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Essar Group News ( Click on the headline to view the article )
Today no news on Essar

Industry News with Essar ( Click on the Headline to view the article )
Workshop on human development held at VNSGU (Times of India )
3G licence bids: a reality check for telecom stocks in the offing (The Mint )
ABG Shipyard set to win $114 mn order ( The Mint)
Airtel to premiere fastest ever Apple iPhone 3GS in India shortly (Cell Bharat )
'Consumer can't be insulated from global prices for very long' (Business Standard )
Roads Min decentralises work to build 20 km a day (Business Standard )
3G bids: Uncertainty may've led to new foreign telcos' absence (Business Standard)
Where is steel headed? (Business Line )

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Page 1 of 14
Essar Group News

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Industry News with Essar

Workshop on human development held at VNSGU

Publication: Times of India

March 22, 2010

SURAT: Social scientists, industrialists, professionals and government officials were among the
150 delegates, who took part in a workshop on Human Development in South Gujarat Region:
Issues and Challenges,' organised at the department of human resource development (HRD) of
VNSGU here on Sunday.

Vidyut Joshi, former vice-chancellor of Bhavnagar University, Rohit Shukla, former professor at
Sardar Patel Institute of Economics and Social Research, Ahmedabad, and G K Vyas, director
of Directorate of Human Development, were some of the well-known names who participated in
the workshop. The corporate world was represented by Umesh Sharma, vice-president,
human resource, Micro Inks, Vapi and Atul Pandya, VP HR, Essar, Hazira. As many as 31
papers were presented at the workshop.

Vidyut Joshi in his keynote address spoke about the aspect of neglected human development in
industrial growth. "In Hazira, we have developed industries but forgot the people for whom they
have been set up. The locals are at the suffering end as there are so many private jetties and no
space for the fishing community of the region. Industries are heartily welcome but the rights of
the residents should also be protected," he said.

Joshi said performance of Gujarat is poor in human development though it ranks among the top
states in industrial development.

As president of the inaugural function, Rohit Shukla said, "In South Gujarat there is no one to
play a role in civic space. There is no one to raise the voice for people which results in absence
of any movement to protect rights." Shukla recalled Bardoli Satyagraha and said, "Now there
are no movements like those days even when problems exist."

Importantly, Shukla described pollution as a major concern. "Increasing pollution between Surat
to Vapi is a major threat for human development in the region. Pollution directly affects the lives
of people of the region," he said.

Umesh Sharma talked about Micro Inks' contribution in the field of education in Valsad district.
"We are gradually changing the education system in the public schools adopted by Micro Inks.
Education is a key area on which we are emphasising on besides human development," he
added.

Atul Pandya talked about Essar's contribution to development of coastal villages around
Hazira. "Essar started community development centres in a number of villages around
Hazira focusing on overall development of the communities in the region," he said.
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3G licence bids: a reality check for telecom stocks in the offing

Publication: The Mint

March 22, 2010

While it was always evident that 3G will be a long-gestation project for telecom service
providers, a higher-than-expected bidding amount will mean that earnings and returns will get
diluted for a longer-than-expected period

Manas Chakravarty, Mobis Philipose, Vatsala Kamat and Ravi Ananthanarayanan

The recent strength of telecom stocks is surprising, to say the least. Telecom service providers
will be paying spectrum fees at a higher rate from 1 April. Besides, bidding for so-called third-
generation, or 3G, licences is likely to be quite intense.

The utility of a 3G licence is quite high for incumbents such as Bharti Airtel Ltd, Vodafone Essar
Ltd and Idea Cellular Ltd. According to a recent report by Citigroup Inc., In metros and A
circles, 3G will be used 1) as a deterrent to post-paid churn post-number portability, and 2) for
voice capacity enhancement (especially by market leaders in each circle). These factors,
coupled with the limited number of slots available in the 3G auction, will lead to high bidding.

In most circles, only three slots are available. According to an analyst, who did not want to be
identified, in the metros and A circles, there will be serious bidding from at least five players. As
a result, the bids are likely to be considerably higher than the reserve price of Rs3,500 crore for
a nationwide 3G licence. Besides, according to him, telecom operators will have to invest $400-
500 million (Rs1,820-2,275 crore) annually for the next two-three years in setting up the 3G
telecom network.

All this will add up to a high capital cost, the returns on which will be a long way coming.
Demand for 3G services is expected to grow gradually in the country. According to HSBC
Research, 3G service penetration will be gradual in India, largely driven by the low penetration
of 3G-enabled handsets. Currently, only 30 million subscribers are estimated to have 3G-
enabled handsets, representing less than 6% of the total subscriber base.

While it was always evident that 3G will be a long-gestation project for telecom service
providers, a higher-than-expected bidding amount will mean that earnings and returns will get
diluted for a longer-than-expected period.

Despite all this, telecom stocks rose sharply last week, much faster than the 2.4% rise in the
Nifty. While Idea led with a rise of 15%, Reliance Communications Ltds shares rose by 6.6%
and Bhartis shares gained 4.3%. Perhaps there will be a reality check when the bid amounts
are announced in April.

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ABG Shipyard set to win $114 mn order

Publication: The Mint

March 22, 2010
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ABGs first order win since the economic crisis deepened in September 2008 will be signed in a
few days

P. Manoj
Bangalore: Indias biggest private shipbuilder, ABG Shipyard Ltd, is set to win a $114 million
(Rs518.7 crore) order to construct four cement carriers for Singapore-based Associated Bulk
Carriers Ltd, an ABG executive said on condition of anonymity.

ABGs first order win since the economic crisis deepened in September 2008 will be signed in a
few days, the executive said.

Each cement carrier can carry up to 20,000 tonnes of cargo and will cost $28.5 million to
construct, according to the executive. The ships will be delivered between August 2011 and
April 2014. Dhananjay Datar, chief financial officer and spokesman for ABG, declined to
comment.

Associated Bulk Carriers is 50% owned by Bangkok-based dry bulk cargo specialist Precious
Shipping Public Co. Ltd. The balance equity is held by PFS Shipping (Singapore) Pte. Ltd, a
wholly owned subsidiary of PFS Shipping (India) Ltd.

Precious Shipping has signed long-term contracts with Aditya Birla Groups UltraTech Cement
Ltd in December 2009 to haul cement for a minimum of 15 years and extendable to 20-25 years
using three firm and one optional cement carriers at a day rate of $15,000 per ship.

Associated Bulk Carriers was formed to own and operate the cement carriers used for the
UltraTech contract. It will also look for similar contracts from other cement producers in India,
said Khalid Moinuddin Hashim, managing director of Precious Shipping.
The order from Associated Bulk Carriers swells ABGs order book to 91 ships worth Rs13,180
crore.

Precious Shipping is ABGs biggest customer. The Mumbai-based yard is building 18 dry bulk
cargo-carrying ships for Precious Shipping at a total cost of $ 518 million.

ABG booked its last order in August 2008 for building two oil drilling rigs for Essar
Oilfields Services Ltd, a unit of the diversified Essar Group, for about Rs2,400 crore.

ABG is also planning to build two oil drilling rigs for itself at a cost of $360 million at its
shipbuilding facility in Dahej, Gujarat. The yard has tied up with US-based Friede and Goldman
Ltd for design and Singapores Megaway Engineering and Trading Pte. Ltd for detailed
engineering for executing the rig building contracts, said the company executive quoted above.

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Airtel to premiere fastest ever Apple iPhone 3GS in India shortly

Publication: Cell Bharat

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Page 5 of 14
March 21, 2010

Bharti Airtel the leading giant in Telecom space will be the first to bring the grand premiere,
Apple iPhone 3GS to India. The iconic device is anticipated to hit the Indian screens in the
month of August. Earlier Vodafone Essar and Airtel were curious to bring iPhone 3GS to
India and now the day has come to reveal the fastest gadget.

Iphone 3GS is the latest chic from Apple that boasts revolutionary features like a wide screen
iPod, and a breakthrough internet device with HTML, email and web browsing. iPhone 3GS is
supposed to be the most powerful and fastest iPhone ever seen.

iPhone 3GS is more responsive than iPhone 3G with faster 2X and renders the web page in a
fraction of time. You can also enjoy the incredible gaming experience with updated 3D graphics.

Video

It is time to capture the memorable moments with new 3MP autofocus camera and a photo
application that makes it easy to share, iPhone 3GS is the most photo-friendly phone ever. You
can turn out any photo in to iPhone Wallpapers , geotags, and share photos through MMS,
email or directly through MobileMe.

Share and Sync your photos using iTunes, which sync the iphotos on MAC or using Adobe
photoshop.

Voice control

Making calls on iphone is very easy, you can just make calls and play music using just the
sound of your voice. Voice control recognizes and reports the person name or their contact
number.iPhone repeats your voice commands to confirm them, then dials away.

One can order Voice Control to play the album of their wish as it knows the music in your iPod.

Digital Compass

iPhone 3GS locates you exactly through GPS, Wi-Fi, and cellular towers as it is outfitted with
inbuilt Digital Compass. Turn-by-turn navigation navigates you in a right way, whether you
progress by walk or by driving.

A built-in digital compass rotates maps to always match the direction youre facing.Maps on
iPhone shows you live traffic information, indicating traffic speed along your route in easy-to-
read green, red, and yellow highlights.

Cut, Copy & Paste

Perform cut copy & pastein a tap,You can also copy content from the web, then paste it into an
email or text message. Multiple photos and videos you have shot can be emailed or SMS.

Keyboard

iPhone keyboard is crafted intelligently which bids faster typing and even full QWERTY
keyboard appears only when you need otherwise you can set in an off mode. Itsuggests words,
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correct spellings and incorporate punctuations.

The multitouch keyboard tracks what yoy type and compares with the in-built dictionary.It comes
in more than 40 international lay outs.

Spotlight search

Spotlight searches all your contacts, email, calendars, and notes, as well as everything in your
iPod. It also boasts Nike+Pod, voice memo, You Tube, stock news, voice memo, Find your
Phone, remote wipe, and internet tethering.

iPhone 3GS is available in two modes iPhone 3GS 16 GB in Black & White Colour and
iPhone3GS 32 GB in Black & White Colour.

The iPhone 3G S offers longer battery life, and thus it saves its users from the hassles of
charging again and again. The phone supports 7.2 Mbps HSDPA for faster and smoother
networking.
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'Consumer can't be insulated from global prices for very long'

Publication: Business Standard

March 22, 2010

Q&A: S Sundareshan, Petroleum Secretary

Ajay Modi & Jyoti Mukul
Second month into his tenure as petroleum secretary, S Sundareshan is in the middle of a
situation where oil marketing companies are seeking an increase in prices as well as higher
subsidy from the government. The two demands, so far, have failed to move the political class.
In an interview with Ajay Modi and Jyoti Mukul, he says the Kirit Parikh report is alive and the
government will take care of its companies. Edited excerpts:

What is your long-term view of the ministry on the petroleum sector?

The long-term outlook is extremely bright. First and foremost is our achievement in building
refining capacity. We have already built annual capacity of 178 million tonnes (mt). Our
domestic consumption is 135 mt. It is growing at a rate of 4-5 per cent. By 2012, we will build
capacity to the tune of 255 mt. There has been tremendous achievement in terms of technology
and risk-taking ability of the industry. After two-three years, 100 mt of petroleum products will be
exported. In the public sector, three new refineries are coming up Bhatinda by Hindustan
Petroleum Corporation Ltd, Bina by Bharat Petroleum Corporation Ltd and Paradip by IndianOil.
A private greenfield refinery is being built at Cuddalore. Essar refinery will be expanded. So,
in the foreseeable future, there is going to be no shortage of any petroleum product for
want of capacity. The huge surplus would be used to the countrys advantage.

In gas, the last year has been phenomenal in terms of increase in production. We are producing

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60 million standard cubic metre a day more gas (total 142 mscmd) from 82 mscmd last year.
This offers tremendous scope for increased supply to critical sectors. We also expect additional
gas production from the discoveries of public and private sectors. Last year has been good as
the facilities of a joint venture between Cairn and ONGC started production in Rajasthan and we
hope it will produce 22 per cent more at its peak from the current level.

In terms of acquisition of oil and gas assets abroad, OVL (ONGC Videsh Ltd) has been doing a
remarkable job. It has made investments of over Rs 52,000 crore in 39 projects and had
revenues of Rs 18,000 crore last year, with profits of Rs 2,800 crore.

Considering the positive outlook, correct pricing policy is important. If prices are remunerative,
there will be more investment, if not, more investment will mean more losses for the companies.
What is the governments long-term outlook on pricing? Is the Kirit Parikh report on petroleum
prices dead?
The oil marketing companies are losing over Rs 5 on every litre of petrol, over Rs 3 on diesel,
Rs 16 on a litre of kerosene and over Rs 260 per LPG cylinder. It is impossible that the Indian
consumer can be insulated from the movement of international oil prices. Ultimately, the
consumer has to pay the price for what he consumes. The government could have a deliberate
policy to subsidise the weaker sections, particularly kerosene and LPG, and a special scheme
could be formulated for this purpose. A decision has to be taken in this regard. The Parikh
committee report has offered certain suggestions, the basis of which is equity and sustainability.
The government is examining the report.

When are you going with the report to the Cabinet? Is it that the hike after the Budget has made
price increase on account of international prices difficult?
The decisions in the Budget are resource mobilization steps of the finance ministry and I have
no comments to offer on that. The problem remains that in the current year oil marketing
companies would have under recoveries close to Rs 45,000 crore. The under-recoveries on
account of petrol and diesel (estimated at Rs 13,000-14,000 crore) will be absorbed by the
upstream companies. The balance on account of kerosene and LPG have to be borne by the
government. Already, Rs 12,000 crore have been released. So far as the balance is concerned,
we are in constant touch with the Ministry of Finance and will have deliberations with them early
in the next financial year once accounts are finalised. We are sure oil companies will be
adequately compensated.

Is there any thinking on changing the burden sharing mechanism in the next financial year,
especially with regard to the upstream companies?
First and foremost, there is absolutely no panic from the observers of the industry on this
account. In 2007-08, under-recoveries were to the tune of Rs 70,000 crore, which was fully
compensated; in 2008-09 it was Rs 103,000 crore, which was compensated by the upstream
companies and the government. We have ensured that no investment proposal of oil companies
suffer for want of funds. These companies are building new refineries, upgrading facilities and
completing major pipelines. So, the oil companies have been able to sustain both activities and
investment.

We have a formula on the basis of which we take decisions every year. The formula for the
current period was known early in the year. For the last two years, it was that one-third of the
under-recoveries were to be borne by the upstream companies. What is now required is a
sustainable decision for the future. For 2010-11 and beyond, the Kirit Parikh report will be the
benchmark. The government is studying it and the implications on various sections of the
society. It is studying the need to subsidise the weaker sections and not subsidise the better-off.
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A decision will be taken keeping all these into account. There were reports that IndianOil wants
to raise more funds through sale of shares. At one point, it sold some of its crossholdings to
fund expansion. Is there any fresh proposal from any of the companies?
They have not sought permission. Such a requirement will be considered by the boards of
respective companies. There is no proposal as of now.

Is there any proposal for disinvestment in oil PSUs?

There is no scope for disinvestment in HPCL, BPCL and GAIL since the government holding in
HPCL and BPCL is 51-52 per cent and in GAIL, it is 57 per cent. For IOC and ONGC, there is
no proposal under consideration at this juncture.

What about Engineers India Ltd, which has a Cabinet approval in place?
The process is on and it is likely to be kicked off in the next couple of months.

There are talks about a sovereign fund for acquisition of assets. Is there any such proposal from
the ministry?
OVL will continue to acquire assets abroad. Clear directions have been given to OVL to go for a
couple of major acquisitions in the next fiscal. OVLs acquisition has not been hampered due to
lack of funds. So far as a separate fund is concerned, it could be in the context of the need of
the country to acquire assets not only in area of hydrocarbons, but also in other raw material
assets such as coal, iron-ore, etc. We have written to the finance ministry a few months back. It
is a general idea at this juncture and contours have to be finalized if found acceptable by the
finance ministry.

The ministry had plans to set up a national gas highway authority. What is the current status?
Will the creation of such an authority lead to the Petroleum and Natural Gas Regulatory Board
losing its power of authorization?
The government is committed to having a network of gas pipelines across the country to ensure
availability. Currently, availability is largely restricted to the western and northern regions. South
and East are starved. PNGRB can authorise new pipelines, which it has not been able to do due
to various reasons. We have to resolve this issue and find a way for providing authorization for
more pipelines. One way of doing it is the gas highway authority and in that context inter-
ministerial discussions are on.

When can we expect a revision in APM (administered price mechanism) gas prices? Will the
ministry also go for a uniform gas price along with the revision in APM prices?
It has to be realized that monumental reforms like uniform gas price are not done overnight.
One of the priorities that I have is that there should be uniform price for gas in the country. The
first step was to increase the price of APM gas and a proposal in this regard is in the final
stages of government decision-making. One of the ideas to ensure that consumers pay similar
prices is pooling of gas. But it is a new idea and a complex task, which will have its
repercussions for decades. We will study it carefully and come to a decision in course of a few
months.
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Roads Min decentralises work to build 20 km a day

Publication: Business Standard

March 22, 2010

Mihir Mishra
The road transport ministry is decentralising its functioning to speed up and achieve the target
of building roads at a pace of 20 km per day. The National Highways Authority of India (NHAI)
had earlier decentralised its work to increase efficiency and pace of construction.

The ministry is opening seven regional offices to award road projects directly. They are Kolkata,
Bangalore, Mumbai, Chandigarh, Lucknow, Chennai and Bhopal. Each region is to be headed
by a chief engineer.

Projects under the National Highways Development Programme (NHDP) come under the NHAI
and the rest are done by the ministry. It earlier awarded the roads to be built or maintained to
the Public Works Department of respective states.

NHAI had opened 150 special land acquisition units (SLUs) and 10 regional offices. The SLUs
are in Rajasthan, Bihar, Uttar Pradesh, Gujarat, Orissa, West Bengal, Jharkhand, Maharashtra,
Assam, Tamil Nadu, Karnataka and Goa. The regional offices are in Lucknow, Patna, Jammu,
Chennai, Guwahati, Delhi, Nagpur, Bangalore and Kolkata.

In June 2009, a few days after Kamal Nath took charge of the ministry, he set a target of
building 20 km of road a day. Recently he announced that the government would achieve its
target by June 2010. The first five years of the UPA rule (from 2004) had seen construction at a
pace of 4 km per day.

We are doing 13 km a day and will add another 4,000 km in the next three months, Nath
said on the sidelines of the Essar Steel Infrastructure Excellence Awards 2010 recently.

NHAI plans to award over 200 projects worth Rs 2 lakh crore by the end of 2010-11. To
streamline the process and avoid frivolous bidding, the highways authority has revised eligibility
conditions, including raising the net worth criteria of the bidder, to restrict to only big national
and international companies all projects that cost over Rs 3,000 crore.

The total length of the countrys national highways is also being increased by 10,000 km to over
80,000 km, with the empowered group of ministers last week giving an in-principle approval to
convert state highways.
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3G bids: Uncertainty may've led to new foreign telcos' absence

Publication: Business Standard

March 22, 2010

Mansi Taneja
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The lack of any new foreign telecom companys application to join the April 9 auction for third-
generation (3G) spectrum may be due to uncertainty on spectrum availability, coupled with
higher cost of rolling out services.

Only those foreign companies with an existing presence in Indian telecom finally put in bids for
the 3G auction. The last date for applications was March 19.

US-based AT&T and Verizon and Australias Telstra, among others such as Orange and Sprint,
were keen to enter the Indian mobile market and participate in the auction.

According to industry experts, the uncertainty in granting 2G spectrum for successful new
entrants dampened the spirits of companies for bidding 3G frequency. Moreover, even the 3G
winners would be allowed to offer commercial services from only September 1, while the
payment has to be made upfront within 15 days after close of the auction.

Prashant Singhal, a telecom analyst at research firm Ernst & Young, said, There was an
incremental burden on the new foreign entrants of acquiring a unified access service license
(UASL) for Rs 1,650 crore, apart from bidding in the 3G auction. The reserve base price for 3G
auction has been fixed at Rs 3,500 crore, and acquiring an UASL license over that would have
increased the cost substantially.

He said the Indian market was not as profitable currently as it was one to two years earlier,
because of too many players and low rates, so the business case for foreign firms was not that
viable. Plus, the availability of 2G spectrum for new entrants was still an issue.

Even the Central Vigilance Commission had said that the department of telecommunications
(DoT) 3G spectrum policy preferred Indian telecom players over foreign players, a claim DoT
denied.

Another Mumbai-based analyst said the entire schedule for 3G auction was announced by DoT
just a few days before, which gave foreign firms very little time to go through the details and
take a proper decision. After the process was delayed for over two years, the sudden
announcement on February 25 this year made it difficult for the new foreign firms to introspect
and decide.

For the 3G auctions starting April 9, nine applications have come to DoT. Bharti Airtel,
Vodafone Essar, Aircel, Reliance Communications, Tata Teleservices, Idea Cellular, STel
all being existing operators in the market and Etisalat DB (earlier Swan Telecom)
and Videocon, which hold licences but have not started services, applied to participate.

DoT is to auction three slots of 3G spectrum in most of the circles. The reserve price for pan-
India spectrum has been fixed at Rs 3,500 crore. Out of the 22 circles, five Punjab, Bihar,
West Bengal, Himachal Pradesh and Jammu & Kashmir will have four private players each.

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Where is steel headed?

Publication: Business Line

March 22, 2010

Backbone:Steel demand will soar when projects that propel the economy, such as the Bandra-
Worli sea link, mushroom across the country.

Adarsh Gopalakrishnan
To say that a bet on the future of the Indian steel industry is a bet on the country's future
economic prosperity would not be far from the truth.

If expansion plans are any measure of future expectations, the top three domestic players, led
by SAIL, will be expanding capacities by 66 per cent by 2012. This expensive leap is a bet on
India consuming a lot more automobiles and consumer durables, among a variety of products.
However, the single biggest impetus for fresh capacity remains infrastructure spending, which
over the next decade will be the crucial growth driver for steel consumption.

Hot rolled steel coil prices are up around 25 per cent in the domestic market from the lows of
mid-2009. Rising raw material costs, demand and taxes are some of the contributors to rising
steel prices. Global demand has been propped by a stimulus steroid pumped Chinese
economy. A circumspect Europe and Japan have been operating at utilisation levels of below 80
per cent over the last quarter. The constant threat of imports has kept tightly supplied Indian
prices in line with international prices.

The Indian steel industry is gifted in one vital regard: Iron ore. SAIL, Tata Steel and JSP are a
few of the players who have captive mines to provide 100 per cent of their iron ore
requirements. Even with the added production capacity, SAIL and Tata Steel have reserves to
comfortably cater to expanded production for the foreseeable future.

Iron ore is the biggest cost component for most non-integrated steel producers. India, by
conservative estimates, has proven iron ore reserves of 25 billion tonnes, with PSU's such as
NMDC and SAIL sitting on reserves well in excess of billion tonnes and private players such as
Tata Steel on reserves of 300 million tonnes. Calendar year 2009 saw us export close to 104
million tonnes of iron ore, which would have been slightly less than our local requirement.

Ore control

Iron ore is a tightly held global resource with the top three global players Vale, BHP Billton and
Rio Tinto controlling 70 per cent of the export ore.

The year 2009 proved to be crucial in the way iron ore is priced. Traditional annual contracts are
giving way to shorter contracts linked to immensely volatile spot prices. The Government had
hiked taxes on iron ore lumps and fines to 10 and 5 per cent respectively in December 2009.
The fact that the Government has been more than willing to use taxes as a tool to keep iron ore
exports in bay augurs well for steel companies.

Coking coal is the one of the weaknesses of steel players. Tata Steel depends on external
sources for 40 per cent of its requirement, SAIL close to 80 per cent of its requirement and JSW
its entire requirement. Australia is the leading exporter of coking coal whose prices have shot up
over the last two months with renegotiated contract prices higher by 55 per cent.
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Like in iron ore, volatile quarterly contracts are becoming the norm. Efforts are on by local
players to secure coal blocks in Jharkhand and locations outside the country.

To maintain the integrated low-cost production model for Greenfield capacities, captive mines
are an absolute necessity.

The major drivers for demand for the greenfield capacity are from infrastructure, industrial
machinery, automobiles and consumer durables. With $500 billion and $1.5 trillion of expected
spending in the Eleventh and Twelfth Five-Year Plans, the much awaited push for construction
of roads, airports, bridges and ports will be a major consumer of long steel products. Top this of
with automobiles and consumer goods whose markets are expected to double over the next five
years and the rationale for expansion in a country where six million tonnes of steel is imported
becomes clear.

The recent spurt in the automotive steel segment with Sumotimo-Bhushan, Nippon-Tata Steel
and JFE-JSW tie-ups are signs of the expected expansion of automobile market, which has
been posting stellar double digit growth figures for the last 11 months.

Fortune tracker

The wide application of steel in a number of industries ensures that its fortunes closely track the
country's GDP growth. Growth in steel consumption has hovered around 1.2 times GDP growth
over the last five years. Assuming our economy chugs along at an 8 per cent average over the
next five years, we are looking at a surplus capacity of 6-10 million tonnes.

The Steel Minister, Mr Virbhadra Singh, said in an interview that he had set a target for India to
become the second largest steel producer in the world by 2012 with a capacity of 124 million
tonnes. This would entail significant new greenfield capacity coming on stream on 2012.

Mining licences, land acquisition, resettling and providing sustainable means for locals are some
of the issues faced by those seeking greenfield projects. However, incremental brownfield
additions by SAIL, Tata Steel, JSW,JSP, RINL, Essar Steel and greenfield additions by
Bhushan Steel, NMDC will make 95-100 million tonnes per annum by FY13 a more
pragmatic goal. Tata Steel and JSW will be adding over 3 million tonnes each to their facilities,
funding for which has already been tied up through debt and internal accruals.

SAIL will be spending close to Rs 600 billion to double capacity. A possible share sale by the
Government and the company is expected to raise around Rs 160 billion. The company's low
leverage, solid cash flow and Rs 182 billion in cash should come in handy to raise the remaining
Rs 440 billion.

Tata Steel's greenfield, 6-million-tonne project at Orissa is expected to cost Rs 210 billion.
JSW's ambitious greenfield project of 10 million tonnes in West Bengal is expected to cost Rs
350 million, funds for which are expected to come from a stake sale to Japanese major JSE and
debt.

However if history is anything to go by, the success of an enlarged steel industry five years
down the line rests in our nation making a huge leap in growth. For investors this means a huge

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Page 13 of 14
leap of faith.
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