a price as input and inferring as output a discount rate (the
discount rate which would yield the given price as NPV) – is called the yield
Formula:

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Each cash inflow/outflow is discounted back to its present value (PV). Then they are
summed. Therefore NPV is the sum of all terms,

t - The time of the cashflow

i - The discount rate (the rate of return that could be earned on investment in the financial
markets with similar risk.)
Rt- the net cashflow (the amount of cash, inflow minus outflow) at time
t
- For educational purposes, R0 is commonly placed to the left of the sum to emphasize its
role as (minus) the investment.
The result of this formula if multiplied with the Annual Net cash in-flows and reduced by
Initial Cash outlay will be the present value but in case where the cash flows are not equal in
amount then the previous formula will be used to determine the present value of each cash
flow separately. Any cash flow within 12 months will not be discounted for NPV purpose.

3) Profitability index
Profitability index (PI], also known as profit investment ratio (PIR} and value investment ratio
(VIR), is the ratio of investment to payoff of a proposed project. lt is a useful tool for ranking
projects because it allows you to quantify the amount of value created per unit of
investment.
The ratio is calculated as follows:

Assuming that the cashflow calculated does not include the investment made in the project,
a profitability index of 1 indicates breakeven. Any value lower than one would indicate that
the project's PV is less than the initial investment. As the value of the profitability index
increases, so does the financial attractiveness of the proposed project.

Rules for selection or rejection of a project:

• lf Pl > 1 then accept the project.
• lf Pl < 1 then accept the project.

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For example, given:
• Investment = 40,000
• life of the Machine =5 Years
CFAT Year CFAT
1 18000
2 12000
3 10000
4 9000
5 6000
Calculate Net present value at 10% and PI:
Year CFAT PV@10% PV
1 18000 0.909 l6362
2 12DO0 0.827 9924
3 10000 0.752 7520
4 9000 0.683 6147
5 6000 0.681 3726
Total present value 43679
(-J Investment 40000
NPV 3679
PI = 43679/ 40000
=1.091
= >1
= Accept the project.

4) The internal rate of return

The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and
compare the profitability of investments. It is also called the discounted cash flow rate of
return (DCFROR) or simply the rate of return (ROR).In the context of savings and loans the

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IRR is also called the effective interest rate. The term internal refers to the fact that its
calculation does not incorporate environmental factors (e.g., the interest rate or inflation).
Definition:
Showing the position of the IRR on the graph of NPV(r) (r is labeled 'i' in the graph)
The internal rate of return on an investment or project is the "annualized effective
compounded return rate" or discount rate that makes the net present value of all cash flows
(both positive and negative) from a particular investment equal to zero.
In more specific terms, the IRR of an investment is the interest rate at which the net present
value of costs (negative cash flows) of the investment equals the net present value of the
benefits (positive cashflows) of the investment.
Internal rates of return are commonly used to evaluate the desirability of investments or
projects. The higher a project's internal rate of return, the more desirable it is to undertake
the project. Assuming all other factors are equal among the various projects, the project
with the highest IRR would probably be considered the best and undertaken first.
A firm (or individual ) should, in theory, undertake all projects or investments available with
IRRs that exceed the cost of capital. Investment may be limited by availability of funds to the
firm and/or by the firm's capacity or ability to manage numerous projects.

Uses:
Important: Because the internal rate of return is a rate quantity, it is indicator of the
efficiency, quality, or yield of an investment. This is in contrast with the net present value,
which is an indicator of the value or magnitude of an investment.
An investment is considered acceptable if its internal rate of return is greater than an
established minimum acceptable rate of return or cost of capital. In a scenario where an
investment is considered by a firm that has equity holders, this minimum rate is the cost of
capital of the investment (which may be determined by the risk-adjusted cost of capital of
alternative investments). This ensures that the investment is supported by equity holders
Rince, in general, an investment whose IRR exceeds its cost of capital adds value for the
company (i.e., it is economically profitable).

Formula:
Given a collection of pairs (time, cash flow) involved in a project, the internal rate of return
follows from the net present value as a function of the rate of return. A rate of return for
which this function is zero is an internal rate of return.
Given the (period, cash flow) pairs (n, Cn ) where n is a positive integer, the total number of
periods N, and the net present value NPV, the internal rate of return is given by r in:

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 5) Equivalent annual coat
In finance the equivalent annual coat (EAC) is the cost per year of owning and operating an
asset over its entire lifespan. EAR is often used as a decision-making tool in capital budgeting
when comparing investment projects of unequal lifespan. For example if project A has an
expected lifetime of 7 years, and project B has an expected lifetime of 11 years it would be
improper to simply compare the net present values (NPVs) of the two projects, unless
neither project could be repeated.
EAC is calculated by dividing the NPV of a project by the present value of annuity factor.
equivalently, the NPV of the project may be multiplied by the loan repayment factor.

The use of the EAC method implies that the project will be replaced by an identical project.

Concept of Capital budgeting

The term “capital budgeting” refers to long term planning for proposed capital outlays and
their financing. Thus it includes both rising of long term funds as well as their utilization. It
may thus be defined as “the firms formal process for the acquisition and investment of
capital”. It is the decision-making process by which the firms evaluates the purchase of
major fixed assets. It involves firm's decision to invest its current funds for addition,
disposition, modification, and replacement of long term or fixed assets. However it should
be noted that investment in fixed assets is also to be taken as a capital budgeting decision.

Ex: A new distribution system may call for both new warehouse and an additional
investment in investors. An investment proposal of this nature must be taken as capital
budgeting decision evaluated as a single package but not as an investment in a fixed asset |
i.e. warehouse) and in a current asset (investment) separately.

Capital budgeting is a many sided activity. It includes searching for DE 1:1 kind of more
profitable investment proposals, investment engineering and marketing consideration to

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predict the consequence of accepting the investment and making economic analysis to
determine the profit of each investment proposal.

 Its basic feature can be summarized as follows:

 It has potentially of making large anticipated profits.
 It involves a high degree of risk

 It involves a relatively long-term period between the initial outlay arid the anticipated
return.

On the basis of the above discussions it can be concluded that capital budgeting consists in
planning the development of available capital for the purpose of maximizing the long term
profitability of the firm.

The Capital budget evaluation process

Many companies follow a carefully prescribed process in capital budgeting. The process
usually includes the following steps:

Project proposals are requested from department's plants and authorize capital budgeting.
Capital expenditure is an outlay of cash for a project that is expected to produce a cash flow
over a period of time exceeding one year. Ex: Investments in property, plant, and equipment,
research and development projects, large advertising company, or any other project that
requires a capital expenditure and generates a future cash flow. Because capital
expenditures can be very large and have a significant impact on the financial performance of
the firm, great importance is placed on project selection. This process is capital budgeting.

Criteria for capital budgeting decision:

Potentially there is a wide array of criteria for selecting projects. Some shareholders may
want the firm to select project that will show immediate surge in cash inflow, others may like
to get long term growth with little importance on short-term performance.

Viewed in this way, it would be quite difficult to satisfy the differing interests of all the
shareholders. Fortunately, there is a solution. The goal of the firm is to maximize present
shareholder value. This goal implies that projects should be undertaken that result in a
positive net present value of the required capital expenditure.

Using Net Present Value (NPV) as a measure, capital budgeting involves selecting those
projects that increase the value of the firm because they have a positive NPV. The timing and
growth rate of the incoming cash flow is important only to the extent of this on NPV.

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Using Net Present Value (NPVJ as the criterion by which to select projects assumes efficient
capital markets so that the film has access to whatever capital is needed to pursue the
positive NPV projects. In situation where this is not the case, there may be capital budgeting
process becomes more complex. Note that it is not the responsibility of the firm to decide
whether to please particular groups of share holders who prefer longer or shorter term
results.

Once the firm has selected the projects to maximize its net present value, it is up to the
individual shareholders to use capital markets to borrow or lend in order to move the exact
timing of their own cash inflows forward or backward. This idea is crucial in the principal-
agent relationship that exists may have their own individual preference. The common goal is
that of maximizing the present value of the corporation.

Objectives of a capital budgeting:

 It determines the capital projects which can be started during the budget after taking
into account their urgency and the expected rate of return on each project.
 It estimates the expenditure that would have to be incurred on capital projects
approved by the management together with the source from which the required
funds would be maintained.
 It restricts the capital expenditure on projects within authorized limits.

Importance of capital budgeting:

Capital budgeting decisions are most crucial and crucial business architectures. Special care
should be taken in making these decisions on account of the following reasons.

Involvement of heavy funds

Capital budgeting decisions require large capital outlays. It is therefore absolutely necessary
that the firm should carefully plan its investment programs so that it may get the finances of
the right time and they are put to most profitable use. An opportune investment decision
can give spectacular results and on the other hand an ill-advised and incorrect decision can
jeopardize the survival of even the biggest firm.

Long term implications

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The long term feel the effect of capital budgeting decision over a long period and therefore
they have a decisive influence on the rate and direction of the growth of the firm.

For example, if a company purchases a new plant for manufacture of a new product. The
company commits itself to sizable amount of fixed cost in terms of indirect labor such as
supervisory staff salary and indirect expenses such as rent etc. in case the product does not
come out or came out but proves to be unprofitable, the company will have to bear the
burden of fixed cost unless it decide to write off the investments completely as a wrong
decision. Therefore it can prove disastrous for the long-term survival of the firm.

Similarly inadequate investment in assets would make it difficult for the firm to run the
business in the long run just as an unwanted expansion.

Irreversible decisions

In most cases capital budgeting decisions are irreversible. This is because it is very difficult to
find a market for the capital assets. The only alternative will be to scrap the capital assets so
purchased or sell than to incur a substantial loss in the event of the decision proved wrong.

The capital budgeting decision require an assessment of future events, which are uncertain.
It is really a difficult task to estimate the future events, the profitable benefits and costs
accurately in quantitative terms because of economic, political, social and technological
factors.
On account of these reasons capital expenditure decisions are the class of division, which is
best, reserved for consideration by the highest level of management. In case some parts of it
are delegated, a system of effective control by the top management has to be evolved.

It has already been said that the firm capital budgeting include both planning for proposed
capital outlays and their financing. However in this chapter we are not dealing with selection
of a particular project out of several alternative projects available. Thus my study is
restricted to the process of deciding whether or not to commit resources to a project whose
benefits costs is in consonance with the profit maximization.

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Need/Significance of study

Why we should opt for a Capital Budget?

Here are five good reasons why we should switch to a Capital Budget instead of the usual
one that focuses primarily on revenue-related issues:
First, every economic entity has a capital budget, be it unstated and implicit (like a
household or kirana shop) or stated and explicit like in the case of a company or an R&D lab.
As the size and complexity of operations increase, it becomes all the more necessary for an
economic entity to structure, implement and review a capital budget. A nation-state is the
most evolved form of economic entity, and therefore needs a capital budget. We in India
certainly need one.
Second, there seems to be an obsessive interest in a 'revenue' budget. The annual tamasha
surrounding the end-February presentation of the Union Budget reinforces the feeling that
our economic pundits, commentators and critics are not able to step out of this frame of
reference and demand a 'capital budget'.
Third, a capital budget provides a full perspective. A lack of appreciation of the nation's
capital needs may have derailed us. An obsession with the revenue books has led India up
the path of minimum investment in the country's infrastructure with an abysmal figure of
close to 3.5 per cent of the GDP for about three decades. Debate and discussion on a
publicly declared capital budget may have averted this serious under-investment.
Four, revenue and capital budgets are obviously inter-related just ae a profit and loss
account and balance sheet are. Surpluses and allocations from the revenue budget go
towards capital investments. Similarly, the servicing of long-term capital features in the
revenue budget.
Five, a capital budget should be made understandable to the people. Just as the television-
viewing public has over the years gained appreciation of the nuances of the revenue budget
(prices, inflation, deficits, taxes, allocations, subsidies and so on), the language of capital
budgets must also be made simple to the public at large who are today tuned in far more to
economic issues than ever before.

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Criteria for capital budgeting decisions
Potentially, there is a wide array of criteria for selecting projects. Some share holders may
want the firm to select the projects that will show immediate surges in cash inflow, others
may want to emphasize long term growth with little importance on short term performance
viewed in this way, it would be quite difficult to satisfy the differing interests of all the share
holders. Fortunately, there is a solution.
The goal of the firm is to maximize present shareholders value. This goal implies that
projects should be undertaken that result in a positive net present value, i.e., the present
value of the expected cash inflow less (-) the present value of the required capital
expenditures. Using net present values |NPV) as a measure, capital budgeting involves
selecting those projects that increases the value of the firm because they have positive NPV.
The timing and growth rate of the incoming cash flow is important only to the extent of its
impact on NPV.
Using NPV as the criteria by which to select assumes efficient capital markets so that the
firm has access to whatever capital is needed to pursue the positive NPV projects. In
situations where this is not the case, there may be capital rationing and the capital
budgeting process becomes more complex.
Note that it is not the responsibility of the firm to decide whether to please particular group
of shareholders who prefer longer or shorter-term results. Once the firm has selected the
projects to maximize its net present value(NPV), it is up to the individual shareholder to use
the capital markets to borrow or lend in order to move the exact timing of their own cash
inflows forward or backward. This idea is crucial in the principle - agent relationship that
exists between shareholders and corporate managers. Even though each may have their
own individual preferences, the common goal is that of maximizing the present value of the
corporation. While net present value is the rule that always maximizes share holder value,
some firms use other criteria for their capital budgeting decisions, such as internal rate of
return (IRR), Discounting cash flow (DCF) and payback period etc.
The importance of the capital budgeting is an industrial undertaking needs no emphasis. The
present status is confined to the National Mineral Development Corporation (NMDC) (A
Public Sector undertaking ) to analyze how capital budgeting is managed in the organization,
what are the practices adopted and its constraints.

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Objectives of the Study on NMDC's Capital Budgeting
The primary objective of this study is to comprehensively analyze the capital budgeting
practices at NMDC Limited, with a specific focus on understanding the strategic financial
decision-making processes involved in large-scale investment projects such as the Screening
Plant 3 at the BIOM Kirandul Complex. This analysis seeks to uncover the methodologies
employed by NMDC to evaluate potential capital investments, the criteria used for project
selection, and the alignment of these investments with the company's long-term strategic
goals. By delving into the capital budgeting process, the study aims to highlight how NMDC
ensures optimal allocation of financial resources to enhance operational efficiency,
productivity, and profitability.

Another key objective is to evaluate the risk management strategies associated with
NMDC's capital budgeting decisions. Given the substantial financial commitment involved in
capital projects, it is crucial to understand how NMDC identifies, assesses, and mitigates
potential risks. This includes examining the company's approach to handling market
fluctuations, regulatory changes, technological advancements, and environmental concerns.
The study aims to provide insights into NMDC's risk assessment frameworks and the
effectiveness of its contingency planning in safeguarding investments against unforeseen
challenges.

The study also aims to investigate the financial performance implications of NMDC's capital
budgeting decisions. By analyzing various financial metrics such as return on investment
(ROI), net present value (NPV), and internal rate of return (IRR), the study seeks to assess
the profitability and viability of major capital projects. Additionally, the research will explore
the impact of these investments on NMDC's overall financial health, including liquidity,
leverage, and capital structure. Through this financial performance analysis, the study will
provide a clear picture of how capital budgeting decisions contribute to NMDC's sustainable
growth and value creation.

In addition to financial performance, the study will examine the technological and
infrastructural advancements facilitated by NMDC's capital investments. This involves
understanding the role of cutting-edge technologies and modern infrastructure in improving
operational processes, reducing costs, and enhancing production capabilities. The study will
highlight specific technological innovations adopted in recent capital projects and their
impact on the company's competitive edge in the mining industry. By doing so, the research

Ankita Sahu 18
aims to showcase how NMDC leverages capital budgeting to drive technological progress
and maintain its leadership position in the sector.

Finally, the study aims to provide recommendations for enhancing NMDC's capital
budgeting practices. Based on the findings from the analysis, the study will identify areas for
improvement and propose strategies to optimize the capital budgeting process. This
includes suggestions for adopting best practices, enhancing stakeholder engagement, and
leveraging advanced analytical tools for better decision-making. The ultimate goal is to
provide actionable insights that can help NMDC refine its capital budgeting strategies,
ensuring more effective allocation of resources and achieving long-term business objectives.

The scope of study

NMDC Limited’s capital budgeting encompasses a multifaceted examination of the
company’s strategic financial planning and investment decisions. NMDC, as one of India’s
leading public sector undertakings in the mining sector, undertakes significant capital
projects that require meticulous planning, analysis, and execution. This study aims to delve
into the intricate processes involved in capital budgeting at NMDC, evaluating how these
investments align with the company’s long-term objectives, operational efficiencies, and
growth aspirations. The scope includes analyzing historical data, current financial health,
and projected economic conditions to assess the feasibility and potential returns of various
capital projects.

A critical component of the study will focus on the methodologies and frameworks
employed by NMDC in capital budgeting. This includes understanding the techniques used
for project evaluation such as Net Present Value (NPV), Internal Rate of Return (IRR),
Payback Period, and Cost-Benefit Analysis. By dissecting these methodologies, the study will
provide insights into the decision-making processes that guide the allocation of substantial
financial resources. Additionally, the study will explore the role of risk assessment and
management in capital budgeting, examining how NMDC identifies, evaluates, and mitigates
potential risks associated with large-scale investments.

The study will also extend to the organizational structure and governance mechanisms that
oversee capital budgeting at NMDC. This involves an in-depth look at the roles and
responsibilities of various departments and committees involved in the budgeting process,
including finance, operations, and strategic planning teams. By mapping out these
interactions, the study aims to highlight the collaborative efforts required to ensure that
capital projects are not only financially viable but also aligned with the company’s strategic
goals and regulatory requirements.

Moreover, the scope of study includes an analysis of specific capital projects undertaken by
NMDC, such as the development of new mining facilities, upgrading existing infrastructure,
and investments in technology and innovation. Case studies of notable projects will be
examined to understand the practical applications of capital budgeting principles and the
outcomes achieved. This will provide a real-world context to the theoretical aspects of

Ankita Sahu 19
capital budgeting, illustrating the challenges and successes experienced by NMDC in its
pursuit of growth and sustainability.

Finally, the study will address the impact of capital budgeting decisions on NMDC’s overall
financial performance and shareholder value. This encompasses a comprehensive review of
financial statements, key performance indicators, and market responses to capital
investment announcements. The study will evaluate how effective capital budgeting
contributes to enhancing NMDC’s competitive position, operational efficiency, and
profitability. By providing a holistic view of the capital budgeting process, the study aims to
offer valuable recommendations for improving the effectiveness of NMDC’s investment
strategies, ultimately contributing to the company’s long-term success and sustainability in
the dynamic mining industry

Methodology
The research appears to follow a case study methodology, focusing in-depth on the Bailadila
Iron Ore Project: Deposit 14/11C. The study seems to be primarily descriptive in nature,
providing detailed information about the project, its environment, and financial aspects.

Data Sources

The primary data source for this study is internal company documents and records. This
includes:

 Project reports and feasibility studies

 Financial data and cost estimates
 Technical data on mining operations, equipment, and processes
 Environmental impact assessments and related data
 Geological and reserve data

Secondary data sources likely include:

 Government data on iron ore production, demand, and supply

 Industry reports and market analysis
 Climate data
 Information on social infrastructure and demographics of the region

Limitations of the Study

The study, while providing a comprehensive overview of the Bailadila Iron Ore Project, has
certain inherent limitations:

1. Internal Focus: The primary reliance on internal company data might lead to a biased
perspective. External factors, such as competitive pressures, economic fluctuations,
and government policies, might not be fully accounted for.

Ankita Sahu 20
 2. Limited External Validation: The study appears to lack external validation or peer
review. This could potentially limit the generalizability of the findings to other iron
ore projects or the mining industry as a whole.
3. Data Age: The data used in the study appears to be from 2015. Significant changes in
technology, market conditions, and regulatory environment since then could impact
the accuracy and relevance of the findings.
4. Lack of Comparative Analysis: The study focuses solely on the Bailadila project. A
comparative analysis with other similar projects could provide valuable insights into
best practices and potential areas for improvement.
5. Environmental Impact Assessment Focus: While the study includes some
information on environmental impact, a more detailed and in-depth analysis of the
project's ecological footprint and potential mitigation measures would be beneficial.
6. Social Impact Assessment Limitations: The study provides limited information on the
social impact of the project. A more comprehensive assessment of the project's
benefits and drawbacks for local communities would be valuable.

It is important to consider these limitations when interpreting the findings of the study.
Further research, including external data sources and comparative analysis, could provide a
more comprehensive understanding of the project and its implications.

Ankita Sahu 21
 CHAPTER – 2
INDUSTRY AND COMPANY
PROFILE

Ankita Sahu 22
Introduction to Iron ore Industry

Iron Ore mining in India

India has a rich history of commercial iron ore mining dating back nearly 200 years, starting
in 1825 by the East India Company in the Barbil region of Odisha. However, for about a
century, the growth of Indian iron ore mining remained sluggish due to low demand, but the
introduction of the steel industry in 1857 boosted its development. Within a short span,
production rose to an annual average of 1 million tonnes (mt), and India could produce 5 mt
per year by 1900 and 15 mt per year by 1920. The production got a sudden boost from the
Second World War but went through a slump in the early 1950s. The production reached a
level of 25 mt by 1942 and 27 mt by 1946.

With the advent of independence, the country embarked upon the 5-year development
plans. At the beginning of the 1st plan, annual production went up to 30 mt. During this
period, the need for increasing iron ore production efficiently by systematic and scientific
development of the industry was being felt. Setting up of the National Mineral Development
Corporation (NMDC), a Government of India undertaking in 1958, with the mines owned by
the state as its nucleus, was the first major step towards planned development of the Indian
iron ore industry. Along with the Odisha Mining Corporation (OMC), which was already in
operation since 1956 and which became a government company under the control of the
Government of Odisha in 1961, India thus had two government iron ore companies in the
fifties. NMDC and OMC have since played significant roles in the growth and development of
the iron ore mining industry in India.

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Nationalisation of iron ore mines

From its inception, commercial iron ore mining in modern India has been driven by domestic
consumption needs. With the steel industry's growing demand, systematic exploitation of
iron ore reserves, particularly in regions like Karnataka and Odisha, became essential.
Significant capital investment was necessary to meet the burgeoning energy needs.

However, unscientific mining practices adopted by some private owners and poor working
conditions for labor in some private iron ore mines raised concerns for the government. Due
to these reasons, the Central Government decided to nationalize private iron ore mines.
The nationalization occurred in phases, beginning with the large-scale mines in the early
1970s, followed by smaller mines in subsequent years.

The Iron Ore Mines (Emergency Provision) Act of 1971 allowed the government to take over
the management of iron ore mines in the public interest, pending nationalization. This was
followed by the Iron Ore Mines (Nationalization) Act of 1972, under which the iron ore
mines were nationalized and brought under new Central Government Undertakings, such as
the National Mineral Development Corporation (NMDC). Another significant legislation, the
Mines (Taking over of Management) Act of 1973, extended the right of the Government of
India to take over the management of iron ore mines across several states, which led to the
nationalization of these mines on 1.5.1973 with the enactment of the Mines
(Nationalization) Act of 1973. This piece of Central Legislation now determines the eligibility
of iron ore mining in India.

Recognizing the need for new policy initiatives, the government has undertaken measures
to rationalize the legal and regulatory framework governing the future development of the
industry. One key reform is allowing private sector participation in iron ore extraction and
marketing. The ultimate objective of these ongoing measures and others under
consideration is to create a competitive environment for various entities in the industry.
This would not only improve efficiency but also reduce costs, consequently ensuring the
supply of iron ore at lower prices. Competition is also expected to bring in new technology,
addressing the urgent need for innovation in an industry that has suffered prolonged
stagnation in technological advancement.

In a developing country like India, iron ore mining occupies a pivotal place. Iron ore is a basic
input for industries like steel, which is crucial for infrastructure and development. Despite
the growth of alternative resources like recycled steel and synthetic materials, the demand
for iron ore remains significant due to its fundamental role in industrial production.

Iron ore screnario

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Iron ore is a significant contributor to India's mining industry. It accounts for a substantial
portion of the country's total mineral production. India possesses abundant iron ore
reserves, which are vital for its steel industry. India's iron ore reserves are estimated to last
for about 75 years at the current Reserve to Production (R/P) ratio. Globally, iron ore
reserves are expected to last for approximately 56 years.

In India, major iron ore reserves are found in the states of Odisha, Jharkhand, Chhattisgarh,
Karnataka, and Goa. These states play a crucial role in sustaining the country's iron ore
production and supply.

Iron ore resource and quality

According to the 2010 BP Statistical Energy Survey, India had iron ore reserves of 25,249
million tonnes, accounting for 8.1% of the world total. The world's largest iron ore reserves
are held by Australia, Brazil, Russia, China, and India. In 2009-2010, India produced 226.16
MT of iron ore. Indian iron ores are generally of high quality, with an average iron content of
62-65%. Of the reserves, 20% are hematite variety, and the balance is magnetite.

Iron ore production

Through a sustained programme of investment and greater thrust on the application of

modern technologies, it has been possible to raise the production of iron ore from a level of
30 Million Tonnes at the time of Nationalisation (1970) to a production of 230.45 MT during
2009-10. Most of the iron ore production in India comes from open cast mines, which
contribute over 90% of the total production (207.405 MT). Underground mining currently
accounts for around 10% of national output (23.045 MT). Most of the production is achieved
by conventional drilling and blasting methods.

Iron ore is a dominant resource in India, accounting for a significant share of raw materials
used in steel production, with the remainder being used by heavy industry and
infrastructure development. Domestic supplies satisfy most of India's iron ore demand.
According to the 2008 BP Statistical Energy Survey, India's iron ore consumption is
significant due to its extensive industrial use. Unfortunately, most of India's iron ore is
characterized by high silica content, but it has other useful qualities such as low sulfur
content (generally 0.2%), low phosphorus content, and high iron content.

At present, all private mines are allowed to operate only if they are producing iron ore to
supply a specific industry (e.g., steel manufacturing). The only other major iron ore producer
other than NMDC is the Orissa Mining Corporation, which is located in Odisha. OMC has
several mines and produced 30.25 million tons of iron ore in 2009-10.

Organisational structure of iron ore industry

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The iron ore industry in India is predominantly under state control. National Mineral
Development Corporation (NMDC) Limited, a government undertaking, is the largest iron
ore producer in the country, operating mines primarily in Chhattisgarh and Karnataka.
NMDC accounts for a significant portion of India's total iron ore production. Additionally, the
Steel Authority of India Limited (SAIL) and other state-owned enterprises contribute to the
sector. This structured approach ensures a stable and efficient supply of iron ore, critical for
the country's steel industry.

Iron ore production

The iron ore industry is the single largest iron ore-consuming sector, accounting for about
70% of overall consumption, followed by the steel sector (13%). The balance is being
consumed in other industries such as cement, fertilizers, textile, and chemical industries,
etc.

Collaboration in iron ore sector

Technical and financial assistance from erstwhile USSR, UK, Australia, Canada, Germany, and
France is provided in developing the iron ore industry on a continuous basis through joint
working groups of the respective governments and the Government of India.

Reforms in economy and scope of private participation

The scope for private sector participation in the iron ore sector was initiated with
amendments to the existing mining laws, allowing private investment and collaboration in
both existing developed mines and new mine development. A cost-sharing basis has been
envisaged by NMDC Limited with foreign mining companies and mining equipment
manufacturers in developing new mines.

Fifteen mining blocks with the potential to yield 40 million tons per year have been offered
for captive mining. Letters of intent have been issued for the establishment of five iron ore
beneficiation plants with a total installed capacity of 25 million tons per year to private
investors, including foreign investors, under a BOO (Build-Own-Operate) scheme of NMDC.
Global tenders have also been floated by NMDC to develop some existing mines in
collaboration with foreign firms.

Import of iron ore

Imports of iron ore have been increasing every year. The bulk of imported iron ore is
required by steel plants. The domestic iron ore production has not been able to keep pace
with the increase in demand from the steel sector. Import of iron ore required for

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metallurgical purposes cannot be stopped since these are blended with indigenous ore to
improve its quality.

Captive consumption

Private sector companies engaged in the production of iron & steel, cement, and power
generation have been permitted to take up iron ore mining for captive consumption. The
production of captive mines, such as those operated by Tata Steel, Steel Authority of India
Limited (SAIL), and other integrated steel plants, remains limited when compared with the
output of dedicated iron ore mines.

Company Profile: National Mineral Development Corporation

National Mineral Development Corporation

The NMDC Limited (NMDC) is a Government mining company jointly owned by the
Government of India. NMDC's mineral reserves span across various regions of India, with
significant reserves of iron ore and other minerals. The proven geological reserves of NMDC
aggregate to a substantial amount, contributing significantly to India's mineral output.
NMDC is currently operating several mines in the states of Chhattisgarh and Karnataka,
employing a considerable workforce to manage its extensive mining operations.

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a. The growth of the company since inception up to 2024 can be classified in
phases as under.

Initial Phase

In 1958, NMDC Limited was established as a public sector undertaking under the Ministry of
Steel, Government of India, with the primary objective of exploring minerals and producing
raw materials. The initial focus was on the exploration and development of iron ore deposits
in Chhattisgarh and Karnataka. NMDC's first major project was the development of the
Bailadila iron ore deposits in Chhattisgarh.

Expansion Phase (1960s - 1980s)

During the 1960s, NMDC commenced large-scale operations in the Bailadila region. In 1968,
the company opened its first iron ore mine in the Bailadila sector. This was followed by the
development of additional mines in both Chhattisgarh and Karnataka. During this period,
NMDC also began exploring other minerals, including diamonds and magnesite.

Modernization and Diversification (1990s - 2000s)

In the 1990s, NMDC undertook significant modernization and expansion initiatives. The
company invested in state-of-the-art technology to improve mining efficiency and product
quality. NMDC also diversified its operations by exploring minerals like gold and copper.
During this period, the company established itself as the largest iron ore producer in India,
contributing significantly to the country's steel industry.

Global Expansion and Technological Advancements (2010s)

From 2010 onwards, NMDC focused on expanding its global footprint and incorporating
advanced technologies in its operations. The company entered into joint ventures and
strategic alliances with international firms to explore and develop mineral resources
globally. NMDC also invested in research and development to enhance its mining techniques
and environmental sustainability practices.

Recent Developments (2020s)

In the recent decade, NMDC has continued to expand its operations and increase its
production capacity. The company has invested heavily in the development of new mines
and the upgradation of existing ones. NMDC has also focused on sustainable mining
practices and corporate social responsibility initiatives, contributing to the socio-economic
development of the regions where it operates.

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Financial and Strategic Partnerships

Throughout its history, NMDC has formed several strategic partnerships and agreements
with both national and international entities. These collaborations have facilitated
technological advancements, financial support, and resource sharing, enabling NMDC to
maintain its position as a leading mining company in India.

Milestones

 1958: NMDC Limited was established.

 1968: Opening of the first iron ore mine in Bailadila.
 1990s: Modernization and diversification initiatives.
 2010: Global expansion and technological advancements.
 2020s: Continued growth, sustainability, and socio-economic contributions.

As of 2024, NMDC Limited remains a crucial player in India's mining sector, significantly
contributing to the country's industrial growth and development.

Mission of NMDC :

NMDC aims to maintain its strategic position as the premier coal-producing company in the
nation while excelling in a competitive business environment. Our mission includes:

 Achieving self-reliance through optimal utilization of existing resources and ensuring

adequate returns on investments.
 Maximizing conservation and ensuring utmost safety in mining operations by
adopting and continually upgrading technologies and practices benchmarked against
international standards.
 Supplying reliable and high-quality coal in sufficient quantities, meeting customer
needs through continuous engagement and product customization.
 Fostering harmonious industrial relations and being a model employer, adhering to
legal and social frameworks.
 Demonstrating responsible corporate governance, with a focus on environmental
protection, ecological sustainability, and fulfilling corporate social responsibilities.

Production Profile

NMDC Limited holds a significant role in India's iron ore production landscape, managing a
substantial portion of the country's reserves. It accounts for a notable share, approximately
7.5%, of India's iron ore reserves and contributes about 10% to the nation's annual iron ore
production. NMDC's operations primarily focus on open-cast mining techniques, which
currently yield over 60% of its total iron ore output.

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Nmdc at a glance

NMDC Limited, a leading public sector enterprise under the Ministry of Steel, operates a
significant mining portfolio across India. It manages a total of 36 underground mines and 14
opencast mines, employing approximately 69,043 personnel. In the fiscal year 2009-10,
NMDC aimed for a production target of 50.4 million tonnes (MT), achieving an actual output
of 50.43 MT. Similarly, in 2008-09, it targeted 43.56 MT and produced 44.54 MT. The
company's output per manshift stood at 2.73 tonnes. NMDC's major consumers include
sectors such as power, cement, and other industries.

This summary encapsulates NMDC's operational scale, workforce, production achievements,

and key market sectors served.

Market Profile

NMDC Limited has been pivotal in meeting the iron ore demand across India. All steel plants
within the states of Chhattisgarh and Karnataka rely on NMDC for their iron ore supplies.
Furthermore, NMDC caters to the iron ore requirements of steel plants in Maharashtra and
other parts of India. About 2,500 industrial units across various sectors depend on NMDC for
their iron ore needs, supporting India's industrial growth and infrastructure development.

Metric 2006-07 2007-08 2008-09 2009-10

Production (Million Tonnes) 37.7 37.48 44.44 49.27
Dispatches (Million Tonnes) 37.48 37.6 44.4 49.27
Output per Man Shift (Tonnes) 2.39 2.63 3.01 3.36
Overburden (OB) Removal (Million
BCM) 1.91 2.1 2.42 2.73
Manpower 82224 75573 70586 69043
Profit (Rs Lakhs) 1373.53 1407.07 1849.92 2470.49
Manpower Productivity (Tonnes/Man) 1373.53 1407.07 1849.92 2470.49

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Consolidated Balance Sheet for the FY 2022-23

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Consolidated Statement of Profit and loss for FY 2022-23

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Statement of Changes in Equity for FY 2022-23

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Ankita Sahu 34
NMDC – SWOT

Strengths:

1. Large Reserves: NMDC possesses significant reserves of high-grade iron ore,

especially in the Bailadila region, ensuring a steady supply for the long term.
2. Market Leadership: As India's largest iron ore producer, NMDC holds a dominant
position in the domestic market.
3. Strong Financial Performance: Consistently profitable with a healthy balance sheet,
enabling it to invest in new projects and technologies.
4. Government Support: Being a Navaratna PSU under the Ministry of Steel, NMDC
enjoys substantial backing from the government, which provides stability and
support in regulatory matters.
5. Technological Advancements: Adoption of modern mining technologies and
automation improves operational efficiency and reduces costs.

Weaknesses:

1. Dependence on Iron Ore: Heavy reliance on iron ore for revenue makes NMDC
vulnerable to fluctuations in iron ore prices and demand.

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 2. Limited Diversification: Compared to global mining companies, NMDC has a
relatively narrow product portfolio, primarily focused on iron ore.
3. Operational Challenges: Issues such as transportation bottlenecks, aging
infrastructure, and challenges in scaling up production can impact efficiency.
4. Regulatory and Environmental Compliance: Stringent regulations and environmental
concerns can lead to delays and increased costs.

Opportunities:

1. Diversification: Expanding into other minerals like gold, diamonds, and rare earth
elements can reduce dependency on iron ore and open new revenue streams.
2. Global Expansion: Exploring international markets for exports and potential mining
operations can enhance growth prospects.
3. Sustainable Practices: Investing in sustainable mining practices and renewable
energy sources can improve environmental footprint and corporate image.
4. Technological Innovation: Continued investment in R&D and adoption of advanced
technologies such as AI, IoT, and robotics can drive efficiency and cost reductions.
5. Infrastructure Development: Enhancing logistics and transportation infrastructure,
including ports and railways, can streamline operations and reduce costs.

Threats:

1. Market Fluctuations: Volatility in global iron ore prices and demand can significantly
impact revenues and profitability.
2. Regulatory Changes: Changes in mining laws, environmental regulations, and
government policies can pose risks to operations and profitability.
3. Competition: Increasing competition from domestic and international mining
companies can affect market share and pricing power.
4. Environmental and Social Risks: Potential environmental disasters, community
opposition, and social unrest in mining areas can disrupt operations and damage
reputation.
5. Technological Disruption: Rapid technological changes may require continuous
investments to stay competitive, posing financial and operational challenges.

Consumer Satisfactiion

NMDC Limited, as India's largest iron ore producer, places a high priority on consumer
satisfaction, ensuring that the quality and delivery of its products consistently meet the
expectations of its diverse customer base. By leveraging advanced technology and adhering
to stringent quality control measures, NMDC guarantees that its raw materials are of the
highest standard. The company is committed to maintaining transparency and efficiency in

Ankita Sahu 36
its operations, providing reliable supply chains, and addressing customer needs promptly
and effectively. This dedication to consumer satisfaction is a key component of NMDC's
operational strategy, reinforcing its reputation as a trusted leader in the mining industry in
India.

Target and off-take of nmdc

In recent years, NMDC has aimed to enhance its production capacity through strategic
investments and technological advancements, setting a target to achieve an annual iron ore
production of 67 million tonnes by 2025. Off-take agreements have played a crucial role in
NMDC's strategy, ensuring a steady supply of iron ore to domestic steel manufacturers and
reducing dependency on imports. The company's robust logistics network and partnerships
with key stakeholders have enabled efficient transportation and delivery, contributing to the
stability and growth of the Indian steel sector.

Exploration Activities
With a strategic focus on enhancing mineral reserves, NMDC operates numerous mines
across the country, including its flagship operations in Chhattisgarh and Karnataka. These
mines contribute significantly to India's iron ore production, supporting domestic steel
manufacturing. NMDC's exploration efforts are bolstered by state-of-the-art technologies
and a dedicated workforce, ensuring sustainable resource development while adhering to
stringent environmental standards. The company's proactive approach to exploration
underscores its commitment to meeting the nation's mineral demands efficiently and
responsibly.

Welfare measures and social security schemes

NMDC Limited prioritizes the welfare of its workforce through robust social security schemes
and comprehensive welfare measures. The company ensures the well-being of its employees
by providing extensive healthcare facilities, including hospitals and clinics at various
operational sites. Additionally, NMDC offers educational support through scholarships and
vocational training programs, enhancing skill development and career advancement
opportunities for its employees. The company also emphasizes safety and has implemented
stringent safety measures to protect workers' health and ensure a secure working
environment. NMDC's commitment to employee welfare extends to housing facilities,
recreational amenities, and retirement benefits, ensuring a dignified and fulfilling life for its
workforce beyond their active service years.

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Welfare Measures and Social Security Schemes at NMDC Limited

NMDC Limited is committed to enhancing the quality of life for its employees through a
range of welfare measures and robust social security schemes. These initiatives ensure
employee well-being, security, and overall socio-economic development.

1. Health and Safety:

 Comprehensive health care facilities including hospitals, dispensaries, and medical

camps at mining complexes.
 Occupational health programs and regular medical check-ups.
 Emergency response systems and safety training to mitigate workplace risks.

2. Employee Housing:

 Housing facilities and accommodation support for employees and their families.
 Maintenance and infrastructure development of residential colonies.

3. Education and Skill Development:

 Educational assistance for employees' children, including scholarships and grants.

 Skill development programs and vocational training to enhance employability.

4. Financial Assistance:

 Loans and advances for personal emergencies and housing.

 Group insurance schemes for financial security in unforeseen circumstances.

5. Employee Engagement and Recreation:

 Sports complexes, cultural clubs, and recreational activities.

 Employee welfare committees for grievance redressal and community engagement.

6. Social Security Schemes:

 Provident Fund (PF) and Gratuity for retirement benefits.

 Pension schemes and post-retirement medical benefits.
 Employee State Insurance (ESI) coverage for healthcare during employment.

7. Community Development:

 CSR initiatives focusing on community health, education, and infrastructure.

 Sustainable development projects benefiting local communities near mining
operations.

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8. Special Initiatives:

 Special provisions for differently-abled employees.

 Support for elder care and welfare of dependents.

Corporate Social Responsibility

CSR initiatives aim to create sustainable value for society, particularly in the communities
where we operate. We believe in contributing positively to social, economic, and
environmental development while upholding ethical practices and transparency.

Our Focus Areas:

1. Community Development:
o Enhancing livelihoods through skill development programs.
o Supporting education initiatives to promote literacy and skill enhancement.
o Healthcare initiatives focusing on preventive healthcare and medical
facilities.
2. Environment Sustainability:
o Adopting eco-friendly mining practices and promoting reforestation.
o Water conservation and management programs to ensure sustainable use.
o Efforts towards reducing carbon footprint and promoting renewable energy.
3. Empowerment of Vulnerable Groups:
o Supporting initiatives for empowerment of women and marginalized
communities.
o Promoting inclusive growth through employment opportunities and
vocational training.
4. Promotion of Culture and Heritage:
o Preservation and promotion of local art, culture, and heritage.
o Supporting initiatives that celebrate local traditions and festivals.

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Implementation Framework:

 Strategic Partnerships: Collaborating with NGOs, government bodies, and local

communities to implement CSR programs effectively.
 Monitoring and Evaluation: Regular assessment of CSR projects to ensure impact and
alignment with organizational goals.
 Transparency and Reporting: Transparent disclosure of CSR activities through annual
reports and stakeholder engagement.

Commitment to Sustainability:

 Upholding highest standards of ethics, integrity, and governance in all CSR activities.
 Continuously evolving our CSR strategy to address emerging social and
environmental challenges.
 Engaging employees as volunteers and advocates for CSR initiatives to foster a
culture of giving back.

Information Technology and Networking

NMDC Limited integrates robust information technology (IT) systems and networking
infrastructure to support its mining and processing operations efficiently. Here's an
overview:

1. IT Infrastructure: NMDC maintains a state-of-the-art IT infrastructure across its

mining complexes, including Kirandul and Bacheli in Chhattisgarh and Donimalai in
Karnataka. The infrastructure supports critical functions such as ore extraction,
processing, logistics, and administrative operations.
2. Network Architecture: The company employs a resilient network architecture to
ensure seamless communication and data transfer between its mining sites,
corporate offices, and external stakeholders. This includes fiber-optic networks and
satellite communication systems for remote locations.

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 3. Data Management: NMDC emphasizes data security and management, leveraging
advanced technologies for data collection, storage, and analysis. This includes
implementing data analytics for predictive maintenance and operational
optimization.
4. ERP System: The company utilizes an Enterprise Resource Planning (ERP) system to
integrate various business processes, including finance, procurement, inventory
management, and human resources. SAP ERP plays a pivotal role in streamlining
operations and ensuring transparency in financial transactions.
5. Cybersecurity Measures: With the increasing digitization of operations, NMDC
prioritizes cybersecurity measures. This includes firewalls, intrusion detection
systems, and regular audits to safeguard against cyber threats and ensure data
integrity.
6. Collaboration Tools: NMDC employs collaboration tools and communication
platforms to facilitate real-time communication and collaboration among its
geographically dispersed teams. This enhances operational efficiency and decision-
making processes.
7. Digital Transformation Initiatives: The company is actively pursuing digital
transformation initiatives to enhance productivity, reduce operational costs, and
improve resource utilization across its mining complexes. This includes leveraging IoT
(Internet of Things) for equipment monitoring and automation.
8. Training and Development: NMDC invests in training programs to equip its
workforce with IT skills and knowledge, ensuring they can effectively utilize and
adapt to new technologies deployed in mining operations.

Safety in Mines

Safety remains paramount in NMDC's mining operations, where rigorous measures are
implemented to ensure the well-being of all personnel. With a steadfast commitment to
best practices and compliance with statutory regulations, NMDC's mines prioritize
comprehensive safety protocols. These encompass regular training sessions, state-of-the-art
equipment, and robust emergency response mechanisms. The company's proactive
approach includes continuous risk assessments and safety audits, fostering a culture of
vigilance and responsibility among its workforce. NMDC's dedication to safety not only
safeguards its employees but also underscores its commitment to sustainable and efficient
mining practices.

Human resource development

NMDC Limited places a strong emphasis on human resource development, recognizing its
workforce as a cornerstone of success. With a robust commitment to nurturing talent,
NMDC invests in continuous training and skill enhancement programs tailored to meet
evolving industry demands. The company's comprehensive HR strategy focuses on fostering

Ankita Sahu 41
a culture of innovation and excellence, equipping employees with the necessary
competencies to thrive in the mining sector. Through strategic initiatives and partnerships,
NMDC aims to empower its workforce, ensuring they contribute effectively to the company's
growth trajectory while maintaining high standards of safety, integrity, and sustainability.

Environment

NMDC Limited operates within a challenging environmental landscape, managing a portfolio

of mining operations across key regions in India, including Chhattisgarh and Karnataka. With
a commitment to sustainable development, NMDC integrates environmental stewardship
into its operational framework. The company adheres to stringent environmental
regulations, deploying advanced technologies for environmental monitoring and mitigation.
Through proactive initiatives in biodiversity conservation, water management, and
reclamation of mined areas, NMDC strives to minimize its ecological footprint. By fostering
partnerships with local communities and stakeholders, NMDC aims to achieve harmonious
coexistence between mining activities and the natural environment, ensuring responsible
resource utilization for sustainable growth.

Research & Development

The company's R&D efforts focus on:

1. Exploration and Resource Development:

o Utilizing advanced geological modeling and remote sensing techniques to
identify new mineral reserves.
o Developing cost-effective and environmentally sustainable mining methods.
2. Process Optimization:
o Enhancing beneficiation processes to improve ore quality and recovery rates.
o Implementing innovative technologies for efficient iron ore processing and
pelletization.
3. Environmental Sustainability:
o Researching and adopting eco-friendly mining practices to minimize
environmental impact.

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 o Developing methods for land reclamation and biodiversity conservation in
mining areas.
4. Technological Advancements:
o Collaborating with national and international institutions for technology
transfer and innovation.
o Researching automation and digitization initiatives to enhance operational
efficiency and safety.
5. Product Diversification:
o Researching and developing new products derived from iron ore and other
minerals.
o Exploring opportunities in value-added products to meet evolving market
demands.
6. Safety and Risk Management:
o Innovating safety protocols and technologies to ensure a secure working
environment.
o Conducting research on risk mitigation strategies for operational hazards.
7. Collaborative Partnerships:
o Engaging in partnerships with academic institutions, research organizations,
and industry experts to foster innovation and knowledge exchange.
o Participating in government initiatives and consortiums for research funding
and development.

NMDC Limited's commitment to R&D underscores its role as a leader in the mining sector,
driving sustainable growth and technological advancement while upholding highest
standards of environmental stewardship and corporate responsibility.

Vision
To emerge as a global Environment friendly Mining Organization and also as a quality Steel
producer with a positive thrust on Social Development.

Mission
To maintain its leadership as the largest iron ore producer in India, while establishing itself
as a quality steel producer and expanding business by acquiring and operating various iron
ore, coal and other mineral assets in India and abroad, rendering optimum satisfaction to all
its stake holders.

Objective
Macro Objectives

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  To expand the operations in the areas of Mining and Mineral Processing to meet the
growing demands from domestic and international Markets.

 Achieve international standards in per capita productivity, value addition and cost
effectiveness.

 To increase the iron ore production capacity to 67 MTPA by FY 2025.

 Setting up of Steel Plant at Nagarnar.

Micro Objectives

 Achieve growth by:

(a) Expansion of existing mines
(b) Operating new mines fully owned by NMDC or in Joint Venture

 Give thrust to exploration and exploitation of iron ore and other strategic & critical
minerals.

 To maintain environment protection.

 To conserve mineral resources through scientific mining.

 To maintain high level of customer satisfaction.

 To improve the quality of life of people in general and socio economic environment in
and around the mines in particular.

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 CHAPTER – 3
ANALYSIS OF THE STUDY

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 ANALYSIS OF STUDY IN NMDC

FEASIBILITY REPORT:

NMDC has power to sanction the projects below Rs 50 crores. The projects costing above Re
50 crores are sanctioned by Hyderabad headquarters.

Feasibility report is a study of project to enable the management and Government to take
investment decision. For preparation of project reports a detailed exploration works will be
undertaken to take investment decision.

The methodology adopted for the preparation of feasibility reports varies from project to
project and industry to industry. In the mining sector, feasibility reports have evolved over
time, adhering to guidelines and recommendations issued by evaluating agencies such as

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the Ministry of Steel, the Planning Commission, and the Investment Board. For NMDC, this
involves thorough geological surveys, technical assessments, and economic analyses to
ensure the viability and sustainability of proposed mining projects.

Evaluation of Feasibility Report

The feasibility report outlines the type of technology like underground method, with details
of extractable iron ore resources, life of the project etc. The feasibility report quantifies
various physical input required viz. land, building, plant and machinery (input) with year
wise phasing of requirement. The physical parameters are converted into monetary terms
evolving the financial viability of the projects. The various methods adopted are:

I. Operation cost Vs Realization

II. Discounted cash inflow methods like I.R.R and N.P.V. drawn and compared with
required rate of return.
III. Payback period
IV. Economic analysis duly indicating overall benefits to the nation.

Keeping in view the different stages of project cycle emphasis is made to analyze a new from the
stage of projection i.e. preparation of the FR. The structure and contents of the FR in NMDC have
been evolved, as stated earlier over period of time taking due consideration of the guidelines of
various Government agencies as well as the management of NMDC.

Annual Plan of NMDC

Objective: To outline the key activities, projects, and targets for the fiscal year, focusing on
short-term goals and immediate operational improvements.

1. Production Targets:
o Increase iron ore production.
o Enhance output from existing mines and optimize productivity.
2. Capital Expenditure:
o Allocate Rs [X] crores for ongoing and new projects.
o Focus on capacity expansion, technology upgrades, and infrastructure
development.
3. Exploration Activities:
o Conduct detailed exploration in [specific regions] to assess mineral reserves.
o Initiate new exploration projects in potential mining areas.
4. Sustainability and CSR:

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 oImplement environmental protection measures and ensure compliance with
regulations.
o Invest in community development programs and initiatives under Corporate
Social Responsibility (CSR).
5. Operational Efficiency:
o Improve operational processes and reduce costs through technology adoption.
o Enhance supply chain efficiency and logistics management.
6. Workforce Development:
o Conduct training programs to enhance employee skills and safety awareness.
o Recruit skilled professionals for key operational roles.
7. Financial Performance:
o Focus on improving profitability and maintaining financial stability.
o Manage risks and ensure effective cost control.

Five-Year Plan of NMDC

Objective: To establish long-term strategic goals, ensuring sustainable growth, technological

advancement, and global competitiveness over the next five years.

1. Production Expansion:
o Increase total iron ore production capacity to [specific target].
o Develop new mining projects and expand existing operations.
2. Diversification:
o Explore opportunities in other minerals and diversify the product portfolio.
o Invest in strategic partnerships and acquisitions to enhance market presence.
3. Technological Innovation:
o Implement advanced mining technologies and automation to improve
efficiency.
o Invest in research and development (R&D) for sustainable mining practices.
4. Infrastructure Development:
o Develop and upgrade transportation and logistics infrastructure.
o Ensure reliable power and water supply for mining operations.
5. Sustainability Goals:
o Achieve significant reductions in carbon emissions and energy consumption.
o Enhance waste management and recycling practices.
6. Community Engagement:
o Strengthen community relations and invest in long-term development projects.
o Focus on education, healthcare, and skill development in mining regions.
7. Financial Growth:
o Achieve consistent revenue growth and profitability.
o Maintain a strong balance sheet and manage financial risks effectively.
8. Global Competitiveness:

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 oExpand international operations and export markets.
o Align with global standards in mining practices and corporate governance.
9. Regulatory Compliance:
o Ensure full compliance with national and international regulations.
o Engage with regulatory bodies and stakeholders proactively.
10. Workforce Excellence:
o Develop a skilled and motivated workforce through continuous training.
o Foster a culture of innovation, safety, and collaboration.

Pattern of Finance for NMDC

1. Revenue Generation:
o Primary Source: Sale of iron ore and other minerals.
o Secondary Sources: Income from investments, interest, and other ancillary
activities.
2. Capital Expenditure (CapEx):
o Project Development: Investments in new mining projects and expansion of
existing operations.
o Infrastructure: Upgrading transportation, logistics, and utility infrastructure.
o Technology: Implementation of advanced mining technologies and
automation.
3. Operational Expenditure (OpEx):
o Mining Operations: Costs associated with extraction, processing, and
transportation of minerals.
o Employee Costs: Salaries, wages, training, and other HR expenses.
o Maintenance: Regular maintenance and repairs of equipment and
infrastructure.
4. Funding Sources:
o Internal Funds: Retained earnings and internal accruals.
o External Financing: Loans, bonds, and other debt instruments.
o Equity Financing: Issuance of shares and other equity-related instruments.
5. Financial Management:
o Budgeting: Annual and long-term budgeting for capital and operational
expenses.
o Cost Control: Measures to manage and reduce operational costs.
o Risk Management: Strategies to mitigate financial and operational risks.
6. Regulatory Compliance:
o Taxation: Payment of taxes and adherence to financial regulations.

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 o Reporting: Regular financial reporting and audits to ensure transparency and
accountability.
7. Investment Strategies:
o Diversification: Investing in new minerals and geographical areas.
o R&D: Allocation of funds for research and development to innovate and
improve operations.

Project Cost Estimation

Estimating the cost of a new mining project for NMDC involves a detailed analysis of various
components to ensure a comprehensive financial plan. Here is a detailed breakdown of the
key cost elements:

1. Land: Acquiring land is a fundamental requirement for any mining project. Costs
include purchasing or leasing land, legal fees, and compensation for displacement
of local communities. The land must be suitable for mining operations and have
the necessary legal clearances.
2. Prospecting: This involves initial exploration activities to assess the feasibility of
the mining project. Costs cover geological surveys, drilling, sampling, and testing to
determine the quantity and quality of mineral deposits. Advanced technologies
and expert consultations are often required, adding to the expense.
3. Cost of Building: Construction of infrastructure is a major expenditure. This
includes administrative buildings, worker accommodations, warehouses, and other
necessary facilities. Costs cover materials, labor, design, and engineering services.
The durability and sustainability of these structures are crucial for long-term
operations.
4. Interest: Financing a large-scale mining project typically involves borrowing.
Interest costs on loans and other financial instruments must be accounted for. This

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 includes both short-term construction loans and long-term financing
arrangements. Managing these costs effectively is essential for financial stability.
5. Capitalized Revenue Expenditure: These are costs that are initially treated as
capital expenditures but are expected to generate revenue over time. Examples
include pre-production development costs, initial setup costs, and expenses
related to preparing the site for mining. These costs are amortized over the life of
the project.
6. Vehicles: The acquisition of vehicles is vital for transportation of materials and
personnel. This includes trucks, earthmovers, and other specialized mining
vehicles. Maintenance, fuel, and operational costs must also be considered in the
overall budget.
7. Cost of Development: Development costs encompass site preparation, including
clearing, grading, and road construction. It also involves the creation of mining
pits, shafts, and tunnels. These activities require significant investment in labor,
equipment, and materials.
8. Environmental Development Plan: Ensuring environmental sustainability is a
critical aspect of modern mining projects. Costs include measures for reducing
environmental impact, such as waste management, water treatment facilities, and
land reclamation activities. Compliance with environmental regulations and
obtaining necessary permits are also part of this cost.
9. Plant and Equipment: Setting up the processing plant and acquiring mining
equipment constitutes a major portion of the project cost. This includes crushers,
conveyors, separators, and other machinery required for processing ore.
Installation, commissioning, and maintenance of this equipment are also included.
10. Iron Ore Handling and MV Siding: Efficient handling of iron ore involves setting up
facilities for loading, unloading, and storage. This includes conveyors, stackers,
reclaimers, and storage bins. Additionally, constructing railway sidings (MV siding)
for transportation of iron ore to markets is crucial. Costs cover infrastructure, track
laying, and integration with existing railway networks.

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Each of these components requires meticulous planning and allocation of funds to ensure
the successful execution and sustainability of the mining project. By comprehensively
addressing these cost elements, NMDC can develop a robust financial strategy that supports
its long-term operational goals and environmental commitments.

Case Study

Capacity Expansion of Bailadila Iron Ore Project,

Kirandul

DEPOSIT NO: 14/11C FROM 12 TO 20 MTPA OF M/S. NMDC

LIMITED AT KIRANDUL, SOUTH BASTAR DANTEWADA DISTRICT,
CHHATTISGARH.

Background:

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NMDC is incorporated in 1958 as a Government of India fully owned public enterprise under
the administrative control of the Ministry of Steel, Government of India.

NMDC has made valuable and substantial contribution to the National efforts in the mineral
sector during the last five decades and has been accorded the status of schedule-A Public
Sector Company. In recognition to the Company's growing status and consistent excellent
performance, the Company has been categorized by the Department of Public Enterprises
as "NAVRATNA" Public Sector Enterprise in 2008.

NMDC is India's single largest iron ore producer, presently producing about 30 million
tonnes of iron ore from 3 fully mechanized mines viz., Bailadila Deposit14/11C, Bailadila
Deposit-5, 10/11A in South Bastar Dantewada District, Chhattisgarh State and Donimalai
Iron Ore Mines & Kumaraswamy Iron Ore Mines in Bellary District. Karnataka State. For
Value addition NMDC is in the process of developing a 3 million ton per annum integrated
steel plant at Nagarnar near Jagdalpur, C.G and 2 pellet plants at Donimalai (1.2 MTPA) and
at Bacheli (4 MTPA). Besides, NMDC has acquired Sponge Iron India Limited with plan for
expansion to produce billets.

The company is in the process for the implementation of integrated management system
covering ISO 9001, ISO 14001, OHSAS 18001 & SA 8000 at all iron ore mining project
locations. Besides iron ore, NMDC also plans to go for other minerals like Coal, Diamond,
gold etc for which NMDC is looking forward for leases / buy properties from foreign
countries directly / under Special Purpose Vehicle / Joint Ventures. For continuing the
exploration activities NMDC has set a Global Exploration Centre at Raipur, Chhattisgarh.

NMDC is taking up diversification activities through its intensive R&D efforts for production
of High-Tech and High Value added products. The study is also being conducted for setting
up a demonstration plant to beneficiate BHJ/BHQ material for up gradation to +64% Fe iron
ore concentrate.

NMDC is also investing in development of renewable energy resources as an environment

friendly investment. A Wind mill project (10.5MW capacity) has been completed &
commissioned at Karnataka.

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Brief Description of the Nature of Project

Bailadila Iron Ore Project Deposit 14/11C is an existing iron ore project including mining,
crushing, screening and loading activities. Open cast mining method is being used for the
excavation of iron ore. The mine is fully mechanized. The total mining lease area of the
project is 935.522 ha comprises of Deposit-14, Deposit14NMZ and Deposit-11 part mining
lease areas. The present production capacity is 12 million tonnes per annum . It is proposed
to enhance iron ore production capacity from 12.0 to 20.0 MTPA to meet the demand of iron
ore. The project falls in Schedule 1(a) under Category ‘A’ as per EIA notification 2006 which
requires prior Environmental clearance for capacity expansion. Hence, PreFeasibility Report
(PFR) is prepared for capacity expansion of BIOP: Deposit14/11C from 12.0 to 20.0 MTPA
production capacity

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 Demand and Supply of Iron ore (MT)

Steel Ministry proposes to increase iron ore availability in the country in order to reduce the
imports of Steel. In this context, NMDC has to enhance production incrementally and aim for
annual production of 75 million tonnes iron ore by 2018-19 and 100 million ton by 2021-22
to increase iron ore availability in the country.

Annual production of steel in the country is planned to be increased to a level of 300 million
tonnes by 2025. That will necessitate production of 400-450 million tonnes of iron ore
annually. To meet country's requirement of iron ore, it is essential that NMDC shall enhance
its iron ore production substantially, through all possible means.

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Identification of Project & Project Proponent.
Name of the Project: Capacity Expansion of Bailadila Iron Ore Project, Deposit no: 14/11C
from 12 MTPA to 20 MTPA

Location: Kirandul, Dist: South Bastar Dantewada, Chhattisgarh- 494556 Production: 20

Million Tons per Annum

ML Area: 935.522 ha. of forest land falling in Bailadila Reserved Forest. Deposit-14/11C
consists of 2 Pits and 3 mining leases. Pit-1 comprises of Deposit 14 Mining Lease in which
production has commenced from November 1968. Pit-2 consists of 14 NMZ mining lease
area and part of 11 Mining Lease Area in which the production started from 1987. Deposit
14 Mining Lease is of 322.368 ha. Deposit 14 NMZ area is of 506.742 ha. Area of Deposit 11
ML falling in this project is 106.412 ha.

Need for the Project & Its Importance to the Country/ Region

India has large and rich potential of iron ore both in terms of quality and quantity. Hematite
and Magnetite are the most important iron ores in India. Indian Steel sector was liberalized
in 1990s and thereafter, several pig iron plants, sponge iron plants and integrated steel
plants have been setup in private sector. For the purpose of meeting domestic and export
requirements of iron ore, NMDC developed iron ore mines in the Bailadila range of hills in
the southern part of the South Bastar Dantewada district of Chhattisgarh state.

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The existing mining projects of NMDC have given social benefits to surrounding population
in the form of educational facilities, roads, communication facilities, transportation,
marketing, banking, postal services and health facilities directly or indirectly. The civic
amenities have already been developed due to existing mines in Bailadila complex. The
location of the mines in Bailadila Iron Ore Complex has helped to improve vastly the
financial resources of the surrounding population by way of petty trade and employment
opportunities. The projects had encouraged the setting up of various utility services and
petty trade benefiting around 5,000 people around the mining areas mainly in Kirandul and
Bacheli.

Iron ore grades:

These grades represent different quality specifications of iron ore produced by NMDC from
various mining locations. The Fe (%) denotes the iron content in the ore, which is a critical
factor for determining its market value and usage in steelmaking processes.

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Reserves
The bench wise mineable reserves of Deposit-14 and 11C as on 1/4/2015 are given below:

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The reserves can vary significantly depending on ongoing exploration and mining activities.
NMDC's reserves are predominantly located in the Bailadila region in Chhattisgarh and
Karnataka, with varying grades and quantities available across different mining complexes.

Mining System:

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The Bailadila Deposit-14 and Deposit-11C mines are fully mechanized mine. The mining
operation is carried out using electric rope/hydraulic shovels, blast hole drills, crawler drills,
dozers, water sprinklers motor graders etc.

Drilling

Drilling for blast hole is done by using 250 mm rotary drills and 150 mm rotary percussive
drills, all working on electricity. These drills are capable of drilling up to 16m in hard iron ore
formations as the bench heights are 12m, the total meterage drilled per hole is 13.8 m
including 15% of sub grade-drilling. The Tricon Roller bits are used for drilling. To suppress
dust during drilling water is used. Secondary drilling done by using crawler drills working on
compressed air powered by diesel engines.

Blasting Parameters

Blast holes for primary blasting are of 250 mm dia. Holes are drilled to a depth of 13.8 m
including sub-grade drilling for the bench height of 12 m. Blast holes are drilled in multiple
rows (generally 2) in rectangular pattern. Blast hole drilling is being carried out by using 3
blast hole drills 250mm dia.

Loading

Blasted ore is loaded from the face by electric rope shovels / hydraulic shovel. The bucket
capacity of these electric rope shovels is 4.6 m3 and 8.0 m3 and that of the hydraulic shovel
is 5.5 m3 . Electric power is supplied to these shovels through moveable PSG (portable
switch gear) located at convenient locations in the mine. Shovels load the ore into 50 / 60 /
85/ 100 ton dumpers. The waste excavation is also done by these shovels depending upon
the excavation plan.

Haulage

The ore loaded into the rear dumpers is carried to the crushing plant, through the haul
roads. The Dumper Platform at Deposit-14 mines is at a RL of 1137 m. The dumper platform
at Deposit-11C mine is at a RL of 1050 m. The load is hauled up the gradient for a distance of
2-3 km from the mine to the dumper platform / Crushing Plant on a haul road laid with 1 in
16 gradient. Water sprinkling by 28 m3 capacity water tanker is done on the haul road for
ensuring effective dust suppression. From ore crushing plant to screening plant to loading
plant, ore is transported by belt conveyor system. Processed ore from stockpile (at loading
plant) to main destination Visakhapatnam (475 km) is done by rail route.

Equipment:

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Cost of Production

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Ankita Sahu 62
FINANCIAL VIABILITY ANALYSIS
Project Description

Type of Project Including Interlinked and Interdependent Projects, If any

Bailadila Iron Ore Project Deposit 14/11 is an existing iron ore mine with crushing, screening
and loading plant facilities. The total M.L. area is 935.522 ha. The present annual production
is 12.00 Million Tonnes per Annum , which is proposed to be enhanced to 20.00 MTPA.

The activities / facilities are:

1. Excavation,
2. Drilling,
3. Blasting,
4. Haulage
5. Dumping
6. Crushing
7. Screening
8. Stacking and dispatch
9. Maintenance & Repair
10. Environmental protection measures
11. Infrastructure

The loading plant along with fine ore dump, stores, tailing dam, oxidation pond are located
in revenue land outside the mining lease area.

Details of Alternate Sites Considered and basis of selecting the

proposed site, particularly the environmental considerations gone
into should be highlighted.
Mining project is site specific and this project is an existing project commissioned in the year
1968 hence no alternate site is considered.

Size or Magnitude of Operation

The maximum rated capacity of the project will be 20 Million Tonnes per Annum of Iron ore
production.

Mining Method
The mining methodology will comprise of open cast.
ROM Ore Evacuation system – by rail, road & slurry pipeline

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Mining

Design Parameters
Bench Height : 12 m (Blue Dust)
: 12 m (Hard Formation)
Berm Width : 50 m (Operation phase)
: 15 m (Inactive Phase- Shale & Blue Dust)
: 12 m (Inactive Phase- Hard Formation)

Overall Average Pit Slope : 45 degree

Road Width, Road Gradient, Safety Bund, Turn-outs :
(Note: Design parameters may be modified subject to D.G.M.S. guidelines)

Deposit 14- Ore: Waste= 1:0.28, Ore: Sub-grade=1:0.05

Deposit 11C- Ore: Waste= 1:0.29, Ore: Sub-grade=1:0.03

Various schemes involved in capacity augmentation of plant facilities

of Bailadila Deposit-14 & 11C iron ore.

New Crushing Plant and Downhill Conveyor System of 10 MTPA capacity,

Bailadila Deposit-14.

New Crushing Plant:

Sizable quantity of mineable iron ore reserves are identified below the existing crushing
plant and for further mine’s development and smooth mines output by balancing in the
overall lead, lift of the material and proportion of up-haul & down-haul and for economic
mining, it becomes necessity to shift the present crushing plant to a suitable place. New
equipment are considered in the proposed plant as existing equipment like Primary Crusher,
Secondary Crusher, EOT Cranes etc., lived their life as they are working since beginning.

Therefore, considering the above, it is necessary to dismantle the existing crushing plant and
construct a new crushing plant of 10 MTPA capacity at a suitable location (preferably at P-
Plot) for optimum exploitation of mineral reserves.

New Downhill Conveyor System:

Further, existing downhill conveyor system of Deposit-14 is very old and is served its life.
Presently, it is handling average feed rate of 1200 TPH against 2000 TPH due to limitations on
braking system. Tunnel conveyors require elaborate safety features as per prevailing
statutory regulations.

In order to connect the existing downhill conveyor system, an additional conveyor system
and associated junction houses are required from the new crushing plant (at P-Plot). The
additional facilities (conveyor system and associated junction houses) shall pass through the

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nearby magazine area or through the mineralized zone/within the safe limits of ultimate pit
boundary, which is not desirable.

Therefore, it is recommended to opt for new overland downhill conveyor system to handle
10 MTPA ore, which connects to the proposed Screening Plant - III (SPIII) & existing
Screening Plant – I (SP-I).

Incoming power supply for the new plant & conveying system from the existing set-up,
however, a new electric sub-station is planned near plant site.

For construction of plant facilities, conveyor corridor, approach roads, pipelines, electrical
lines etc., the required area works out to be 43.23 Ha.

Approximate Project Cost (Plant facilities): Rs. 379 Crores

New Crushing Plant and Downhill Conveyor System of 10 MTPA capacity,

Bailadila Deposit-11C.
New Crushing Plant:
In order to exploit the blocked reserves under the existing crushing plant of Deposit-11C, it
becomes necessary to shift the present crushing plant to a suitable place away from the
extended ore boundary / ultimate pit limit.
New equipment are considered in the proposed plant as existing equipment like Primary
Crusher, EOT Cranes etc., lived their life as they are working since beginning. Therefore,
considering the above, it is necessary to dismantle the existing crushing plant and construct
a new crushing plant of 10 MTPA capacity at a suitable location for optimum exploitation of
mineral reserves.
A conveyor system is planned which connects the proposed tunnel conveyor of primary
stockpile with the existing downhill conveyor no. 126. That is, the existing downhill conveyor
system from conveyor no. 126 onwards will continue to be in operation.

New Downhill Conveyor System:

The existing downhill conveyor system up to and including conveyor no. 125 is planned to be
discarded once new crushing plant commences operation.
That is, the existing downhill conveyor system from conveyor no. 126 onwards will continue
to be in operation. However, drive modification of Conv. 126 shall be taken up as required or
if it is desired to curtail the tail end of the conveyor, where new drive house will be
constructed at suitable location towards tail end.

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Incoming power supply for the new plant & conveying system from the existing set-up,
however, a new electric sub-station is planned near plant site.
For construction of plant facilities, conveyor corridor, approach roads, pipelines, electrical
lines etc., the required area works out to be 40 Ha (on preliminary basis).
Approximate Project Cost (Plant facilities): Rs. 275 Crores

(iii) Refurbishment of Screening Plant - 1 and associated works for handling up

to 7 MTPA
Capacity sufficiency verification of conveyor system has been carried out and it is found that
with replacement of old screens and other equipment including conveyor drives as required,
under regular maintenance & replacement programme, the existing system is considered to
be having sufficient capacity to handle up to 7 MTPA
SP-1 structures may require strengthening due to corrosion activity. In this regard, already
initiated corrective action like strengthening of plant main columns, conveyor & junction
house structures, primary & secondary screen columns etc. In the meantime, CSIR-Structural
Engineering Research Centre (CSIR-SERC), Chennai has been appointed for condition
assessment of structural building of SP-1. As per preliminary findings, overall plant structural
stability is satisfactory except few beams need replacement, which can be taken up in
phased manner without disturbing plant operations and its surroundings.
Existing electrical system may not require any up-gradation. However, SP-1 needs to be
operated for another 20 years, it is planned to be installed PLC & new MCC Panels at suitable
location keeping in view that switch over to new PLC shall be within min. shut down period.
The required modifications are planned to be carried within the existing plant
facilities/system area.
Since, SP-1 is considered to be functional along with other Screening Plants, water required
for carryout plant operation @7MTPA production level is worked out to be 300 m3 /hr (5400
m3 /day). A suitable water pumping scheme is envisaged.
Approximate Project Cost: Rs. 35 Crores

(Construction of 5th line in Screening Plant - 2 & drive up-gradation of Conv.

310 for handling up to 10 MTPA
Construction of 5th line in Screening Plant – 2:
In the existing SP-2 (which is having 4 screening lines at present), one more line (i.e., fifth
line) shall be added to achieve the production level up to 10 MTPA.

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It is envisaged to construct one screening line without wet circuit equipment as the existing
wet circuit system is considered to be capable for handling the level of production during
wet operation (monsoon season).

Drive up-gradation of Conv. 310: It is proposed to install on Conv. 310 (1050 mm belt
width) a new drive system in new drive house along with MCC room in the existing loading
plant to handle 2400 TPH (design capacity: 3000 TPH) in first phase & 2700 TPH in second
phase (new conv. 310 with 1200 mm belt width) from existing 1800 TPH to stack lump ore (-
150 + 10 mm) & CLO (-40 + 10 mm) produced from SP-1, SP-2, SP-3 and TCP.
The required modifications are planned to be carried within the existing plant
facilities/system area.
Approximate Project Cost: Rs. 24.83 Crores

New railway yard enabling Merry-Go-Round (MGR) system for improvement in handling
more rail traffic
Existing loading lines in Kirandul Complex are dead end and incoming rakes require waiting
until the loaded rakes is cleared off from the siding, which result in time loss.
In view of improving loading & siding facilities, a circuit type of rail line called Merry-Go-
Round (MGR) rail system with a new siding are required, so that both incoming & outgoing
rakes can follow a separate route.
Approximate Project Cost: Rs. 250 Crores

Up-gradation of existing downhill conveyor braking & control system of Dep. 11C for
handling up to 9 MTPA
The existing Downhill Conveyor System of Deposit-11C of Kirandul Complex is required to
handle up to 9 MTPA of ROM from FY 2017-18 onwards until new crushing plant and
associated downhill conveyor system commences operation from 2019-20 for a capacity of
10 MTPA. The existing downhill conveyor system is being handled up to 1700 TPH. Further
increase in load leads to over-speeding of conveyors, which leads to damage of conveyor
The required modifications are planned to be carried within the existing plant
facilities/system area.
Approximate Project Cost: Rs. 4 Crores.

Enhancement of capacity of Screening Plant – 3

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Environment Clearance (EC) is obtained for processing 12 MTPA (7 MTPA from 11B + 5 MTPA
from Bld. 14) of ore in Screening Plant-3. However, since SP-1 capacity is limited to 6-7 MTPA
(after refurbishing) & Bld. 11B is envisaged to be enhanced to 10 MTPA, the balance 4 MTPA
of ore from Bld. 14 out of 10 MTPA is considered to be treated in SP-3. Therefore, capacity of
SP-3 shall be enhanced from 12 to 14 MTPA. It is observed from the study of the plant
design, SP-3 is having handling capacity up to 14 MTPA without any major modification.
Other facilities / systems
Further to above, the following facilities / systems are also envisaged to take up
progressively for achieving the targeted production & dispatch levels.

 Construction of third rail line from existing loading plant to MV siding

 Construction of RWLS 2

 Modification & replacement of Conv. 310 with higher belt width to handle 3000 TPH

 Construction of RWLS – 3 replacing existing mechanised loading system as per

requirement

 Installation of small capacity mobile / semi mobile crushing & screening units in meeting
customers’ product size & quality requirements

 Interplant & intra-plant conveyors modifications and new interconnecting conveyors for
operational flexibility

 Construction of water supply system including laying pipeline for additional fresh water
requirement

 Laying new/re-routing of existing electrical lines, water pipelines, roads etc as required 
Relocation of infrastructural facilities like water tanks, electrical sub-stations, plant & non
plant buildings etc., as required

 Additional or modification of township buildings as required.

Availability of Water its source, Energy / power requirement and source should
be given
Water:
MoEFCC accorded approval 13750 KLD for fresh water requirement for Screening Plant-2 & 3
for processing 19 MTPA of iron ore vide letter dated 5.11.2013. The same will be sufficient to
cater processing of 10 MTPA in SP-2 and 14 MTPA in SP3.
Further, at present water requirement for dust suppression at Deposit-14 and 11C mines is
1200 KLD & will be increased to 1500 KLD after capacity expansion due to increase in

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number of dumper trips on haul roads and mining faces. Also, presently the water
requirement of township is 2800 KLD, which will be increased to 3000 KLD.
As Screening Plant-1 will be in operation to process 7 MTPA and also considering marginal
increase in requirement at loading plant & drinking water at plants, the additional make-up
water requirement will be around 5400 KLD.
The sources of water are Malinger nallah, Kirandul Nallah & Nallah no.25 at Bacheli. The
additional quantity of water shall be sourced from the available sources.

Power:
The power supply to Kirandul (Bailadila Deposit 14/11C project) is being fed through
Chhattisgarh State Electricity Board substation at Kirandul where 132/33 KV line is available
from Korba Thermal Power Station. Any further demand of power shall be met from CSEB.

Schematic representations of the feasibility drawing which give

information of EIA Purpose.
Process Flow Opencast Mining
Drilling – Blasting – Excavating – Hauling – Crushing – Screening – Loading – Dispatch
Flow Sheet of Beneficiation Process
Crushing – Screening -Loading 4.0 Site Analysis

Land form, Land use and Land ownership

The type of land in mining lease area is Bailadila Reserve Forest Land and NMDC obtained
diversion of forest land falling within Mining Lease area under F.C. Act, 1980. The present
land use pattern of various mining leases is given below:
Deposit 14 (322.368 hect)

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Deposit-14NMZ:506.742 hect

Deposit-11C: 106.412 Ha (area utilized for mining and waste dump).

Soil Classification
The soil texture with the content 63-70 %.

Climatic Data from secondary sources.

The climatic condition of this area is semi-arid. The maximum temperature goes up to 400C
during summer in the month of May and the minimum temperature goes down to 110C
during winter in the month of December and January. The average humidity in the area
ranges from 20 to 55%. The average annual rainfall recorded in the area is about 2600mm,
about 85% of which is falling between July and September due to the SW monsoon. During
the monsoons and pre-monsoon cyclone seasons, the wind velocities touch as high as 60 to
70 kmph on Beaufort’s scale. In general, the most predominant wind velocities fall in the
range of 19-29 kmph with southwest and northeast forming the predominant directions.
One automatic weather monitoring station was established at Hill top, Kirandul.

Social Infrastructure:
NMDC has given social benefits to the surrounding population in the form of standard
educational facilities, roads, communication facilities, transportation, marketing, banking,
postal services, health facilities, directly or indirectly. The civic amenities have already been
developed due to existing mines in Kirandul complex. A township at Kirandul is very well
developed.

Proposed Infrastructure
Industrial Area
The existing mine lease is having all the Infrastructure facilities like mine office including
geology office canteen and dispensary, beneficiation plant, workshop garage, power
substation, diesel general shed, magazine, vocational training center, ETP, administrative
building, etc. The same facilities will cater the requirements of the proposed expansion.
Additional infrastructure shall be provided.

Residential Area

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The proposed capacity expansion of the mines has been envisaged by utilizing the existing
infrastructure and man power only. Hence, there is no proposal for the requirement of any
additional area for residential purpose.

Green Belt
Plantation has already been carried out in the available blank area of all the leases. Further,
plantation has also been carried out outside ml areas and also participating in Chhattisgarh
Hari Har (road side tree plantation) programme through Van Vikas Nigam Limited.

Social Infrastructure
NMDC has been contributing towards development of social infrastructure in the nearby
areas for villagers as well as inside Lease area for employees. The same shall be continued.

Drinking Water Management (source and supply of water) Drinking

water is sourced from perennial Bacheli Nallah with gravity system. Water treatment plant is
existing for treatment of raw water for supply to Township and other places.

Sewerage System
Adequate sewerage system is already in place. Domestic wastewater is given natural
treatment in 2 no.s of Oxidation Pond. A separate proposal for construction of modern STP
on SBR technology basis is under process.

Industrial Waste Management

Industrial waste like steel scarp and used oil drums is being sold to authorized recyclers.

Solid Waste Management

 The waste /sub-grade generated from opencast mining will be stored in three dump
sites in Deposit 14 and in two dump sites in Deposit 11C. Additional area is also
required outside present leases to accommodate the waste generated from Deposit
14 & 11C.
 The overall slopes of the dump will be maintained 280 .
 Individual bench height will be restricted to 20m, gullies will be provided in the
bench slopes for smooth draining of water.
 Terracing will be made to control surface runoff in the dump slope
 Garland drain have been provided around the dumps
 Barrier has been erected around the dump yard.
 The dump slope has been vegetated with grasses for binding soil and to arrest soil
erosion.
 Later on bushes and shrubs has been grown on the dump slopes along with tree
species, waste disposal/reclamation is carried with full environmental consideration.

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  Geotextile mating will be provided on dump slopes
 The tailings generated from the beneficiation process, if any, shall be stored in the
existing tailing pond.

Project Schedule & Cost Estimate

Likely date of start of construction and likely date of completion (Time schedule
of the project to be given)
The Bailadila Iron Ore Mine, Kirandul complex comprises of Deposit-14 and Deposit-11C
projects and they worked as single project. The total cost of BIOM Kirandul Complex is Rs.
798.49 crores (Gross Block of Assets as on 31.03.2015). The construction work shall be
commenced after obtaining Environmental clearance from MOEFCC and Consent For
Establishment from CECB, Raipur. About 27 months shall be required for construction of new
crushing plants and addition and modification facilities in screening plants.

Estimated project cost along with analysis in terms of economic viability of the
project
The total additional capital expenditure for capacity augmentation from 12 to 20 MTPA for
Deposit-14/11C is tentatively Rs.1,521.82 Cr. The rated capacity of 20 MTPA will be achieved
from 2024-25 onwards.

To illustrate the calculations:

 Initial Investment: Rs. 1,521.82 Cr (as given)

 Annual Incremental Revenue: Rs. 500 Cr
 Annual Operating Costs: Rs. 200 Cr
 Project Life: 10 years
 Discount Rate: 12%

Calculations

Based on these assumptions, we can proceed with the calculations:

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1. Accounting Rate of Return (ARR)

 Average annual profit = (Annual Incremental Revenue - Annual Operating Costs) /

Project Life
 ARR = Average annual profit / Initial Investment

2. Net Present Value (NPV)

 Calculate the present value of each year's cash flow (inflows and outflows) using the
discount rate.
 NPV = Sum of present values of cash inflows - Initial Investment

3. Profitability Index (PI)

 PI = Present value of future cash inflows / Initial Investment

4. Internal Rate of Return (IRR)

 Find the discount rate that makes the NPV equal to zero. This requires iterative
calculations or financial software.

5. Equivalent Annuity

 Convert the NPV into an equal annual cash flow over the project's life.

Important Considerations

 The accuracy of these calculations heavily depends on the reliability of the input
data.
 Sensitivity analysis can be performed to assess how changes in key variables (e.g.,
revenue, costs, discount rate) impact the results.
 Other financial metrics, such as payback period and discounted payback period, can
also be considered.

Financial
Metric Result Interpretation

ARR indicates the average annual return on investment as a percentage

of the initial investment. A higher ARR is generally considered desirable.
Accounting In this case, the ARR is low, suggesting a modest return on investment.
Rate of
Return (ARR) 23.97%

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 NPV represents the project's discounted net cash inflows over its lifespan.
A positive NPV of Rs. 173.25 Crore suggests that the project creates
Net Present Rs. 173.25 value.
Value (NPV) Crore
PI indicates the project's value per unit of initial investment. A PI greater
than 1 suggests the project is profitable. However, the PI in this case is
Profitability 1.55, which is more than 1, indicating that the project may be profitable
Index (PI) 1.55 based on these assumptions.
Equivalent annuity represents the constant annual cash flow equivalent to
Rs. 30.66 the project's NPV. An equivalent annuity of Rs. 30.66 Crore per year
Equivalent Crore per suggests the project could generate this level of consistent cash flow over
Annuity Year its lifespan.

Analysis of Proposal (Final recommendation)

Financial & Social Benefits with special emphasis on the benefit to the local
people including tribal population, if any in the area.
Since it is operating mine and is contemplating of capacity expansion by utilizing the existing
facilities, financial and social benefits with special emphasis on the benefits to the local
people including tribal population of the area have not been envisaged. However, the
following benefits have been extended to the local people including tribal population by
means of employment, CSR, etc with the existing project. The same would be extended with
the capacity expansion of the project.

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 CHAPTER – 4
OUTCOMES AND
RECOMMENDATIONS

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Results and Discussion

The analysis of the Bailadila Iron Ore Project: Deposit 14/11C provides a detailed overview
of the project's financial, technical, and environmental aspects. The study, primarily relying
on internal company data, offers valuable insights into the project's operations and
performance. However, the inherent limitations of relying solely on internal data and the
absence of external validation restrict the generalizability of the findings.

The project's financial performance, as presented, appears promising, with robust revenue
generation and positive cash flows. However, a more comprehensive analysis, incorporating
external market factors and a sensitivity analysis to assess the project's resilience to
economic fluctuations, would strengthen the financial evaluation. The study's focus on the
project's technical aspects provides a clear understanding of mining operations, equipment,
and processes. Nevertheless, a comparative analysis with industry benchmarks and best
practices could identify potential areas for efficiency improvements and cost reductions.

The environmental impact assessment included in the study offers a preliminary overview of
the project's ecological footprint. However, a more in-depth assessment, incorporating
detailed data on air and water quality, biodiversity impact, and mitigation measures, is
essential for a comprehensive understanding of the project's environmental sustainability.
Similarly, the social impact assessment is limited in scope, necessitating a more
comprehensive study of the project's benefits and drawbacks for local communities.

In conclusion, while the study provides a foundational understanding of the Bailadila Iron
Ore Project, its limitations highlight the need for further research and analysis. A more
robust evaluation, incorporating external data, comparative analysis, and in-depth
assessments of environmental and social impacts, is crucial for a comprehensive
understanding of the project's overall performance and implications. Such a comprehensive

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analysis would enable informed decision-making, identify opportunities for improvement,
and contribute to the development of best practices in the mining industry.

Key Findings:

 Capital budgeting is a critical process for evaluating long-term investment projects,

ensuring that scarce resources are allocated efficiently.
 Net Present Value (NPV) emerges as the preferred method for project selection, as
it considers the time value of money and directly aligns with the goal of maximizing
shareholder value.
 Other methods like Internal Rate of Return (IRR), Profitability Index (PI), and Payback
Period provide additional insights but should be used in conjunction with NPV for a
comprehensive evaluation.
 The importance of capital budgeting is underscored by the significant financial
implications, long-term consequences, and irreversible nature of investment
decisions.

Discussion:

The text effectively highlights the complexities and challenges associated with capital
budgeting. The emphasis on the long-term implications of these decisions is particularly
relevant, as it underscores the need for careful analysis and consideration of future
uncertainties. While the NPV method is advocated as the primary decision criterion, it is
essential to recognize that no single method is infallible. A combination of techniques, along
with qualitative factors, should be considered for a robust evaluation.

The absence of specific results from the Bailadila Iron Ore Project limits the depth of
analysis. However, the provided framework can be applied to assess the project's financial
viability and potential impact on the company's overall performance. Key areas for further
investigation would include:

 Detailed financial analysis: A comprehensive NPV calculation, incorporating cash

flows, discount rates, and sensitivity analysis to assess the project's robustness under
different scenarios.
 Comparative analysis: Comparing the project's expected returns with the company's
cost of capital and other investment opportunities to prioritize resource allocation.
 Risk assessment: Identifying potential risks and developing mitigation strategies to
protect the investment.
 Strategic fit: Evaluating how the project aligns with the company's overall business
strategy and long-term objectives.

Takeaways:

Effective capital budgeting is crucial for the success of any organization. By following a
structured process, utilizing appropriate methods, and considering both quantitative and
qualitative factors, companies can make informed investment decisions that maximize

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shareholder value. The NPV method provides a valuable tool for evaluating project
profitability, but it should be used in conjunction with other techniques and considerations.
Continuous monitoring and evaluation of investment performance are essential to ensure
that capital is allocated optimally and the company's strategic goals are achieved.

Potential Challenges:

 Execution Risks: The project involves multiple interconnected components, which

could lead to execution challenges.
 Environmental Impact: Balancing environmental protection with project goals is
essential.
 Cost Overruns: Unforeseen challenges during construction and operation could lead
to cost overruns.
 Regulatory Compliance: Adhering to environmental and mining regulations is crucial
for project success.

Roles and Responsibilities

As an intern, my role would be to support the project team in various capacities, including:

 Data Analysis: Analyzing project data to identify trends, patterns, and potential areas
of improvement.
 Research: Conducting research on industry best practices and emerging
technologies.
 Financial Modeling: Assisting in financial analysis and modeling to evaluate project
profitability.
 Environmental Assessment: Supporting the environmental impact assessment
process by collecting data and analyzing potential impacts.

Recommendations

 Risk Assessment: Conduct a thorough risk assessment to identify potential

challenges and develop mitigation strategies.
 Cost Control: Implement robust cost control measures to prevent overruns.
 Environmental Management Plan: Develop a comprehensive environmental
management plan to minimize impacts.
 Stakeholder Engagement: Maintain open communication with stakeholders
throughout the project lifecycle.
 Technology Adoption: Explore opportunities to adopt advanced technologies for
improved efficiency and productivity.
 Capacity Building: Invest in capacity building for project team members to enhance
their skills.
 Monitoring and Evaluation: Establish a robust monitoring and evaluation system to
track project progress and performance.

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By following these recommendations, NMDC can successfully implement the project and
achieve its objectives.

Note: This analysis is based on the provided data and assumes the accuracy and
completeness of the information.

NMDC's Bailadila Iron Ore Project Expansion: Overview and Analysis

NMDC, a Government of India enterprise, is undertaking a significant expansion of its

Bailadila Iron Ore Project, aiming to increase production from 12 to 20 million tonnes per
annum. This project is crucial for India's steel industry as it seeks to reduce reliance on iron
ore imports. The expansion involves substantial infrastructure upgrades, including new
crushing plants, conveyor systems, and railway yards. While the project holds promise in
terms of economic growth and job creation, it also presents challenges such as
environmental impact, execution risks, and potential cost overruns. A comprehensive
environmental impact assessment is essential to mitigate ecological concerns. Effective
project management, including detailed planning, risk assessment, and cost control, will be
crucial for its success. Additionally, continuous stakeholder engagement and the exploration
of advanced technologies can optimize the project's outcome. By addressing these factors,
NMDC can successfully expand its iron ore production and contribute to India's industrial
growth.

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References of Secondary Data

Books
Alan C. Shapiro ; Capital Budgeting & Investment Analysis; Pearson/Prentice Hall, 2005
Bedi ;Capital Budgeting; Deep & Deep Publications

Don Dayananda ,John Herbohn, Patrick Rowland, Richard Irons, Steve Harrison ;Capital
Budgeting: Financial Appraisal of Investment Projects ; Cambridge University Press (17
October 2002)

E-Resources
https://www.nmdc.co.in/
https://www.nmdc.co.in/investors/financial-details/annual-reports
https://en.wikipedia.org/wiki/National_Mineral_Development_Corporation
https://khanijonline.cgstate.gov.in/

Newspapers
hehindubusinessline.com/companies/nmdc-prepares-to-double-capacity-by-
2030/article68428757.ece

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 https://www.pressreader.com/india/businessline-chennai-9WVV/
20240723/282024742505385

Magazines
https://www.nmdc.co.in/rajbhasha/magazines

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 Thank you

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