The Company has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements including: the host country laws and regulations; IFC’s Performance Standards; and the relevant environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the Company is summarized in the paragraphs that follow. Further information is provided in the attached documentation (i.e. Environmental and Social Action Plan (ESAP), in English as well as in local language together with the REIA report in full with Executive Summary in local language.
PS 1: Social and Environmental Assessment and Management System
IFC’s assessment considered the company’s management of its environmental, health and safety performance in the establishment and operation of its facilities; compliance with national and local permitting requirements; and the company’s engagement with local communities regarding environmental, health and safety performance and corporate social responsibility.
- Environmental & Social Assessment:
In accordance with the local regulatory requirements, KGS commissioned external consultants to undertake a Rapid Environmental Impact Assessment (REIA) study for the proposed efficiency improvement Project as well as the future capacity expansion to 1 MTPA of steel production and township. As part of this REIA process, a public consultation was conducted on 15 October 2009 near the Project site. The REIA report (attached to this disclosure), identifies potential impacts on the receiving environment as well as necessary mitigation measures – both during construction phase as well as during the project operation. According to the REIA report, the environmental and social impacts of the proposed Project are not expected to be significant or irreversible.
- Management Systems:
KGS is currently working towards an ISO9001 based quality management system which is expected to be certified in coming months. At the moment, Company has no plans for certification for environmental (ISO14001) or occupational health and safety (OHSA18001) management systems. However, it is in the process of establishing management systems and operational procedures for these aspects – in accordance with the Sponsor’s (Gerdau) operational practices and procedures – such as, for instance, a Safety Manual.
- Organization:
KGS has a dedicated environment and safety department to oversee these matters. At the moment the department comprises of safety manager, environment manager and an assistant manager. This department shall be adequately staffed up in due course once the production is resumed after completion of the current Project for efficiency improvement. In addition, a Central Safety Committee has been put in place, with representation from both management and workers.
- Monitoring & Reporting:
KGS has in place a robust monitoring program in place for its operations based on the KGS corporate as well as local regulatory reporting requirements. KGS shall update this monitoring program in line with the recommendations in the REIA report and IFC’s relevant environmental, health and safety guidelines. As a condition of disbursement KGS in consultation with IFC shall finalize the protocol for monitoring its EHS performance for reporting to IFC through Annual Monitoring Reports (such as format, frequency).
- Community Engagement:
Public consultation was conducted as a part of REIA process providing an excellent opportunity for KGS to connect with the neighboring community and understand about their views and expectations. This was very important for KGS, as it has inherited a distressed asset with a legacy of limited engagement with and benefits for the nearby villages.
In order to continue and further enhance the relationship with neighboring community, KGS will develop a community engagement program and a formal and documented disclosure and grievance mechanism for the nearby community to address any concerns related to its operations.
- Supply Chain/Associated Facilities:
Iron ore required for the production is sourced from the nearby Bellary mines, while the coke is imported from China. For lime and dolomite, Company has its own mines (approx. 25 Acres of mining lease for each) in the vicinity of the Tadipatri plant, which are not in operation at the moment. Once mining is resumed, IFC will conduct a due-diligence of the mining operations to assess the EHS compliance of these operations vis-à-vis IFC performance standards and relevant EHS guidelines. An action plan shall be developed as necessary, which will be implemented by KGS in due course. An oxygen plant is housed in the Company premises, which is operated by third party under a lease agreement.
All major raw materials are received by railroad, which passes adjacent to the plant boundary. In order to mitigate the risks associated with the supply of coke and its international price fluctuations, KGS is planning to establish its own coke oven in near future.
PS 2: Labor and Working Conditions
- Human Resource Policy, Management and Training
During the current construction and commissioning phase of the Project, with production suspended, KGS has 300 regular employees and up to 300 contract workers, which includes 50 security guards. Once the Project is implemented, the Company shall have a total of around 1000 persons including up to 650 regular employees and around 350 contract workers. In recruiting regular or contract staff, KGS gives preference to the members of the nearby communities and especially the former land-owners.
KGS has implemented Model Standing Orders issued by the Government and ensures that all statutory compliances under Factories Act, Provident Fund Act, and Contract (Abolition & Regulation) Labor Act, Minimum wages Act, Payment of Wages Act, Gratuity Act etc. are complied with.
Moreover, the HR department of KGS is in the process of redesigning its HR manual documenting its HR policies and procedures. These policies and procedures are in line with the Sponsors’ corporate HR policies and practices as well as local regulations, and will be developed in a manner compatible with IFC’s PS2 requirements. As a condition of disbursement, KGS will share with IFC the new HR manual and other relevant information once it is finalized, to enable IFC assess its compliance with PS2 requirements. Moreover, KGS has agreed to make necessary changes in the HR manual to address any gaps with the PS2 requirements, identified after the review by IFC.
- Occupational Health and Safety
KGS combines adherence to the national industrial safety standards as well as the Gerdau Group’s corporate safety standards for its workplace. As such, KGS is instituting very high standards of occupational health and safety at its facility in Tadipatri and is developing a safety manual, which will include standard safety protocols, operational control procedures, training of staff, and monitoring.
The company maintains its own firefighting and emergency response operation including its own fire engine. Elaborate firefighting equipment is fitted across the facility in accordance with the potential fire risks. Fire exits and the locations of fire extinguishers are clearly marked.
KGS has on its premises an Occupational Health Center, staffed with a doctor and 4 male nurses. KGS has its own ambulance on the site in case emergency cases need to be referred to the hospitals in the nearby Tadipatri town.
Once the facility is fully operational, KGS shall resume monitoring of noise levels, workplace air quality, temperature, and lighting levels to ensure that they all are within national limits and World Bank Group guidelines for workplace environment.
- Labor Safety during Construction
For the construction work associated with the Project, KGS intends to contract highly reputed construction companies in India with good OHS policies and practices. Moreover, in order to oversee and manage safety during the construction and commissioning phase, around 20-25 technical staff members from various departments have been identified and are being trained on safety issues.
PS3: Pollution Prevention and Abatement
IFC’s assessment considered the company’s operations with regard to resources consumption (water, energy, fuel), efforts to optimize resource inputs, waste minimization and management practices as well as the storage, handling hazardous materials used in the construction and operations of facilities.
- Legal Compliance
With the upcoming Project and physical/infrastructure changes associated with it, the Company is in the process of procuring all the necessary approvals and permits related to EHS, hazardous waste storage and disposal etc.
- Resource Conservation:
The proposed Project involves setting up a 6 MW captive power plant to recover calorific value and waste heat from the blast furnace exhaust gases (which were previously flared), thus reducing the grid electricity consumption. In addition, the proposed sintering plant shall use the cheaper iron ore and coke fines and shall also be able to taken in other residual wastes such as flue dust, sludge, mill scale, lime sludge and ferric dust. This will result in conservation of electricity and natural resources.
The subsequent phases of the project (coke oven, gas recovery, new blast furnace with pulverized coal injection etc.) are also being designed so as to maximize resource efficiency. As an example, KGS is expecting to reduce the fuel rate in kg of coke/ton of hot metal (THM) produced – a key performance indicator for steel sector - from the current levels of 640kg/THM to 580 kg/THM. This is equivalent to 1770 MJ/THM, thus comparing well with the international benchmark of 1050-2700MJ/THM as cited in the IFC’s Environmental, Health and Safety Guidelines for Integrated Steel Mills
- Water Supply and Effluent:
Average water requirement for the existing operations is approx. 1,500 m3/day which is expected to reach 2,700 m3/day after completion of efficiency improvement Project. The water is abstracted from infiltration bore wells (18 nos.) on the bed of Pennar River at a distance of 5 km from plant and pumped to the KGS plant, where it is stored in 2 storage reservoirs of 85,000 m3 capacity each - equivalent to 2 months water requirement.
This additional water requirement (including that for the future capacity expansion) will be met from the Gandikota reservoir which is about 22 km from plant site via pipeline. Approval for an additional 28,500 m3/day for proposed expansion have already been obtained.
Approx. 120 m3/day effluent is generated from the current operations, which would increase up to 980 m3/day after completion of entire expansion (1MTPA capacity) and the township. All the wastewater will undergo treatment in the wastewater treatment plants and the treated waste water will be used for dust suppression (dust pollution control) & for green belt development. As such, no waste water will be discharged outside the plant premises to the natural environment.
- Power Supply:
Power requirement for the existing plant is 15.5MW which is met through 132 KV transmission line from Tadipatri. For the proposed expansion, additional requirement of 60 MW power have been sanctioned by Transmission Corporation of A.P. Ltd. through new 220 KV transmission line from Thimmapuram (23 km from the Plant Site).
- Air Quality:
The main sources of air pollution from steel plants are raw material handling, blast furnace (BF), basic oxygen furnace (BOF), sinter plant and coke oven. The main air pollutants from steel production are suspended particulate matter (SPM), sulfur dioxide (SO2), oxides of Nitrogen (NOx), carbon monoxide (CO) and green house gases (GHG).
Currently, KGS has a 350m3 BF to produce hot metal from iron ore with hot blast temperature of 1100 deg C, and is equipped with 3 hot blast stoves and a gas cleaning plant. The main emissions from the BF occur during tapping operations and primarily constitute iron oxide particulates and graphite. Variable quantities of hydrogen sulfide and SO2 are emitted from slag cooling and treatment. Collected dust and sludge from the gas cleaning system shall be recycled in the proposed sinter plant, to be developed as part of the project. To further enhance the thermal efficiency of BF thereby reducing emissions, KGS is planning to introduce pulverized coal injection in near future.
The basic oxygen furnace (BOF) converts the hot metal produced by BF into steel. KGS has two BOFs with 25-30 T capacity each, equipped with gas cleaning plant comprising of wet type scrubber. In order to minimize particulate emissions, KGS uses primary controls for the flue gas of the BOF, including venturi scrubbers with complete combustion technique with automatic combustion control systems and positive oxygen balance.
Sinter Plant converts the fine iron ore particles and various other scrap materials into a porous clinker referred to as sinter, which is then crushed and recovered as raw material supply to the blast furnace. Existing BF at KGS has been designed with sinter as the majority raw material. In addition to using the low cost iron ore and coke fines, with the proposed sinter plant the BF capacity will increase from 250,000 tons to 310,000 tons per annum. In addition, use of sinter in BF burden will bring down the coke consumption in BF by 60 kg per THM and hence associated reduction in air emissions. Moreover, the sintering machine will use BF Gas as its fuel which is presently being flared to atmosphere, and would not require any additional fuel.
KGS plans to mitigate impacts on ambient air quality during construction and commissioning and operation phases with appropriate air pollution control techniques and technologies. Fugitive emissions will be controlled with jet pulse bag filters at all dry material conveying and transfer points, while dust suppression system by water sprinkler at dump hopper of raw materials and on roads. Accordingly, suitably designed electrostatic precipitators (ESPs) / Bag filters will be placed downstream of the stacks to separate the dust in flue gas and limit the dust concentration so as to comply with emission levels stipulated in IFC’s EHS Guidelines for Integrated Steel Mills. In the event of failure of any pollution control equipment, automatic tripping in the control system will be provided.
KGS is planning to set up its own coke oven to meet its coke demand for BF. Currently, KGS is in the process of finalizing the technical designs and details for this. At the moment Company is considering to set up a 4-battery coke oven with capacity in the range of 10-20,000 TPM, with a 9 MWe waste heat recovery.
During the REIA, prediction of incremental Ground Level Concentrations (GLCs) of SPM and SO2 was carried out by using internationally accepted models. Predicted average incremental values due to proposed expansion were 2.06 µg/m3 for SPM, and 0.94 µg/m3 for SO2, which is expected after the completion of entire expansion to 1MTPA capacity. As such, the efficiency improvement Project is expected to have a minimal impact on the ambient air quality in terms of particulate matter and SO2. In addition, KGS shall simulate the projected NOx and CO levels based on the available ambient air quality data, to assess its compliance against the IFC’s EHS guidelines.
- Carbon Footprint:
During 2007-08, with only blast furnace in operation (with steel melting shop not operating) the CO2 emissions are estimated at approx. 880,000T for 195,000T of hot metal production. During 2011-12 once the efficiency improvement Project is fully operational, and production levels of around 290,000 T for hot metal from blast furnace plus the new sinter plant and steel rolling mill to produce value added steel products such as rebar and SBQ at 100,000 T each, the CO2 emissions are expected to increase only marginally to say 1,220,000T/annum. On the other hand, KGS through its energy recovery-based 6 MW power plant would reduce approx. 40,000T of CO2 emissions annually, by avoiding the purchase of grid electricity. As such, the project would result in reduction of unit electricity and coke consumption and hence GHG emissions per ton of product.
- Solid and Hazardous Waste:
Granulated blast furnace slag generated through the process is sold to the nearby cement plants. Other solid waste such as sinter plant dust, Flue dust from the blast furnace, coke fines from the stock house, scale from rolling mills and continuous casting machines, lime plant dust, gas cleaning sludge etc. shall be recycled in sinter plant. Basic Oxygen Furnace (BOF) scrap shall be used in steel making and cast house scrap and steel scrap shall be sent to BOF.
Other waste such as spent oils, lead acid batteries shall be sent to authorized waste handlers while the sludge from STP shall be used as manure. Sludge from coke plant desulphurization units will be used for selective land-filling, as per the authorization by the regulatory agencies.
PS4:– Community Health, Safety and Security
IFC’s assessment considered the company’s operations with regard to the impacts of the construction and operations of facilities, including: movement of vehicles to and from construction sites, containment of dust, noise and other nuisance factors; and use of security forces.
Transport of most of the raw materials and part of the final products takes place with the railroad and hence there is no significant truck traffic associated with this project. Moreover, there is direct access to the site on the state highway so that the impact of vehicular movement during construction as well as during facility operations on surrounding communities is expected to be minimal..
A detailed On-site Emergency Response plan has been developed and is being rolled out across the various departments to minimize the risks to the neighboring village and communities.
The company contracts with a nationally certified security agency for 24 hour surveillance of the facility perimeter, with armed security guards. Most of the security guard are well trained ex-servicemen. KGS is in the process of developing documented procedure for screening and training of armed security guards and has agreed to submit the same to IFC as a condition of disbursement.
On the basis of the above information, and by implementing the Environmental and Social Action Plan it is concluded that the Project will be operated in compliance with IFC’s PS and relevant environmental, health and safety guidelines.
