Feasibility Steel Mill

Developing Financial Intermediation Mechanisms for Energy Efficiency Projects in the Steel Re-rolling Cluster at Mandi Gobindgarh, Punjab,
India
Project Report
Submitted to
&
INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY LIMITED
October 1 2004
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Project Report - Developing Financial Intermediation Mechanisms for Energy Efficiency Projects in the Steel Re rolling Cluster at Mandi Gobindgarh, Punjab
Table of Contents
LIST OF ABBREVIATIONS..3 ACKNOWLEDGEMENT...4 EXECUTIVE SUMMARY ....5 1. INTRODUCTION ..12 1.0 1.1 1.2 1.3 1.4 2. ENERGY EFFICIENCY - BACKGROUND ENERGY EFFICIENCY - STEEL RE-ROLLING MILLS THE ASSIGNMENT- UNEP/WBANK PROJECT MANDI GOBINDGARH STEEL CLUSTER STRUCTURE OF THE REPORT
PROJECT APPROACH & METHODOLOGY . ....19 2.1 2.2 2.3 2.4 2.5
APPROACH AND METHODOLOGY SELECTING TWO UNITS FOR DEVELOPING BANKABLE PROJECTS DETAILED ENERGY AUDIT & SELECTION OF EQUIPMENT SUPPLIER PREPARATION OF DPR & BANKABLE PROJECTS DISCUSSIONS WITH EXISTING BANKERS OF SELECTED UNITS & RESPONSES
3.
BANKABLE PROJECTS DEVELOPED..27 3.0 3.0.1 3.0.2 3.1 3.1.1 3.1.2 3.2 3.2.1 3.2.2 DETAILED PROJECT REPORT(DPR) DPR- LAKSHMI STEEL ROLLING MILL.28 DPR- ROYAL STEEL ROLLING MILL54 DETAILED ENERGY AUDIT REPORT ENERGY AUDIT REPORT- LAKSHMI STEEL ROLLING MILL.80 ENERGY AUDIT REPORT- ROYAL STEEL ROLLING MILL..103 IREDA LOAN APPLICATION FORM (FILLED) LOAN APPLICATION FORM- LAKSHMI STEEL ROLLING MILL.125 LOAN APPLICATION FORM- ROYAL STEEL ROLLING MILL152
APPENDIX 1 : DETAILED PROJECT PLAN APPENDIX 2 : LIST OF PARTICIPANTS AISRA / SRMA APPENDIX 3 : LIST OF PARTICIPANTS AT MANDIGOBINDGARH MEETING APPENDIX 4 : STRUCTURED QUESTIONNAIRE APPENDIX 5 : SPECIFICATIONS FOR BRINGING OUT EE INTERVENTIONS APPENDIX 6 : PRICE ESTIMATES FROM M/S LLOYD INSULATIONS (INDIA) PVT. LTD APPENDIX 7 : QUOTATIONS RECEIVED FROM EQUIPMENT SUPPLIERS & MANUFACTURERS APPENDIX 8 : LETTERS TO EXISTING BANKERS OF SELECTED UNITS APPENDIX 9 : RESPONSE FROM SBI, MANDIGOBINDGARH, PUNJAB APPENDIX 10: LETTERS TO SBI , PROJECT 'UPTECH' MANAGERS APPENDIX 11: IREDA LOAN SCHEME APPENDIX 12: RESPONSE FROM MINISTRY OF STEEL , GOVERNMENT OF INDIA.
CONFIDENTIAL This document is the property of Deloitte Touche Tohmatsu India Private Limited and contains confidential information that has been provided at your request. This information should not be disclosed in whole or in part without expressing written consent of the firm. This document should not be duplicated or used, in whole or in part, except for evaluating the firms proposal and should be returned upon request. Proposal and should be returned upon request. 2
Abbreviations AISRA CO2 EE ESCO FIs FO GEF HSD IREDA LDO LSRM M&V MT PCB RSRM SBI SEB SEC SFC SIDBI SME SPM SRMA SRRMs TPH UNDP UNEP All India Steel Re-rollers Association Carbon Di-Oxide Energy Efficiency Energy Services Company Financial Institutions Furnace Oil Global Environment Facility High Speed Diesel Indian Renewable Energy Development Agency Limited Light Diesel Oil Lakshmi Steel Rolling Mill Measurement and Verification Metric Tonne Pollution Control Boards Royal Steel Rolling Mill State Bank of India State Electricity Board Specific Energy Consumption Specific Fuel Consumption Small Industries Development Bank of India Small and Medium Enterprise Suspended Particulate Matter Steel Re-rollers Manufacturers Association Steel Re-rolling Mills Tons per hour United Nations Development Program United Nations Environment Program
Acknowledgements Deloitte team expresses sincere gratitude for the help, support & encouragement provided by all - the experts in conceptualization of the project and to the various stakeholders in carrying the project forward. An innovative project like this would not have been possible without the synergies provided by all and the financial support provided by UNEP Riso Centre. Guidance provided by the IREDA Core Group is acknowledged with gratitude.
Deloitte Team Dr. Naval Karrir Director Mr. U.P.Singh - Energy Consultant Mr. Prem Shankar - Energy Consultant Mr. Tarun Jindal Financial Consultant
EXECUTIVE SUMMARY
In India, the iron & steel industry is one of the key sectors contributing towards the economic development of the country. India is the tenth largest producer of the steel in the world. However, the intensity of the energy use in the steel industry is high. Amongst the major steel producing countries , the intensity of the energy use as well as scope of energy saving is highest in India followed by China, Brazil, Poland, US, France, Japan and Germany. The Small & Medium scale Rerolling Mills (SRRMs) sector in India, constitutes a significant link in the overall supply chain of steel in the country. According to a Comprehensive Survey of Re rolling Industry ( Source: Ministry of Steel ) , this sector comprises of more than 1200 working units of various sizes. The share of the secondary steel producers is 57% of the total demand and with no major steel plant contemplated in the very near future; the present share is likely to grow. The SRRM sector has a definite edge over the major steel producers due to their inherent capabilities of Flexibility in production Meeting the low tonnage requirements in various grades, shapes and sizes.
The direct energy consumed in the sector includes heating fuel (furnace oil, coal & natural gas) and electrical energy. The cost of the direct energy consumed by SRRMs amounts to 25% to 30% of the production costs and 75-90% of the value addition, depending upon the technology deployed and the local conditions. Studies and our experience in past has revealed the following significant features characterizing the status of SRRMs in India: SRRMs are continuing with the outdated technologies and practices The awareness and information levels are very low , particularly on ~ Energy Efficiency interventions which can improve Specific Energy consumption (per ton of steel produced) ~ Ways and methods to access the financial schemes to improve energy efficiency SRRMs have no informational / knowledge linkages to relevant institutions, research and engineering based developments The sector is burdened with high taxes as well as high costs of borrowings, lack of technical knowledge and capacity to obtain low cost financing of energy efficient (EE) technologies. The steel units in the SRRM sector perform operations as re-rolling, forging, foundry and arc furnace melting. These units, apart from being highly energy intensive, pollute environment excessively.
The present assignment, as part of the project Development of Financial Intermediation Mechanisms for Energy Efficiency Investments in Developing Countries Brazil, India and China, supported by the World Bank / UN Foundation / UN Environment Program seeks to address two of the most critical barriers facing this sector i.e. Technological and Financial.
The assignment seeks to provide: Expert advice to SRRMs in Mandi Gobindgarh, Punjab on the benefits of using Energy Efficiency interventions as a tool for becoming more productive & competitive. The advice would be based on techno economic study conducted at specified units to recommend suitable energy saving interventions. Assistance in financing costs in two SRRM units for implementing the Energy Efficiency improvement interventions, recommended through the techno-economic feasibility study. Financing would be done by developing two bankable projects for financing by IREDA (Indian Renewable Energy Development Agency Limited). The methodology adopted for carrying out the assignment is depicted below
Build Commitment Increase Understanding Review results Secure Financial Commitment Preparation of Bankable Project
Create awareness
Undertake Preliminary Energy Audit Preliminary Financial Due Diligence
Discuss Output
Identifying potential units
Secure Energy Management & Implementation commitment
Conduct Detailed Energy Audit
The first phase of the assignment was aimed at Concept Selling. As part of the concept-selling module, the following activities were undertaken: Project Kick-Off: start of the assignment, post signing of the contract with UNEP, a kick-off meeting was held amongst Deloitte, IREDA and members of the Core Group to understand the specifics of the energy efficiency equipment financing scheme of IREDA and other specific requirements for sanctioning the loan. Preparation of a detailed Project Plan: Subsequent to this meeting, a detailed work plan for the project was prepared Cluster Feedback: In order to create awareness about the UNEP-WB initiative & to discuss the salient deliverables of the project in the SME steel re rolling mills a meeting was organized with the members of the All India Steel Re rollers Association (AISRA) and Steel Re rollers
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Manufacturer Association (SRMA). Both AISRA & SRMA are the apex SRRM Associations representing the interests of the steel re rolling units at the national level. The meeting aimed at: 1. Briefing participants on the UNEP/WB sponsored initiatives under the project , 2. Gauging their understanding & level of awareness on the needs for Energy Efficiency (EE) programs in SRRMs 3. Assessing their readiness to undertake such initiatives The participants recognized the experience and knowledge of the Deloitte resources in the SME sector, reposed faith in Deloitte and expressed whole hearted support and cooperation to the project. Association representatives from clusters other than Mandi Gobindgarh wanted similar initiatives to be taken in other locations assuring full support & cooperation. Meetings with Equipment suppliers & Furnace manufacturers: Prominent equipment suppliers and furnace manufacturers were contacted and through meetings with each one of them, salience of the project as well as their involvement in providing solutions were discussed. The following equipment suppliers & furnace manufacturers were part of the discussions: 1. 2. 3. 4. 5. Lloyd Insulations (India) Ltd., New Delhi Eurotherm DEL India Limited, New Delhi The Wesman Engineering Company Limited, New Delhi ENCON Thermal Engineers (P) Ltd., Faridabad Macro Furnaces, Faridabad
Strategic Meeting with various stakeholders at MandiGobindgarh: A field visit to Mandi Gobindgarh was undertaken. During this visit, a half-day strategic meeting was organized at Mandi Gobindgarh with various stakeholders representing the prominent steel re rolling units of the clusters, industry experts , equipment manufacturers & suppliers , furnace manufacturers and maintenance service providers . The objective of the strategic meeting was to discuss energy efficiency initiatives that can be undertaken in the clusters and the corresponding interventions that can be planned for improving energy efficiency in SRRM, the financing modalities and deciding on the action plan for field visits / walk through audits. The discussions at the meeting generated very encouraging response from the SRRM units and proactive units were identified to undertake field visits. The five proactive units identified to undertake field visits were:
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1. 2. 3. 4. 5.
Bhambri Steels Pvt. Ltd. Vivek Re-rolling Mills Lakshmi Steel Rolling Mills Thakur Steel Royal Steel Rolling Mills
Joint Field Visits : A team was formulated comprising of energy auditors & financial experts (from Deloitte), equipment suppliers and furnace manufacturer ( M/s Lloyd Insulations (India) Ltd., New Delhi ) to carry out field visits in the identified re rolling mills with following objectives : 1. To collect & validate the specific energy consumption data from secondary sources 2. To assess the present financial position of the various units 3. To plan the interventions that could improve specific energy consumption 4. To calculate the optimal investment package and the corresponding Return on Investments ( ROIs) 5. To formulate the modalities and requirements of a Monitoring & Verification (M&V) protocol Details of the visits are included in the chapter 2. Selecting two units for developing Bankable Projects Analysis of the financial data & assessing the willingness of the units to undertake EE initiatives The documents used for collecting financial data & analyzing the financial standing of the SRRM unit included 1. Balance Sheet 2. Manufacturing and Trading Account 3. Profit & loss Account Moreover, through interactive dialogue & discussions, an assessment was made on the willingness / pro activeness of the units to undertake the Energy Efficiency initiatives by availing a loan from a Bank / FI . Further, the experts on the team along with equipment suppliers & manufacturers analyzed the secondary data collected from the short listed units during the joint field visits to assess the potential for improving Specific Fuel Consumption and reduction in the scale losses in each short listed unit. Based on the above analysis wrt financial standing, pro activeness and the potential to improve Specific Fuel Consumption in the short listed units, the following units were selected for developing bankable projects on improving Energy Efficiency with financing from Banks/FIs.
Lakshmi Steel Rolling Mills (LSRM) Royal Steel Rolling Mills (RSRM)
Detailed Energy Audits & Selection of Equipment Supplier A meeting was organized with the selected units to familiarize them with the modalities of the preparation of bankable project for improving specific fuel consumption in the steel reheating furnaces. Investment grade audits were conducted in the selected units to assess the potential of energy savings that can be realized through energy efficiency improvement interventions. The interventions proposed to bring out Energy Efficiency improvements include installation of : 1. 2. 3. 4. Combustion Control Systems Temperature Control System Recuperator and Change of the refractory & insulation
For interventions planned, a detailed set of specifications were drawn out for bringing about Energy Efficiency improvements in the furnace of the reheating units. Based on the chosen specifications , costs estimates were requested from M/s Lloyd Insulations (India) Ltd., New Delhi ( with whom Joint Field visits were conducted in the five short listed units earlier).Both the selected units were provided with the detailed estimates of the costs submitted by M/s Lloyd Insulations (India) Ltd., New Delhi.
Feedback from selected units: Both the selected units expressed concerns on the price of equipment & services offered by M/s Lloyd Insulations (India) Ltd., New Delhi, citing it to be too high. Moreover, the selected units suggested that the equipment supplier should be selected on the basis of both the price as well as the quantum of services it can offer. Selected units recommended the names of the following equipment suppliers & furnace manufacturers. 1. Furmat Engineers (India) Pvt Ltd , Delhi 2. Ubbi Engineering Works , Delhi 3. Mercury Electrical , New Delhi Invitation for sealed quotations from recommended equipment suppliers & furnace manufacturers For the specifications chosen, sealed quotations were invited from the above equipment suppliers/ manufacturers who could carry out the implementation of the proposed Energy Efficiency improvement interventions
Evaluation of the Quotation received The quotations received from the three equipment suppliers & furnace manufacturers were evaluated. The costs indicated by M/s Furmat Engineers (India) Pvt Ltd were found to be most competitive.
Joint Field visit to the selected units at Mandi Gobindgarh. Deloitte and M/s Furmat Engineers (India) Pvt. Ltd went for a joint field visit to the selected units , with twin objectives to evaluate the degree of confidence the selected units reposed on the capability of Furmat Engineers to provide services as well as to mutually agree on the time frame under which the implementation of the energy efficiency interventions could be undertake. Both the selected units have reposed their confidence in M/s Furmat Engineers Pvt. Ltd and agreed on the SRRM operational downtime that would be incurred for installation of EE interventions. A unique methodology agreed herein to reduce the downtime of steel re rolling operation is to fabricate the modular structure of the reheating furnace, with all EE interventions, in a place alongside existing furnace and move the modular structure on to the base of the existing furnace. Preparation of DPR and Bankable Projects Preparation of DPR Based on the cost & time data agreed between the selected units and M/s Furmat Engineers Pvt. Ltd, Delhi Detailed Project Report (DPR)has been prepared. Enclosed as part of chapter 3. Discussions with existing Bankers of the selected units for financing of EE interventions. Based on the suggestions given by the IREDA Core Group during the presentation of Inception Report , a field visit was undertaken to explore the opportunity of financing the EE interventions proposed with the existing bankers of the selected units. The existing bankers of the selected units are : M/s Lakshmi Steel Rolling Mills State Bank of India , Mandi Gobindgarh M/s Royal Steel Rolling Mills State Bank of Patiala, Madi Gobindgarh Responses from the banks of the selected units 1. M/s Lakshmi Steel Rolling Mill SBI , Mandigobindgarh, Punjab During the discussion with State Bank of India , MandiGobindgarh the Branch Manager indicated the possibility of the project being financed under Project UPTECH of State Bank of India . The Project UPTECH is an initiative of State
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Bank of India to promote Energy Efficiency in various sectors of economy in India. 2. M/s Royal Steel rolling Mills- State Bank of Patiala , Mandigobindgarh , Punjab The Branch Manager was not very enthusiastic about financing Energy Efficiency interventions and informed that the schemes available for financing any loan scheme could be adopting while requesting for a loan to finance EE interventions. Financing option under Project UPTECH of SBI Communications had been sent to officials of SBI managing project UPTECH at Delhi , Mumbai & Chandigarh.Though no written response has been received from either State Bank of India , Mandi Gobindgarh or managers of Project UPTECH , the informal telephonic discussions with the Project UPTECH managers has revealed that the Steel Sector is yet to be included as a sector for financing Energy Efficiency initiatives in Punjab. Financing EE interventions under IREDA Scheme Based on the responses received from the banks , the selected units have been motivated to file in applications for financing EE interventions under the IREDA scheme. Moreover, there is an opportunity for both of the selected units to reduce the cost of EE improvement investments by using part of the grant available with Ministry of Steel, Government of India under the UNDP - GEF project for capacity building & promotion of EE in SRRMs. We had initiated discussions with the Ministry of Steel , Government of India to provide interest subsidy to SRRM units which implement EE projects by taking loans from agencies such as IREDA. We have received a positive response from Ministry of Steel.
Suggestions provided by IREDA Core Group during our presentation of the Inception Report at the 5th Meeting of India Core Group on August 25,2004 as well as the guidance provided by UNEP-World Bank officials have been utilized to carry the project forward. Inputs have also been drawn from the Interim Reports, of ICRA Developing Manual for appraising Energy Efficiency Projects and Crestar Capital Designing Financial Structures & Financing Instruments for Energy Efficiency Projects in India for the preparation of DPR. The Executive summary of the DPRs as well as Energy Audit Reports have been included separately under relevant sections of chapter 3.
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CHAPTER 1- INTRODUCTION 1.0 Energy Efficiency Background
India is currently the worlds seventh-largest consumer of energy, sixth-largest source of greenhouse gas (GHG) emissions and second-fastest growing source of GHG emissions. The emissions are expected to grow at a rate of 5% between 1990 and 2010. However, the per capita energy consumption and emissions have remained relatively low at 0.3 tonnes of carbon per person due to the large population. The industrial sector constitutes roughly 40% of the total energy consumption in India and approximately 65% of this consumption is attributed to the most energy intensive industries, namely, fertilizer, iron and steel, aluminum, cement and paper and pulp. The end-use energy efficiency levels in these industrial sectors again are very low as compared to the developed world. Consequently, with the growing energy demand, rising shortages and spiraling upward costs of energy, the energy efficiency improvements of the industrial sector has gained national priority. In India, the iron & steel industry is one of the key sectors contributing towards the economic development of the country. India is the tenth largest producer of the steel in the world. However, the intensity of the energy use in the steel industry is high. Amongst the major steel producing countries , the intensity of the energy use as well as scope of energy saving is highest in India followed by China, Brazil, Poland, US, France, Japan and Germany.
The Small & Medium scale Rerolling Mills ( SRRMs) sector in India, constitutes a significant link in the overall supply chain of steel in the country. According to a Comprehensive Survey of Re rolling Industry ( Source: Ministry of Steel ) , this sector comprises of more than 1200 working units of various sizes. The share of the secondary steel producers is 57% of the total demand and with no major steel plant contemplated in the very near future; the present share is likely to grow. The SRRM sector has a definite edge over the major steel producers due to their inherent capabilities of Flexibility in production Meeting the low tonnage requirements in various grades, shapes and sizes.
Most of the Steel Re-rolling Mills (SRRMs) in the SME sector use conventional technologies, inefficient combustion systems, poor operating and maintenance practices that leads to inefficient energy utilization and excessive environmental air pollution (mainly SPM and CO2).
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Developing Financial Intermediation Mechanisms for Energy Efficiency Projects in the Steel Cluster at Mandi Gobindgarh, Punjab
The SME steel units in the secondary steel sector perform operations as rerolling, forging, foundry and arc furnace melting. These units, apart from being highly energy intensive, pollute environment excessively. There have been sporadic efforts by Government agencies and others to improve energy efficiency and to reduce environmental pollution load in the past, but a systematic effort, where in, the SMEs could be motivated to participate voluntarily has been lacking. Most of Government efforts towards environment protection (and thus towards energy efficiency) is through the Pollution Control Boards (PCBs) that stipulate norms for emissions to land, air and water through a Command & Control regime. However, these initiatives have not moved beyond the mandatory compliance status by the SME units. The reasons could be the prohibitive costs associated with the end of pipe solutions to control emissions. Moreover, lack of availability of monitoring and verification infrastructure with PCBs has lead to limited efficacy of the compliance driven pollution control mechanisms. Studies and our experience in past has revealed the following significant features characterizing the status of SRRMs in India : SRRMs are continuing with the outdated technologies and practices The awareness and information levels are very low , particularly on ~ Energy Efficiency interventions which can improve Specific Energy consumption (per ton of steel produced) ~ Ways and methods to access the financial schemes to improve energy efficiency SRRMs have no informational / knowledge linkages to relevant institutions, research and engineering based developments The sector is burdened with high taxes as well as high costs of borrowings, lack of technical knowledge and capacity to obtain low cost financing of energy efficient (EE) technologies. 1.1 Energy Efficiency Steel Re-Rolling Mills (SRRMs)
The steel re-rolling sector largely comprises of Small and Medium Enterprises (SMEs) with an annual production turnover of Rs 10 million 30 million. These SMEs have on an average hourly production capacity between 3 to 14 Tonnes Per Hour (TPH) for small scale units and an average production capacity between 15 to 49 TPH for the medium scale units. The large-scale mills have production capacities of 50 TPH and above. The cumulative average annual growth rate of the SRRM sector from 1966 to 1996 was approximately 4.7%. Correspondingly, the capacity grew from 4.7 million tons up to 19.4 million tons during that timeframe. In spite of global and domestic recession in the steel industry, the sector has recorded an annual average growth of about 6% during 1997 to 2001. The sector thus has a large aggregate capacity and enjoys a competitive edge over the major producers
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due to their flexibility in production for meeting low tonnage requirements in various grades, shapes and sizes to serve niche markets. The SRRMs currently meet 70 % of the long product steel requirement of the country. The growth of the segment has been haphazard with outdated, low-investment technologies. The operational and maintenance practices followed by SRRMs are unscientifically planned and unmethodically executed. These units by and large have been funded through owners equity. Most of the SRRMS in the SME segment function as rolling mills only, but there are some units that operate as composite mills having Induction furnaces to produce steel ingots used as inputs for rolling. The direct energyuse in this sector includes fuels for reheating furnaces 1 (furnace oil and coal), and electrical energy for running the rolling operation & lighting. A majority of the energy losses in SRRMs are primarily in the re heating furnaces due to use of inefficient combustions systems, lack of control systems to manage air-fuel ratios and temperature controls. These lead to higher scale losses and low yields. The direct energy consumed in the sector includes heating fuel (furnace oil , coal & natural gas) and electrical energy . The cost of the direct energy consumed by SRRMs amounts to 25% to 30% of the production costs and 75-90% of the value addition , depending upon the technology deployed and the local conditions. Based on the energy audit studies, it has been estimated that the energy cost in the SRRMs is in the range of 25 30% of overall production cost and there is an energy saving potential of 30-35 % in operations. To make the SME steel re rolling operations energy efficient, productive and cost effective a number of initiatives need to be undertaken to overcome the following barriers: Technological Barriers The SME steel re rolling mills have conventional and inefficient technologies. The reason attributable to this is the lack of awareness on efficient technologies that can be used to save energy as well as the dearth of technological solution providers in the sector. Financial Barriers Financing of energy efficiency projects in the SME sectors is still underdeveloped in India. The leading banks and financial institutions (FIs) are reluctant to lend for individual EE projects due to lack of understanding of technical and financial aspects of new technologies .Also, at times, lack of sizeable investment portfolio and the necessary collateral financial guarantee requirements of the commercial banks is a barrier. There is also a lack of domestic venture capital institutions and/or instruments that can finance new technologies.
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Natural Gas is currently not being used in the Mandi Gobindgarh cluster, though plans exist to use it in future as a gas pipeline is planned for commissioning in the area.
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Trained Manpower - Due to lack of trained manpower and institutional capabilities for providing support on design, engineering and implementation of energy efficient technologies and systems, the productivity of the SME re rolling units have remained a dismal low. Further, the cyclic nature of steel industry has forced the SMEs in the sector to look for short-term objectives & gains rather than long-term EE and productivity enhancement solutions. The table below provides an overview of the various interventions that can be proposed in SRRMs to improve energy efficiency with corresponding energy saving potential. Interventions Installation of Recuperators Improving Furnace Insulation Installation of Temperature Controllers Controlling Air-Fuel Ratio Replacing Local Furnaces with New Furnaces 1.2 The Assignment Potential for Energy Saving 10-12% 12-15% 10-12% 6-8% 30-35%
The current assignment, as part of the project Development of Financial Intermediation Mechanisms for Energy Efficiency Investments in Developing Countries Brazil, India and China, supported by the World Bank / UN Foundation / UN Environment Program seeks to address two of the most critical barriers facing this sector i.e. Technological and Financial. The proposed assignment seeks to provide: Expert advice to SRRMs in Mandi Gobindgarh on the benefits of using Energy Efficiency interventions as a tool for becoming more productive & competitive. The advice would be based on techno economic study conducted at specified units to recommend suitable energy saving interventions. Assistance in financing costs in two SRRM units for implementing the Energy Efficiency improvement interventions recommended through the techno-economic feasibility study. Financing would be done by developing two bankable projects for financing by IREDA (Indian Renewable Energy Development Agency Limited). These units would showcase the modalities of financing energy efficiency in SME industrial units thus enabling large scale replication of EE measures in various steel units in the cluster(s). In order to do this, UNEP has appointed Deloitte to provide consulting services. Deloitte is one of the worlds largest professional services firms having extensive experience of working in India. It has a specialized Energy & Environment Group based at Delhi having resources who have worked
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extensively in the SME units environment protection.
to improve energy efficiency leading to
As part of the assignment, Deloitte would undertake the following in SRRM units at Mandi Gobindgarh: Assess the techno-economic feasibility of various technology interventions that can be utilized for enhancing energy efficiency and reducing energy consumption Develop at least two bankable projects for finance consideration to IREDA/Indian banks. Finalizing suitable financial structures for the EE projects in the selected units, taking due consideration of IREDAs/other bank security requirements etc. Preparing suitable energy efficiency baseline(s) and Monitoring and Verification (M&V) protocol that are agreeable to both the borrower(s) and the lender. 1.3 Mandi Gobindgarh Steel Cluster
The SRRM sector comprises of about 1200 (working) SRRM units having various sizes / capacities in India (as depicted in the map). Mandi Gobindgarh steel re rolling cluster is one of the largest clusters in the country comprising of about 400 SRRMs. The location of Mandi Gobindgarh, is in the State of Punjab. Besides SRRMs, Mandi Gobindgarh also has 60 induction arc furnaces, 10 free forging units and 60 foundries. Out of the 400 registered SRRMs in the cluster approximately 300 are working 2 . Most of these (over 60%) are small units having capacity of less than 20 tonnes per day (TPD), the balance have a capacity range of 20-80 TPD. In terms of ownership over 80% of the units are partnership firms with less than 5% being private limited companies. The balance being proprietorship firms. Approximately, 40 units in
The balance have closed down due to a variety of reasons, chief among them being inability of the units to invest in technological upgrdation leading to cost uncompetitive ness.
2
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the clusters are composite mills i.e. they have rolling mills as well as induction furnaces having turnover in excess of Rs.250 million per annum. This indicates that there are a number of units which are large but continue to be conservative in their ownership pattern i.e. are either partnership firms or proprietorship firms. In terms of markets, most of the rolled products are in the form of bars, flats and angels used primarily in construction sector. Due to the growth of the construction industry, especially in north Indian states, this cluster has witnessed significant growth in the recent times. This trend is likely to continue as construction activity is very closely linked to the overall growth of GDP, which in turn is projected to be growing strong for India. Most of the sale from the cluster is affected through some 300 traders in Mandi Gobindgarh, final market of which includes the northern Indian states like Punjab, Haryana, Himachal and Rajasthan. One of the reasons why the cluster has not been able to expand its market outside of northern India has been due to lack of cost competitiveness arising from dearth of investments in technology upgradations. Companies such as Rathi, Kamdhenu and Ambey have been able to expand nationally due to investments in improved technology and energy efficiency. Cost competitiveness is more pronounced in the SRRM as the industry works on wafer thin margins of 1-2% on a conversion cost of Rs.2300-2800 per tonne. The low margins have in recent times forced large players to invest in efficient technologies to reduce costs. The recent increase in central excise from 8% to 12% has further increased the pressure on margins necessitating companies to look at ways and means to reduce costs. Investing in improving energy efficiency is increasingly being looked at as a viable option. Energy utilization patterns at SRRMs in MandiGobindgarh There are about 400 steel re-rolling mills in Mandi Gobindgarh. Previously most of the units were using Furnace Oil (FO) as fuel in reheating furnaces but presently only about 20% units are operating on FO remaining are using pulverized coal. The only reason of shifting from FO to coal is operating cost of the furnace. At current rate FO costs about Rs.15/kg (GCV 10000 kcal/kg) while coal costs about Rs.4.2/Kg (GCV 6500 kcal/kg). Most of the mill owners are ignorant about the demerits of coal usage ,like increase in scale losses resulting in lower yield, reduced life of refractory leading to increase in furnace maintenance costs, reduction in effectiveness of heat exchangers/recuperators etc. Specific fuel consumption (SFC) in FO fired furnaces varies between 40-45 lt. per ton of material heated. In coal fired furnaces SFC varies between 60-70 kg per ton of material heated.
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1.4
Structure of the Report
The project report, is a deliverable under the assignment, providing details of the proposed approach and methodology, the DPR ( containing M&V protocol both technical & financial) , Energy Audit report and the IREDA application forms (duly filled) for financing of EE interventions. Suggestions provided by IREDA Core Group during our presentation of the Inception Report as well as the guidance provided by UNEP-World Bank officials have been utilized to carry the project forward. Inputs have also been drawn from the Interim Reports, of ICRA Developing Manual for appraising Energy Efficiency Projects and Crestar Capital Designing Financial Structures & Financing Instruments for Energy Efficiency Projects in India for the preparation of DPR. The report is presented in three sections other than the executive summary. The first Chapter of the report provides a background to the study, its objectives, overview of steel re-rolling mills in the Mandi Gobindgarh cluster and the energy efficiency prospects in the cluster. The second Chapter of the report delves in detail on the approach and methodology that has been followed to achieve the objectives of the assignment. The final Chapter ( Chapter 3) of the report includes the DPR, the Energy Audit Report and IREDA Application forms (dully filled) for financing of the EE interventions in the two selected units. Appendixes have been provided for details on references provided in various Chapters of the report.
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CHAPTER 2 - PROJECT APPROACH & METHODOLOGY 2.1 Project Approach & Methodology Project Approach In order to complete an important, multi-disciplinary project of this nature, Deloitte puts a lot of emphasis in designing a suitable approach and adopting a proper methodology to achieve the defined objectives. The assignment includes various interrelated critical areas that need to be worked on, simultaneously. It is, therefore, imperative that the sequence of various activities is structured and processes visualized in a clear manner so as to coordinate the various inputs and outputs to achieve the desired results. For ease of execution, the scope of work for the study has been segregated across four distinct but interrelated modules (figure below).
Project Kick-Off Detailed Work Plan Obtain Cluster Feedback Strategic Workshop Communicate with potential Stakeholders
Build Commitment Preliminary Energy Audit Preliminary Financial Due Diligence Secure Commitment Plan Detailed Energy Audit
Detailed Energy Audit Discussions with Equipment Manufacturers Project Costing Technical Feasibility Commercial Viability
Loan Application Form M&V Protocol
Inception Report
Techno Economic Feasibility study
2 Bankable Project Report
Month1
Month 2-3
Month 4
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Project Methodology The diagram below graphically depicts the project methodology adopted for carrying out various activties, that have been undertaken for generation of
Build Commitment
Increase Understanding
Review results
Secure Financial Commitment
Preparation of Bankable Project
Create awareness
Undertake Preliminary Energy Audit Preliminary Financial Due Diligence
Discuss Output
Identifying potential units
Secure Energy Management & Implementation commitment
Conduct Detailed Energy Audit
bankable projects. The first phase of the assignment was aimed at Concept Selling. As part of the concept-selling module, the following activities were undertaken: Project Kick-Off: start of the assignment, post signing of the contract with UNEP, a kick-off meeting was held amongst Deloitte, IREDA and members of the Core Group in the Office of IREDA on July 07, 2004. The objective of this meeting was to understand the specifics of the energy efficiency equipment financing scheme of IREDA and other specific requirements for sanctioning the loan. Preparation of a detailed Project Plan: Subsequent to this meeting, a detailed work plan for the project was prepared (enclosed as Appendix 1). The detailed work plan has ensured effective project management and monitoring. Cluster Feedback: In order to create awareness about the UNEP-WB initiative & to discuss the salient deliverables of the project in the SME steel re rolling mills a meeting was organized at Delhi on July 12, 2004 with the members of the All India Steel Re rollers Association (AISRA) and Steel Re rollers Manufacturer Association (SRMA). Both AISRA & SRMA are the apex SRRM Associations representing the interests of the steel re rolling units at the national level. The meeting was very well attended and the project was received with great enthusiasm by both the apex associations. List of participants at the meeting enclosed as Appendix 2. The meeting aimed at: 4. Briefing participants on the UNEP/WB sponsored initiatives under the project , 5. Gauging their understanding & level of awareness on the needs for Energy Efficiency (EE) programs in SRRMs 6. Assessing their readiness to undertake such initiatives
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The participants recognized the experience and knowledge of the Deloitte resources in the SME sector, reposed faith in Deloitte and expressed whole hearted support and cooperation to the project. Association representatives from clusters other than Mandi Gobindgarh wanted similar initiatives to be taken in other locations assuring full support & cooperation. Meetings with Equipment suppliers & Furnace manufacturers: Prominent equipment suppliers and furnace manufacturers were contacted and through meetings with each one of them, salience of the project as well as their involvement in providing solutions were discussed. The following equipment suppliers & furnace manufacturers were part of the discussions: 1. 2. 3. 4. 5. Lloyd Insulations (India) Ltd., New Delhi Eurotherm DEL India Limited, New Delhi The Wesman Engineering Company Limited, New Delhi ENCON Thermal Engineers (P) Ltd., Faridabad Macro Furnaces, Faridabad
Based on the discussions with manufacturers/suppliers of furnaces/control systems an action plan was formulated to work together in implementing interventions to improve Energy Efficiency in SRRMs at Mandi gobindgarh, Punjab Strategic Meeting with various stakeholders at MandiGobindgarh: A 5 day field visit to Mandi Gobindgarh starting July 14, 2004 was undertaken. During this period, a half-day strategic meeting was organized at Mandi Gobindgarh with various stakeholders representing the prominent steel re rolling units of the clusters, industry experts , equipment manufacturers & suppliers , furnace manufacturers and maintenance service providers . The meeting was very well attended. Director NISST (National Institute of Secondary Steel Technology) was also present in the meeting. List of participants is enclosed as Appendix 3 The objective of the strategic meeting was to discuss energy efficiency initiatives that can be undertaken in the clusters and the corresponding interventions that can be planned for improving energy efficiency in SRRM , the financing modalities and deciding on the action plan for field visits / walk through audits. The strategic workshop was followed by one to one meetings with interested parties desirous of carrying the project forward, to answer specific clarification on project initiatives. An important component of the workshop was the circulation of a structured questionnaire (enclosed as Appendix 4).
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The discussions at the meeting generated very encouraging response from the SRRM units and proactive units were identified to undertake field visits. The SRRM units suggested that in order to expedite the evaluation process field visits may be undertaken by Deloitte, equipment suppliers and furnace manufacturers jointly. The five proactive units identified to undertake field visits were: 1. 2. 3. 4. 5. Bhambri Steels Pvt. Ltd. Vivek Re-rolling Mills Lakshmi Steel Rolling Mills Thakur Steel Royal Steel Rolling Mills
Joint Field Visits : A team was formulated comprising of energy auditors & financial experts (from Deloitte), equipment suppliers and furnace manufacturer (Lloyd Insulations (India) Ltd., New Delhi ) to carry out field visits in the identified re rolling mills with following objectives : 1. To collect & validate the specific energy consumption data from secondary sources 2. To assess the present financial position of the various units 3. To plan the interventions that could improve specific energy consumption 4. To calculate the optimal investment package and the corresponding Return on Investments ( ROIs) 5. To formulate the modalities and requirements of a Monitoring & Verification (M&V) protocol
Observations from field visits ( walk through audits Deloitte team)
Sl. No 1 2 3 4 5 6 7
Particular Annual Turnover (Rs./cr) Fuel Used Average Operation Per Day (Hrs) Average Production Per Hour (tonne) Sp. Fuel Cons. (SFC) (Ltr/Kg per tonne) Scale Losses (%age) Product Mix
Bhambri Steel 27 Furnace Oil 10 8 40 2.5% Angles, Channels and Flats
Vivek Rerolling 5.6 Pulverized Coal 10 4 60 5% Bars
Lakshmi Steel 4 Pulverized Coal 10 2.5 65 7.5% Flats
Thakur Steel 2.9 Furnace Oil 10 2.5 40 6% Bars
Royal Steel 3 Pulverized Coal 10 3 45 5% Squares and Rounds
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2.2 Selecting two units for developing Bankable Projects Analysis of financial data & assessing the willingness of the units to undertake EE initiatives To understand and analyze the financial standing and credit worthiness of the Short listed SRRM units , a field visits was undertaken by the team to all the five short listed units. The documents used for collecting financial data & analyzing the financial standing of the company included 1. Balance Sheet 2. Manufacturing and Trading Account 3. Profit & loss Account Moreover through an interactive dialogue & discussions, an assessment was made on the pro activeness of the units to undertake the Energy Efficiency initiatives by availing a loan from a Bank / FI. Further, the experts on the team along with equipment suppliers & manufacturers analyzed the operational (secondary) data from the short listed units to assess the potential for improving Specific Fuel Consumption and reduction in the scale losses in each of the short listed units. Based on the above analysis wrt financial standing, pro activeness and the potential to improve Specific Fuel Consumption in the short listed units, the following units were selected for developing bankable projects on improving Energy Efficiency with financing from Banks/FIs. Lakshmi Steel Rolling Mills (LSRM) Royal Steel Rolling Mills (RSRM)
2.3 Detailed Energy Audits & Selection of Equipment Supplier A meeting was organized with the selected units to familiarize them with the modalities of the preparation of bankable project for improving specific fuel consumption in the steel reheating furnaces. Investment grade audits were conducted in the selected units to assess the potential of energy savings that can be realized through energy efficiency improvement interventions. Detailed findings of the Energy Audit are included separately in the Energy Audit Report. The interventions proposed to bring out Energy Efficiency improvements include installation of : 1. 2. 3. 4. Combustion Control Systems Temperature Control System Recuperator and Change of the refractory & insulation
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For the interventions planned, a detailed set of specifications were drawn out for bringing about Energy Efficiency improvements in the furnace of the reheating units,enclosed as Appendix 5. Based on the chosen specifications , costs estimates were requested from M/s Lloyd Insulations (India) Ltd., New Delhi ( with whom Joint Field visits were conducted in the five short listed units earlier).Both the selected units were provided with the detailed estimates of the costs submitted by Lloyd Insulations (India) Ltd., New Delhi. Cost estimates from Lloyd Insulations (India) Pvt. Ltd., New Delhi , enclosed as Appendix 6. Feedback from selected units on cost estimates: Both the units expressed concerns on the price of equipment & services offered by M/s Lloyd Insulations (India) Ltd., New Delhi , citing it to be too high. Moreover, the selected units suggested that the equipment supplier should be selected on the basis of both the price as well as the services offered. The suggested services could include: installation / commissioning of the energy efficiency interventions , providing guarantees on the improvements in the Specific Fuel Consumption improvements & reduction in scale losses as well as to provide an Annual Maintenance Contract (AMC) for maintenance of equipment supplied. Selected units recommended the names of the following equipment suppliers & furnace manufacturers. 4. Furmat Engineers (India) Pvt Ltd , Delhi 5. Ubbi Engineering Works , Delhi 6. Mercury Electrical , New Delhi
Invitation for sealed quotations from recommended equipment suppliers & furnace manufacturers For the specifications chosen, sealed quotations were invited from the above equipment suppliers/ manufacturers who could carry out the implementation of the proposed Energy Efficiency improvement interventions (as per specifications) in the reheating furnace and guarantee the savings in both scale losses and Specific Fuel Consumption. A cost on the Annual Maintenance of the equipment was also included in the quotations requested. The quotations received are enclosed as Appendix 7. Evaluation of the Quotation received The quotations received from the three equipment suppliers & furnace manufacturers were evaluated. The prices indicated by M/s Furmat Engineers (India) Pvt Ltd were found to be most competitive.
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Joint Field visit to the selected units at Mandi Gobindgarh. Deloitte team and M/s Furmat Engineers (India) Pvt. Ltd went for a joint field visit to the selected units viz M/s Lakshmi Steel Rolling Mills (LSRM) and M/s Royal Steel Rolling Mills (RSRM). The visit was undertaken primarily with an objective to evaluate the degree of confidence the selected units repose on the capability of Furmat Engineers to provide services as well as to mutually agree on the time frame under which the implementation of the energy efficiency interventions could be undertake. Both the selected units have reposed their confidence in M/s Furmat Engineers Pvt. Ltd and agreed on the downtime that would be incurred for installation of EE interventions. A unique methodology agreed herein to reduce the downtime of steel re rolling operation was to fabricate the modular structure of the reheating furnace, with all EE interventions, in a place alongside existing furnace and move the modular structure on to the base of the existing furnace. 2.4 Preparation of DPR and Bankable Projects Preparation of DPR Based on the cost data & time frame for implementation of EE interventions, agreed between the selected units and M/s Furmat Engineers Pvt. Ltd, Delhi Detailed Project Report (DPR)has been prepared. Presented in Chapter 3. 2.5 Discussions with existing Bankers of the selected units for financing of EE interventions. Based on the suggestions given by the IREDA Core Group during our presentation of the Inception Report , A field visit was undertaken to explore the opportunity of financing the EE interventions proposed with the existing bankers of the selected units. The existing bankers of the selected units are : M/s Lakshmi Steel Rolling Mills State Bank of India , Mandi Gobindgarh M/s Royal Steel Rolling Mills State Bank of Patiala, Madi Gobindgarh Letters to State Bank of India , Mandi Gobindgarh and State Bank of Patiala, MandiGobindgarh are enclosed as Appendix 8. Responses from the banks of the selected units 1.M/s Lakshmi Steel Rolling Mill SBI , Mandigobindgarh, Punjab During the discussion with State Bank of India , MandiGobindgarh the Branch Manager indicated the possibility of the project being financed under Project UPTECH of State Bank of India . The Project UPTECH is an initiative of State Bank of India to promote Energy Efficiency in various sectors of economy in India.
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Response from the Branch Manager , State Bank of India, Mandi Gobindgarh enclosed as Appendix 9. 2. M/s Royal Steel rolling Mills- State Bank of Patiala , Mandigobindgarh , Punjab The Branch Manager was not very enthusiastic about financing Energy Efficiency interventions and informed that the schemes available for financing any loan scheme could be taken for requesting for a loan. Financing option under Project UPTECH of SBI Letters written to avail financing for EE interventions under Project UPTECH , enclosed as Appendix 10. Though no written response has been received from either State Bank of India , Mandi Gobindgarh or Project UPTECH , the informal telephonic discussions with the Project UPTECH officials has revealed that the Steel Sector is yet to be included as a sector for financing Energy Efficiency initiatives in Punjab. Financing EE interventions under IREDA Scheme Based on the responses received from the banks, the selected units have been motivated to file in applications for financing EE interventions under the IREDA scheme. The Filled up applications are presented in Chapter 3. Features of IREDA Loan Scheme enclosed as Appendix 11. Moreover, there is an opportunity for both of the selected units to reduce the cost of EE improvement investments by using part of the grant available with Ministry of Steel, Government of India under the UNDP - GEF project for capacity building & promotion of EE in SRRMs. We had initiated discussions with the Ministry of Steel , Government of India to provide interest subsidy to SRRM units which implement EE projects by taking loans from agencies such as IREDA. We have received a positive response from Ministry of Steel. Response from Ministry of Steel , enclosed as Appendix 12
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CHAPTER 3
BANKABLE PROJECTS DEVELOPED
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Developing Financial Intermediation Mechanisms for Energy Efficiency Projects in the Steel Re-rolling Cluster at Mandi Gobindgarh, Punjab, India
Detailed Project Report (DPR)

Mandi Gobindgarh ( Khanna), Punjab, India
Lakshmi Steel Rolling Mills
of
Submitted to
&
Detailed Project Report Lakshmi Steel Rolling Mills
29
Table of Contents
LIST OF ABBREVIATIONS..30
ACKNOWLEDGEMENT..31
EXECUTIVE SUMMARY.32 1. INTRODUCTION36
1.0 1.1 1.2

1.3 1.4 1.5 2.
BACKGROUND OF COMPANY MANUFACTURING PROCESS EXPANSION & ENERGY EFFICIENCY IMPROVEMENT PLANS
Constitution Of The Unit Financial Standing Of The Unit Analysis Of The Audited Balance Sheet & Financial Ratios
PROPOSED PROJECT 41
2.0
2.1 2.2
PROJECT OBJECTIVE : IMPROVING SPECIFIC ENERGY CONSUMPTION

Energy Efficiency Improvement Initiatives Reduction In Scale Losses
2.3
2.4 2.5 3.
SUSTAINABILITY CHECK : IMPACTS OF EE INTERVENTIONS ON ENERGY/ENVIRONMENT/ECONOMICS)

Proposed Project Costs & Financial Details Of EE Interventions Projected Balance Sheet After Implementation Of EE Interventions. 51
MONITORING & VERIFICATION PROTOCOL
ANNEXURE : 1.1 COPIES OF BALANCE SHEETS , MANUFACTURING & TRADING ACCOUNT & PROFIT AND LOSS ACCOUNT (AVAILABLE IN HARD COPY) ANNEXURES : 2.1 TECHNICAL DETAILS OF RECUPERATOR ANNEXURE : 2.2 TECHNICAL DETAILS OF REFRACTORY / INSULATION LINING ANNEXURE : 2.3 DIAGRAM OF FURNACE & PROPOSED INSULATION
Confidential
This document is the property of Deloitte Touche Tohmatsu India Private Limited and contains confidential information that has been provided at your request. This information should not be disclosed in whole or in part without expressing written consent of the firm. This document should not be duplicated or used, in whole or in part, except for evaluating the firms proposal and should be returned upon request. Proposal and should be returned upon request.
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Abbreviations AISRA CO2 EE ESCO FIs FO GEF HSD IREDA LDO LSRM M&V MT PCB SBI SEB SEC SFC SIDBI SME SPM SRMA SRRMs TPH UNDP UNEP All India Steel Re-rollers Association Carbon Di-Oxide Energy Efficiency Energy Services Company Financial Institutions Furnace Oil Global Environment Facility High Speed Diesel Indian Renewable Energy Development Agency Limited Light Diesel Oil Lakshmi Steel Rolling Mill Measurement and Verification Metric Tonne Pollution Control Boards State Financial Institution of India State Electricity Board Specific Energy Consumption Specific Fuel Consumption Small Industries Development Financial Institution of India Small and Medium Enterprise Suspended Particulate Matter Steel Re-rollers Manufacturers Association Steel Re-rolling Mills Tons per hour United Nations Development Program United Nations Environment Program
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Acknowledgements Deloitte team expresses sincere gratitude for the help, support & encouragement provided by Management & staff of M/s Lakshmi Steel Rolling Mills (LSRM), and the various stakeholders in formulation of the project DPR. This DPR would not have been possible without the guidance & information provided by all the stakeholders and the financial support provided by UNEP Riso Centre.
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EXECUTIVE SUMMARY Introduction Lakshmi Steel Rolling Mills(LSRM) was incorporated on 22.02.1971 registered under number 16/09/34006. The unit started its commercial production in the same year manufacturing M.S. Flat & Bars . The customers of the unit include big public sector undertakings, Govt. & Semi Govt. undertakings. The unit is presently producing all sizes of Flats and is operational 300 days a calendar year. Lakshmi Steel Rolling Mills (LSRM) is situated at Mandi Gobindgarh ( Khanna), Punjab , India. LSRM comes under district Ludhiana and Tehsil Khanna Manufacturing Process The raw material is obtained in the form of Iron & Steel (Ship Breaking) / Ingots and fed into re-heating furnace. This re-heating furnace is coal fired, which is maintained at a temperature ranging between 500 to 1400 degrees. The material is charged through a pusher into one end of the furnace and the heated material is manually taken out at the other end . The heated material is fed into rolling mill for conversion into a desired output i.e flats or bars. Sources of raw material The raw material (Iron & steel ship Breaking / Ingots ) is procured locally through traders & commission agents .The traders/ agents get the raw material from places like Bhavnagar (Gujarat) , Bhilai (M.P) , Dubai , Singapore , Russia , S. Africa (Durban) ,W . Africa (Gambia , Sanagel) etc. Customers & markets The Finished product of the unit (LSRM) is mainly sold through traders / commission agents operating out of Mandi Gobindgarh . Traders / Commission agents mainly sell the finished products in the states like Punjab , Haryana , Himachal Pradesh (H.P) ,Uttar Pradesh (U.P) ,Jammu & Kashmir (J&K) ,Delhi and Rajasthan. Expansion & Energy Efficiency improvement Plans The unit presently plans to take advantage of the growing secondary steel market by increasing its production capacity from the present 2300 tons/annum to 3500 tons/ annum. Moreover, the unit has realized that there is an ample scope in improving the Specific Fuel Consumption per ton of the product output, if control systems are placed in the furnace and heat of the furnace properly utilized. The unit is proactively considering to undertake EE interventions to improve its Specific Fuel Consumption . Constitution of the Unit The unit, Lakshmi steel Rolling Mill (LSRM) is registered under the Constitution of Proprietorship (having SSI Registration no. 16/09/34006) and CST Registration no. 45248811) based on the provisions of Companies Act
33
1956. Mr. Vinod Vashisht enjoys the proprietorship of Lakshmi Steel Rolling Mill (LSRM) having Pan number AAHPV5203D and a Net worth of Rs 70 lacs. Project Objective : Improving Specific Energy Consumption (SFC) Objective of the project is to reduce Specific Fuel Consumption (SFC) per ton of the product output at Lakshmi Steel Rolling Mill (LSRM) by improving furnace efficiency. Presently the SFC of reheating furnace is about 75 kg of pulverized coal per ton of material heated. After implementing the Energy Efficiency (EE) improvement, interventions it is estimated that the SFC would reduce to 45 kg/Ton. EE interventions proposed to improve SFC at LSRM include : 1. installation of recuperators to recover waste heat from the exiting flue gases 2. Installation of air / fuel ratio control systems to achieve efficient combustion 3. Installation of temperature control system to reduce scale losses and 4. Changing the insulation/ refractory in the furnace to conserve the heat losses from the skin of the furnace Sustainability Check : Impacts of EE interventions on Energy , Environment & Economics Impact on Energy Consumption Due to reduction in SFC of reheating furnace from 75 kg/ton to 45 kg/ton there would be reduction in coal consumption by about 57.5 tons/annum. It is a positive impact leading to conservation of scarce energy resources. Environmental Impact: Since there would be reduction in coal consumption of the mill , it would result in annual CO2 reduction of about 130 tons/annum. The reduction in the emissions of carbon dioxide ( a Global Warming gas) is a positive impact. Economic Impact The proposed project would bring in monetary saving of about Rs. 8.74 lacs/annum. Also there would be rise in capacity utilization of mill resulting in enhanced productivity. The enhanced productivity would have a positive impact on generation of new employment opportunities in the sector. 2.4 Proposed Project Cost & Financial details of EE interventions
Investment Cost of proposed EE interventions Cost of installation, comissioning Taxes (sales tax + excise) @20% Total investment Promoters investment (20%) Loan (80%)
Lac Rs. Lac Rs. Lac Rs. Lac Rs. Lac Rs. Lac Rs.
17 6.5 3.40 26.90 5.38 21.52
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Projected Balance Sheet after implementation of EE interventions

Item 1 Paid-up Capital Net Worth Term Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio Debt Service Coverage Ratio (DSCR) of the Company Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Net Profit % Net Profit to Total Equity % Net Profit to Total Capital Employed 68 97 22 7 97 23.5 124 0.43 2 78 131.5 43.5 10 131.5 40.5 141 0.69 3 76.5 125.2 39.2 9.5 125.2 37.5 138 0.64 Year 4 75 118.9 34.9 9 118.9 32 133 0.59
5 73.5 112.6 30.6 8.5 112.6 28 129.5 0.53
6 72 106.3 26.3 8 106.3 23 125 0.48
7 70.5 100 22 7.5 100 21 122.5 0.42
3.01 3.73 323.44 21% 10.21 1.9 3% 2%
0.97 3.68 462.06 30% 8 2.66 3% 2%
1.02 3.57 462.06 30% 8 3.05 4% 2%
1.07 3.46 462.06 30% 8 3.44 5% 3%
1.13 3.31 462.06 30% 8 3.83 5% 3%
1.20 3.26 462.06 30% 8 4.21 6% 4%
1.25 3.30 462.06 30% 7.9 4.50 6% 5%
Monitoring & Verification Protocol There are mainly two types of Monitoring and verification required in Steel rerolling SME units. Technical Monitoring & Verification This project is an energy efficiency project to reduce specific energy consumption of steel re-rolling mills. SEC can be directly measured through the fuel/energy consumption and quantities of the product output. Fuel (coal) consumption will be directly measured through weighment. The quantities of the product output can be also measured by weight. Procurement records and production logs can be used for cross verification purposes. Hence, Technical M & V would formulate a list of variables from records of which the actual savings can be calculated. This would help in tracking the project w.r.t. objective of EE. Financial Monitoring & Verification This would help the financial institution to monitor payment schedule. A financial M&V has been proposed which can include following in consultation with the financing institution (FI)/ Bank.
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1.
Early Warning Reports: These reports can be generated on a weekly or monthly basis depending on the Financial Institutions policy. Periodic Reviews: This would entail a detailed credit review of the units financial statements. These reviews can be conducted periodically by the Financial Institution on financial ratios which would indicate the financial health of the units. Project Progress Reports: Periodic (time interval agreed with the Financial Institution) progress reports can provide information on production, sales, inventory, receivable, profitability, etc. of the project funded by the Financial Institution. Any externalities affecting/ expected to affect energy savings such as low capacity utilization, decline in sales, accumulation of inventory, decrease in orders in hand or lower profits than anticipated can be taken up with the unit by the Financial Institution. Periodic Visits: Each assisted unit can be visited as per the FIs policy on periodical project / company visits. Such a visit would provide the Financial Institution with a first hand view of the project progress to date.
2.
3.
4.
Hence financial M&V protocol would help in periodic assessment/ review of the financial health of the unit, so that a corrective action can be taken in a timely manner.
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1
1.0
INTRODUCTION
Background of Company
Introduction Lakshmi Steel Rolling Mills(LSRM) was incorporated on 22.02.1971 registered under number 16/09/34006. The unit started its commercial production in the same year manufacturing M.S. Flat & Bars .The unit enjoys a good name & reputation for its products in Punjab and nearby states .The unit is continuously making efforts to improve the quality of its products. The customers of the unit include big public sector undertakings, Govt. & Semi Govt. undertakings. The production and sales of the unit are constantly increasing. The products of the unit are in good demand. The unit is presently producing all sizes of Flats and is operational 300 days a calendar year. Geographical Location Lakshmi Steel Rolling Mills (LSRM) is situated at Mandi Gobindgarh ( Khanna), Punjab , India. LSRM comes under district Ludhiana and Tehsil Khanna. The distance of the unit (LSRM) from the nearest Railway Station is about 5 Kms and from the nearest Airport (Chandigarh) is about 70 Kms. The nearest Grid (PSEB) from the unit (LSRM) is about 5 Kms . 1.1 Manufacturing Process The raw material is obtained in the form of Iron & Steel (Ship Breaking) / Ingots and fed into re-heating furnace. This re-heating furnace is coal fired, which is maintained at a temperature ranging between 500 to 1400 degrees. The time of heating a particular kind of raw material is adjusted in the furnace, to allow the material, to reach a uniform temperature (throughout its cross section). The material is charged through a pusher into one end of the furnace and the heated material is manually taken out at the other end . The heated material is fed into rolling mill for conversion into a desired output i.e flats or bars.In the rolling mill section , the rolls are preset to achieve the required size and shape of the finished product. The finished product is then passed over the cooling bed to bring down its temperature. Moreover , in the rolling mill , the selection of rolls and number of passes the heated material is made to make , depends upon the size and shape of the product to be produced. Sources of raw material The raw material (Iron & steel ship Breaking / Ingots ) is procured locally through traders & commission agents .The traders/ agents get the raw
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material from places like Bhavnagar (Gujarat) , Bhilai (M.P) , Dubai , Singapore , Russia , S. Africa (Durban) ,W . Africa (Gambia , Sanagel) etc. Customers & markets The Finished product of the unit (LSRM) is mainly sold through traders / commission agents operating out of Mandi Gobindgarh . Traders / Commission agents mainly sell the finished products in the states like Punjab , Haryana , Himachal Pradesh (H.P) ,Uttar Pradesh (U.P) ,Jammu & Kashmir (J&K) ,Delhi and Rajasthan. Block Diagram of the re-rolling operation
Raw Material Storage
Gas Cutting of Raw Material
Loading at Charging Pusher
Heating in Reheating Furnace at 1200-1250 oC
Hot Material Exit from Furnace
Rolling
Cooling Bed
Storage
Bunching and Bundling
Dispatch
Technical Know-how & Marketing The unit is in touch with technical consulting institutions like National Institute of Secondary Steel Technology (NISST) situated at Mandi Gobindgarh (Punjab) and Punjab State Council for Science & Technology , Chandigarh to ensure quality output of its products. Experienced operators (foreman) have been employed to run the re rolling operations and also for the management of the workforce. The unit enjoys a good reputation in the steel cluster at Mandi Gobindgarh for its management skills and quality product. There has been a consistent increase in the demand of its products in the market. In other words, the unit does not experience any problems with regards to the marketing of its finished products. Hence, there are no idle inventories accumulated within the unit.
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1.2 Expansion & Energy Efficiency improvement Plans Though small expansions have been done in the past, the unit presently plans to take advantage of the growing secondary steel market by increasing its production capacity from the present 2300 tons/annum to 3500 tons/ annum. Moreover, the unit has realized that there is an ample scope in improving the Specific Fuel Consumption per ton of the product output, if control systems are placed in the furnace and heat of the furnace properly utilized. The unit is proactively considering to undertake EE interventions to improve its Specific Fuel Consumption , which in turn would also improve its capacity utilization from the present 20% to 30%. The costs of EE interventions as estimated by the unit are about Rs.30 lacs. 1.3 Constitution of the Unit The unit, Lakshmi steel Rolling Mill (LSRM) is registered under the Constitution of Proprietorship (having SSI Registration no. 16/09/34006) and CST Registration no. 45248811) based on the provisions of Companies Act 1956. Mr. Vinod Vashisht enjoys the proprietorship of Lakshmi Steel Rolling Mill (LSRM) having Pan number AAHPV5203D and a Net worth of Rs 70 lacs. Personal details of the proprietor: Name: Date of Birth: Fathers Name: Present Address: Mr. Vinod vashisht 18-07-1953 Sh. Ramesh Chander Vashisht Lakshmi Steel Rolling Mills G.T. Road , Opp. Power House Khanna , Punjab Permanent Address: Lakshmi Steel Rolling Mills G.T. Road , Opp. Power House Khanna , Punjab Telephone No.: E-mail ID: PAN No.: 91-1628-226415, 226416 lakshmisteel@rediffmail.com AAHPV5203D
Educational Qualification: Graduation Experience :20 Years experience of managing Steel Rolling Mill Membership of other organisations/ institutions: President AISRA (All India Steel Re-rollers Association), Chairman Golden Grain Club.
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1.4 Financial Standing of Lakshmi Steel Rolling Mill (LSRM) Based on the analysis of Balance Sheet, Profit & Loss Account and Trading & Manufacturing Account (copies enclosed as Annexure 1.1) following information has been tabulated to evaluate the financial standing of LSRM.
Items Gross Sales Cost of Good Sold Net Sales Net Profit Current Assets Current Liabilities Net Fixed Assets S. Debtors & Advances S. Creditors Purchases Long Term Debt (secured & unsecured) Capital Depreciation Interest Closing Stock Loan Repayments PBDIT Ratios Current Ratio Fixed Asset Turnover Debtors Turnover Inventory Turnover Credit Turnover DSCR Interest Coverage ROCE 3.73
Amount in Lakh Rs 2003 323.44 259.4 316.01 1.9 99.57 26.73 23.73 48.64 26.73 264.13 29.08 67.94 5.03 3.28 50.23 0.11 10.21 2002 308.57 249.89 306.81 2.02 92.75 16.22 20.17 46.3 16.22 244.89 14.97 82.42 5.25 4.41 45.06 40.3 11.68 5.72 15.21 6.66 5.55 15.10 0.26 2.65 0.02 2001 343.8 269.25 342.42 2.26 119.31 16.21 24.65 57.38 16.21 274.66 55.27 73.22 0.56 7.76 53.96 0 10.58 7.36 13.89 5.99 4.99 16.94 1.36 1.36 0.02
13.32 6.65 5.16 9.88 3.01 3.11 0.02
Nb:
Depreciation on fixed assets has not been provided in the books of accounts during the year. Central Excise duty is accounted on the basis of debits in the PLA register.
Bankers: The unit deals with State Bank of India (SBI), Mandi Gobindgarh Branch ,Punjab India.
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Banking Arrangements / details

Name of the Bank Bank Limits (Lac Rs.) 19.5 5 Rte of Interest (%) 11 11 Amount Outstanding (Lac Rs.) 19.5 4.62
State Bank of India C/C State Bank of India Book Debt A/C
1.5 Analysis of Audited Balance Sheet (for 3 years) and Financial Ratios
Item
Audited Results in Lac Rs. ) Year 1 2003 67.94 97.02 22.08 6.99 97.02 23.47 123.75 0.43 0.81 3.01 3.73 323.44 21% 10.21 1.9 3% 2% Year 2 2002 82.42 97.39 7.88 7.09 97.39 20.17 113.61 0.18 0.50 0.26 5.72 308.57 19% 11.68 2.02 2% 2%
(Amount Year 3 2001 73.22 128.49 24.93 30.35 128.49 24.65 144.72 0.75 1.11 1.36 7.36 343.80 20% 10.58 2.26 3% 2%
Paid-up Capital Net Worth Term Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio (Current) Debt equity Ratio (After Proposed Loan from IREDA) Debt Service Coverage Ratio (DSCR) of the Company Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Net Profit % Net Profit to Total Equity % Net Profit to Total Capital Employed
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PROPOSED PROJECT
2.0 Project Objective : Improving Specific Energy Consumption (SFC) Objective of the project is to reduce Specific Fuel Consumption (SFC) per ton of the product output at Lakshmi Steel Rolling Mill (LSRM) by improving furnace efficiency. Presently the SFC of reheating furnace is about 75 kg of pulverized coal per ton of material heated. After implementing the Energy Efficiency (EE) improvement, interventions it is estimated that the SFC would reduce to 45 kg/Ton. EE interventions proposed to improve SFC at LSRM include : 1. Installation of recuperators to recover waste heat from the exiting flue gases 2 Installation of air / fuel ratio control systems to achieve efficient combustion 3 Installation of temperature control system to reduce scale losses and 4 Changing the insulation/ refractory in the furnace to conserve the heat losses from the skin of the furnace It is important to note that apart from the improvements in SFC, the implementation of EE improvement measures would also result in reduction of scale losses. The scale losses are the loss of top surface metal due to flaking / burning of the top crystalline metallic layer of the metal. Presently the average scale loss in the unit is 7%. It is expected that there would be at least 1-2 % reduction in scale loss by maintaining optimum desired furnace temperature. 2.1 Energy Efficiency (EE) Improvement Interventions EE interventions proposed to increase the SFC in the unit are discussed briefly here. For details please refer the energy audit report. Air / fuel ratio controller In the existing re heating furnace there is no provision to vary air/fuel flow rate and to control the excess air levels. This leads to inefficient combustion inside the furnace leading to higher fuel consumption. Moreover , the excess air( more than theoretical air) in the furnace leads to excessive heat loss thus increasing fuel consumption. It is proposed to replace the existing combustion system with a self proportionating burner system that not minimizes excess air levels and hence reduces the corresponding dry flue gas losses.
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The proposed air / fuel ratio control system consists of a motorized butterfly valve for air/fuel control. A feedback impulse signal is taken by the system from the temperature controller which senses the furnace temperature. After the desired/ set temperature is achieved, flow of both air and fuel is reduced. Thus leading to improvements in Specific Fuel Consumption. Saving in fuel on account of reduction in dry flue gas loss has been estimated to be 17 Tons per annum and the corresponding monetary saving would be about Rs.0.91 lac per annum. Installation of a recuperator A recuperator is a heat exchanger that can capture the waste heat from the exiting flue gases. The captured waste heat can be used to preheat the air that is utilized for combusting the fuel through a burner system in a furnace. At LSRM , no recuperator has been installed to recover heat from flue gases for preheating the combustion air . It is recommended to install a recuperator so that heat of flue gases may be recovered for pre-heating combustion air. Installation of recuperator also helps in increasing flame temperature which improves combustion and increases heat transfer efficiency. Combustion air temperature of 300 oC can be achieved by installing the recuperator. Annual fuel saving on this account has been estimated to be about 21 Tons of coal. Corresponding monetary saving would be Rs. 1.10 lac per annum. Specification details provided at Annexure 2.1 Changing the refractory / furnace insulation Average skin temperature of the reheating furnaces at LSRM was found to be about 168 oC , resulting in higher radiation losses. The radition losses account for higher fuel consumption as more fuel is required to maintain the desired temperature in the furnace. It is proposed to improve furnace insulation by changing refractory/insulation to reduce the radiation loss and heat-up time. Annual fuel saving by changing the refractory / furnace insulation has been estimated to be about 53 tons. Corresponding monetary saving on implementation of this EE intervention has been estimated to be about Rs. 2.74 lac per annum. Specification details provided as Annexure 2.2 & 2.3. Installation of temperature control system For steel re rolling operation , the input raw iron / steel needs to be heated to the rolling temperature , wherein the metallurgical properties of iron allow a change in the crystalline structure making it possible to form the metal into a desired shape , a flat, bar or a rod. This rolling temperature varies from 1175 1200 degrees Centigrade. However , maintaining a temperature higher than above stated rolling temperature leads to metal loss in form of iron losses as well as results in higher fuel consumption. Hence , it is appropriate to maintain the temperature in a reheating furnace to a desired level. At LSRM ,no temperature control system has been installed to control operating temperature of furnace. Operating temperature of furnace was found about 1400 oC while desired operating temperature is about 1180 oC. An automatic low & high firing temperature control system may be installed in
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furnace to control the operating temperature. After installing the controller, operating temperature can be maintained at 1180 oC. Annual monetary saving on this account has been estimated to be about Rs. 1.35 lac. 2.2 Reduction in Scale Loss Apart from the energy savings, the energy efficiency measures suggested would also result in reduction of scale losses. Scale losses (ie. loss of material due to burning of the top layer of the steel ; calculated as difference of material at input of furnace and finished product) vary depending upon quality and the size of raw material being used. Scale losses for various types of input materials vary between 6 to 8%. At LSRM , the annual average of scale losses is about 7%. It is expected that there would be at least 1-2 % reduction in scale loss by maintaining optimum desired furnace temperature through installation of a temperature control system. Average annual production of the mill is about 2300 tons. Taking a conservative estimate even if there is 1% reduction in scale losses, there would be about 23 tons of material saving per annum. 2.3 Sustainability Check : Impacts of EE interventions on Energy , Environment & Economics For Sustainable Development of the unit , it is essential to evaluate the impacts of the proposed EE interventions on the energy , environment and economics of the project. Impact on Energy Consumption Due to reduction in SFC of reheating furnace from 75 kg/ton to 45 kg/ton there would be reduction in coal consumption by about 57.5 tons/annum. It is a positive impact leading to conservation of scarce energy resources. Environmental Impact Since there would be reduction in coal consumption of the mill , it would result in annual CO2 reduction of about 130 tons/annum. The reduction in the emissions of carbon dioxide ( a Global Warming gas) is a positive impact. Economic Impact The proposed project would bring in monetary saving of about Rs. 8.74 lacs/annum. Also there would be rise in capacity utilization of mill resulting in enhanced productivity. The enhanced productivity would have a positive impact on generation of new employment opportunities in the sector. 2.4 Proposed Project Cost & Financial details of EE interventions
Investment Cost of proposed EE interventions Cost of installation, comissioning Taxes (sales tax + excise) @20% Total investment Promoters investment (20%) Loan (80%)
17 6.5 3.40 26.90 5.38 21.52
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Schedule of Depreciation
Year 1 Equipment Name Investment Equipment life Depreciation Tax benefit on depreciation (A) . Equipment Name Investment Equipment life Depreciation Tax benefit on depreciation (B) Equipment Name Investment Equipment life Depreciation Tax benefit on depreciation(C) Equipment Name Investment Equipment life Depreciation Lac Rs. Years % Lac Rs./annum % Lac Rs./annum Year 2 Burner Year 3 Year 4 Year 5
3 5 20 0.6 35 0.21 20 0.6 35 0.21 Recuperator 20 0.6 35 0.21 20 0.6 35 0.21 20 0.6 35 0.21
Lac Rs. Years % Lac Rs./annum % Lac Rs./annum
3 5 20 0.6 35 0.21 20 0.6 35 0.21 20 0.6 35 0.21 20 0.6 35 0.21 20 0.6 35 0.21
Temperature Control System 3.5 5 20 20 20 0.7 35 0.25 0.7 35 0.25 0.7 35 0.25
20 0.7 35 0.25
20 0.7 35 0.25
Tax benefit on depreciation
Lac Rs. Years % Lac Rs./annum % Lac Rs./annum Lac Rs./annum
Refractory & Insulation 7.5 5
No depreciation & hence no tax benefit
Total tax benefit (A+B+C)
0.67
0.67
0.67
0.67
0.67
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Proposed Repayment Schedule

Payment Structure Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Principal 0 4.30 4.30 4.30 4.30 4.30 Interest Lac Rs. 0 1.94 1.55 1.16 0.77 0.39 Total 0.00 6.24 5.85 5.47 5.08 4.69 Balance 21.52 17.22 12.91 8.61 4.30 0.00
Calculation of Debt Service Coverage Ratio (DSCR) , Payback Period & IRR
Assumptions Average production per annum (average of year 2001-2003) Cost of fuel (Coal) - current rate Average selling price of finished product current rate Pre Implementation Status Specific fuel consumption Annual fuel consumption Scale losses Expected Post Implementation Status Specific fuel consumption Annual fuel consumption Saving in scale losses Annual reduction in fuel consumption Annual reduction in scale losses Saving on account of reduced fuel consumption Saving on account of reduced scale losses Total annual saving by improving energy efficiency Investment Cost of proposed EE interventions Cost of installation, commissioning Taxes (sales tax + excise) @20% Total investment Tonnes/annum Rs./ton Rs./ton kg./ton Tons/annum % tons/annum kg/ton Tons/annum % tons/annum tons/annum tons/annum Lac Rs./annum Lac Rs./annum Lac Rs./annum 2300 5200 25000 70 161 7 161 45 104 1 23 57.5 23 2.99 5.75 8.74
Lac Rs. Lac Rs. Lac Rs. Lac Rs.
17 6.5 3.40 26.90
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Financial Analysis Particulars Investment Promoters investment (20%) Loan (80%) Estimated saving by improving energy efficiency Amount of principal repayment Interest @ 9% Repair & maintenance expenditure Total expenses Net savings Tax benefit on depreciation Cash inflow Depreciation DSCR Payback IRR Calculation Total Investment Net cash inflow - Year 1 Net cash inflow - Year 2 Net cash inflow - Year 3 Net cash inflow - Year 4 Net cash inflow - Year 5 IRR
Lac Rs. Lac Rs. Lac Rs.
Yr 0 26.90 5.38 21.52
Yr 1
Yr 2
Yr 3
Yr 4
Yr 5
Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum % Lac Rs./annum Years
8.74 4.30 1.94 0.50 6.74 2.00 0.67 2.66 20 3.40 1.3
8.74 4.30 1.55 0.50 6.35 2.39 0.67 3.05 20 3.40 1.4
8.74 4.30 1.16 0.50 5.97 2.77 0.67 3.44 20 3.40 1.5 3.08
8.74 4.30 0.77 0.50 5.58 3.16 0.67 3.83 20 3.40 1.6
8.74 4.30 0.39 0.50 5.19 3.55 0.67 4.21 20 3.40 1.7
Lac Rs. Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum
-26.90 8.74 8.74 8.74 8.74 8.74 19%
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2.5 Projected Balance Sheet after implementation of EE interventions

Item 1 Paid-up Capital Net Worth Term Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio Debt Service Coverage Ratio (DSCR) of the Company 3.01 Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) 10.21 Net Profit % Net Profit to Total Equity % Net Profit to Total Capital Employed 2% 2% 2% 3% 3% 4% 5% 1.9 3% 8 2.66 3% 8 3.05 4% 8 3.44 5% 8 3.83 5% 8 4.21 6% 7.9 4.50 6% 3.73 323.44 21% 0.97 3.68 462.06 30% 1.02 3.57 462.06 30% 1.07 3.46 462.06 30% 1.13 3.31 462.06 30% 1.20 3.26 462.06 30% 1.25 3.30 462.06 30% 68 97 22 7 97 23.5 124 0.43 2 78 131.5 43.5 10 131.5 40.5 141 0.69 3 76.5 125.2 39.2 9.5 125.2 37.5 138 0.64 Year 4 75 118.9 34.9 9 118.9 32 133 0.59 5 73.5 112.6 30.6 8.5 112.6 28 129.5 0.53 6 72 106.3 26.3 8 106.3 23 125 0.48 7 70.5 100 22 7.5 100 21 122.5 0.42
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Annexure 2.1 Technical Detail of Recuperator Heating surface area Surface Fluid through the tubes Fluid outside the tubes No. of passes of flue gases No. of passes for combustion air Max. Temp. of flue gases entering the recuperator Temp. of flue gases leaving the recuperator (When entering at 700 oC) : : : : : : : 50 m2 S. S. Steel Tubes Combustion air Flue gases Single Double 700 oC
: 350 oC
Temp. for combustion air entering the : Ambient (20 oC) recuperator Temp. of combustion air leaving the recuperator : 300 oC Pressure drop on flue recuperator Pressure drop on air side gas side of the : 5mm w.g (max) : 150mm w.g(max)
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Annexure 2.2 Thickness of refractory/insulation lining (mm) Soaking Heating Pre-heating zone zone zone Hearth High Alumina Bricks 88% High Heat Duty Fire Bricks (IS-8) Insulation Brick Side Wall High Alumina Bricks (45-50% Alumina) High Heat Duty Fire Bricks (IS-8) Light fire bricks (Hot Face Insulation Bricks) Supercera Ceramic Fibre Hysil Sheet Aluminium sheet Crown (Arch Roof) High Alumina Bricks (45 to 50% Alumina) High Heat Duty Fire Bricks (IS-8) Supercera Ceramic Fibre Flue Channel Medium Heat Duty Fire Bricks (IS6) Cold Face Insulation Brick Burner Walls High Alumina Bricks (45-50% Alumina) Light fire bricks (Hot Face Insulation Bricks) 115 230 190 230 190 230 190
230 190 75 25 0.5
230 119 75 25 0.5
230 119 75 25 0.5
230 .150
230 150
230 150
115 115
230 115
Supercera Ceramic Fibre (1425 oC 200 Grade, Density 128 kg/m3) Supercera Ceramic Fibre Board RTZ Grade 25 Burner Block Burner Block (18" x 18") - 60% Alumina 2 Nos.
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Annexure 2.3 Proposed Insulation/Refractory for Reheating furnace
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The monitoring & verification protocol will use the following definitions of monitoring & verification. Monitoring The systematic surveillance of the projects performance by measuring and recording performance-related indicators relevant in the context of the project agreements. Verification The periodic ex-post auditing of monitoring results, the assessment of improved energy efficiency of the projects continued conformance with the relevant project criteria. There are mainly two types of Monitoring and verification required in Steel rerolling SME units. Technical Monitoring & Verification This project is an energy efficiency project to reduce specific energy consumption of steel re-rolling mills. SEC can be directly measured through the fuel/energy consumption and quantities of the product output. Fuel (coal) consumption will be directly measured through weighment. The quantities of the product output can be also measured by weight. Procurement records and production logs can be used for cross verification purposes. For further verification, periodic energy use studies can be carried out at the unit level and validated through theoretical calculations based on heat / mass balance of specific fuel consumption. Hence, Technical M & V would formulate a list of variables from records of which the actual savings can be calculated. This would help in tracking the project w.r.t. objective of EE. Parameters identified and suggested methods/frequency to for checking these parameters is presented below in a tabular form.
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Data Variable
Unit
Source of data
Recording frequency
Fuel consumed
kg
Field measurement/log book
Raw Material heated
tonnes Field measurement/log book

o
Supply air temperature Surface temperature of different zones Exit flue gas temperature
Field measurement Field measurement
Measured Remarks (M), Calculated (C)or Estimated (E) Daily M Data will be aggregated on monthly & yearly basis Daily M Data will be aggregated on monthly & yearly basis Continuously M Data averaging daily Weekly M Data aggregation weekly Continuously M Data averaging daily Data averaging daily Data will be aggregated on monthly & yearly basis Data will be aggregated on monthly & yearly basis
o Furnace C operating temperature Specific fuel kg/ton consumption
Continuously M
Field Weekly measurement/sells & procurement records Field Weekly measurement/sells & procurement records
Scale losses
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Financial Monitoring & Verification This would help the financial institution to monitor payment schedule. A financial M&V has been proposed which can include following in consultation with the financing institution(FI)/ Bank. 1. Early Warning Reports: These reports can be generated on a weekly or monthly basis depending on the Financial Institutions policy. These reports would facilitate the Financial Institution in monitoring any default in repayment of principal or interest amounts due to the Financial Institution on a regular basis. Periodic Reviews: This would entail a detailed credit review of the units financial statements. These reviews can be conducted periodically by the Financial Institution on financial ratios which would indicate the financial health of the units. Project Progress Reports: Periodic (time interval agreed with the Financial Institution) progress reports can provide information on production, sales, inventory, receivable, profitability, etc. of the project funded by the Financial Institution. Any externalities affecting/ expected to affect energy savings such as low capacity utilization, decline in sales, accumulation of inventory, decrease in orders in hand or lower profits than anticipated can be taken up with the unit by the Financial Institution. Periodic Visits: Each assisted unit can be visited as per the FIs policy on periodical project / company visits. Such a visit would provide the Financial Institution with a first hand view of the project progress to date. The visiting team may review energy consumption bills pre and post EE project implementation, examine the utilization of funds, understand the companys operations, organizational set-up, provide a random check of the correctness of the progress report submitted by the company.
2.
3.
4.
Detailed Project Report (DPR)
Royal Steel Rolling Mills

Mandi Gobindgarh, Punjab, India
of
Submitted to
&
October 2004
Detailed Project Report Royal Steel Rolling Mills
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Table of Contents
LIST OF ABBREVIATIONS..56 ACKNOWLEDGEMENT ...57 EXECUTIVE SUMMARY ..58 1. INTRODUCTION..62

1.0 BACKGROUND OF COMPANY 1.1 MANUFACTURING PROCESS 1.2 EXPANSION & ENERGY EFFICIENCY IMPROVEMENT PLANS
1.3 1.4 1.5
CONSTITUTION OF THE UNIT FINANCIAL STANDING OF THE UNIT ANALYSIS OF THE AUDITED BALANCE SHEET & FINANCIAL RATIOS
2. PROPOSED PROJECT 67
2.0
PROJECT OBJECTIVE : IMPROVING SPECIFIC ENERGY CONSUMPTION
2.1 2.2
2.3
Energy Efficiency Improvement Initiatives Reduction In Scale Losses

SUSTAINABILITY CHECK : IMPACTS OF EE INTERVENTIONS ON ENERGY/ENVIRONMENT/ECONOMICS)
2.4 Proposed Project Costs & Financial Details Of EE Interventions 2.5 Projected Balance Sheet After Implementation Of EE Interventions. 3. MONITORING & VERIFICATION PROTOCOL77 Annexure : 1.1 Copies of Balance sheets , Manufacturing & Trading Account & Profit and Loss Account (enclosed in hard copy) Annexure : 2.1 Technical details of Recuperator Annexure : 2.2 Technical details of Refractory / Insulation lining Annexure : 2.3 Diagram of furnace with proposed insulation
Confidential
This document is the property of Deloitte Touche Tohmatsu India Private Limited and contains confidential information that has been provided at your request. This information should not be disclosed in whole or in part without expressing written consent of the firm. This document should not be duplicated or used, in whole or in part, except for evaluating the firms proposal and should be returned upon request. Proposal and should be returned upon request.
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Abbreviations AISRA CO2 EE ESCO FIs FO GEF HSD IREDA LDO RSRM M&V MT PCB SBI SEB SEC SFC SIDBI SME SPM SRMA SRRMs TPH UNDP UNEP All India Steel Re-rollers Association Carbon Di-Oxide Energy Efficiency Energy Services Company Financial Institutions Furnace Oil Global Environment Facility High Speed Diesel Indian Renewable Energy Development Agency Limited Light Diesel Oil Royal Steel Rolling Mill Measurement and Verification Metric Tonne Pollution Control Boards State Financial Institution of India State Electricity Board Specific Energy Consumption Specific Fuel Consumption Small Industries Development Financial Institution of India Small and Medium Enterprise Suspended Particulate Matter Steel Re-rollers Manufacturers Association Steel Re-rolling Mills Tons per hour United Nations Development Program United Nations Environment Program
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Acknowledgements Deloitte team expresses sincere gratitude for the help, support & encouragement provided by management & staff of M/s Royal Steel Rolling Mills (RSRM), and the various stakeholders in formulation of the project DPR. This DPR would not have been possible without the guidance & information provided by all the stakeholders and the financial support provided by UNEP Riso Centre.
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EXECUTIVE SUMMARY Introduction Royal Steel Rolling Mills(RSRM) was incorporated on 29.05.1973 registered under number 16/13/003/67. The unit started its commercial production in the same year manufacturing Squares . The customers of the unit include big public sector undertakings, Govt. & Semi Govt. undertakings. The unit is presently producing all sizes of & Squares and is operational 300 days a calendar year. Royal Steel Rolling Mills (RSRM) is situated at Mandi Gobindgarh Punjab , India. RSRM comes under district Fatehgarh Sahib. Manufacturing Process The raw material is obtained in the form of Iron & Steel (Ship Breaking) / Ingots and fed into re-heating furnace. This re-heating furnace is coal fired, which is maintained at a temperature ranging between 500 to 1400 0C. The material is charged through a pusher into one end of the furnace and the heated material is manually taken out at the other end . The heated material is fed into rolling mill for conversion into a desired output i.e squares. Sources of raw material The raw material (Iron & steel ship Breaking / Ingots ) is procured locally through traders & commission agents .The traders/ agents get the raw material from places like Bhavnagar (Gujarat) , Bhilai (M.P) , Dubai , Singapore , Russia , S. Africa (Durban) ,W . Africa (Gambia , Sanagel) etc. Customers & markets The finished product of the unit (RSRM) is mainly sold through traders / commission agents operating out of Mandi Gobindgarh . Traders / Commission agents mainly sell the finished products in the states like Punjab , Haryana , Himachal Pradesh (H.P), Uttar Pradesh (U.P), Jammu & Kashmir (J&K), Delhi and Rajasthan. Expansion & Energy Efficiency improvement Plans The unit presently plans to take advantage of the growing secondary steel market by increasing its production capacity from the present 1500 tons/annum to 3000 tons/ annum. Moreover, the unit has realized that there is an ample scope in improving the Specific Fuel Consumption per ton of the product output, if control systems are placed in the furnace and heat of the furnace properly utilized. The unit is proactively considering to undertake EE interventions to improve its Specific Fuel Consumption . Constitution of the Unit The unit, Royal steel Rolling Mill (RSRM) is registered under the Constitution of Proprietorship (having SSI Registration no. 16/13/003/67) and CST Registration no. 90233118) based on the provisions of Companies Act 1956. Mr. Sanjeev Sood & Mr. Anoop Soodenjoys the partnershiprship of Royal Steel Rolling Mill (RSRM).
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Project Objective : Improving Specific Fuel Consumption (SFC) Objective of the project is to reduce Specific Fuel Consumption (SFC) per ton of the product output at Royal Steel Rolling Mill (RSRM) by improving furnace efficiency. Presently the SFC of reheating furnace is about 85 kg of pulverized coal per ton of material heated. After implementing the Energy Efficiency (EE) improvement, interventions it is estimated that the SFC would reduce to 45 kg/Ton. EE interventions proposed to improve SFC at RSRM include : 5. installation of recuperators to recover waste heat from the exiting flue gases 6. Installation of air / fuel ratio control systems to achieve efficient combustion 7. Installation of temperature control system to reduce scale losses and 8. Changing the insulation/ refractory in the furnace to conserve the heat losses from the skin of the furnace Sustainability Check : Impacts of EE interventions on Energy , Environment & Economics Impact on Energy Consumption : Due to reduction in SFC of reheating furnace from 85 kg/ton to 45 kg/ton there would be reduction in coal consumption by about 60 tons/annum. It is a positive impact leading to conservation of scarce energy resources. Environmental Impact: Since there would be reduction in coal consumption of the mill , it would result in annual CO2 reduction of about 136 tons/annum. The reduction in the emissions of carbon dioxide ( a Global Warming gas) is a positive impact. Economic Impact: The proposed project would bring in monetary saving of about Rs. 8.74 lacs/annum. Also there would be rise in capacity utilization of mill resulting in enhanced productivity. The enhanced productivity would have a positive impact on generation of new employment opportunities in the sector. Proposed Project Cost & Financial details of EE interventions Investment Cost of proposed EE interventions Cost of installation & commissioning Taxes (sales tax + excise) @20% Total investment Promoters investment (20%) Loan (80%)
17 6.5 3.40 26.90 5.38 21.52
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Projected Balance Sheet after implementation of EE interventions

Amount in Lac Rs.
Item Paid-up Capital Net Worth Term Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio Debt Service Coverage Ratio (DSCR) of the Company Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Net Profit % Net Profit to Total Equity % Net Profit to Total Capital Employed
Year 1
20.84 40.66 6.98 12.85 40.66 7.43 50.37 0.95 1.63 4.42 289.8 9 16% 6.26 0.77 4% 2%
2
25.84 70.17 28.48 15.85 70.17 24.43 67.37 1.72 1.11 4.35 543.5 4 30% 6.9 1.56 6% 2%
3
24.84 64.47 24.18 15.45 64.47 21.13 63.97 1.60 1.18 4.23 543.5 4 30% 6.9 1.95 8% 3%
4
23.84 58.77 19.88 15.05 58.77 17.53 60.47 1.47 1.26 4.18 543.5 4 30% 6.9 2.34 10% 4%
5
22.84 53.07 15.58 14.65 53.07 14.03 56.97 1.32 1.36 4.09 543.5 4 30% 6.9 2.73 12% 5%
6
21.84 47.37 11.28 14.25 47.37 10.5 53.42 1.17 1.47 4.31 543.5 4 30% 6.9 3.11 14% 7%
7
20.84 41.67 6.98 13.85 41.67 8.03 51.87 1.00 1.70 4.03 543.5 4 30% 7.29 3.89 19% 9%
Monitoring & Verification Protocol There are mainly two types of Monitoring and Verification required in Steel rerolling SME units.
Technical Monitoring & Verification: This project is an energy efficiency project to reduce specific energy consumption of steel re-rolling mills. SEC can be directly measured through the fuel/energy consumption and quantities of the product output.
Fuel (coal) consumption will be directly measured through weighment. The quantities of the product output can be also measured by weight. Procurement records and production logs can be used for cross verification purposes.
Hence, Technical M & V would formulate a list of variables from records of which the actual savings can be calculated. This would help in tracking the project w.r.t. objective of EE.
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Financial Monitoring & Verification: This would help the financial institution to monitor payment schedule. A financial M&V has been proposed which can include following in consultation with the financing institution(FI)/ Bank. 5. Early Warning Reports: These reports can be generated on a weekly or monthly basis depending on the Financial Institutions policy. 6. Periodic Reviews: This would entail a detailed credit review of the units financial statements. These reviews can be conducted periodically by the Financial Institution on financial ratios which would indicate the financial health of the units. 7. Project Progress Reports: Periodic (time interval agreed with the Financial Institution) progress reports can provide information on production, sales, inventory, receivable, profitability, etc. of the project funded by the Financial Institution. Any externalities affecting/ expected to affect energy savings such as low capacity utilization, decline in sales, accumulation of inventory, decrease in orders in hand or lower profits than anticipated can be taken up with the unit by the Financial Institution. 8. Periodic Visits: Each assisted unit can be visited as per the FIs policy on periodical project / company visits. Such a visit would provide the Financial Institution with a first hand view of the project progress to date. Hence financial M&V protocol would help in periodic assessment/ review of the financial health of the unit, so that a corrective action can be taken in a timely manner.
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1
2.0
INTRODUCTION
Background of Company
Introduction Royal Steel Rolling Mills(RSRM) was incorporated on 29.05.1973 registered under number 16/03/003/67. The unit started its commercial production in the same year manufacturing squares .The unit enjoys a good name & reputation for its products in Punjab and nearby states .The unit is continuously making efforts to improve the quality of its products. The customers of the unit include big public sector undertakings, Govt. & Semi Govt. undertakings. The production and sales of the unit are constantly increasing. The products of the unit are in good demand. The unit is presently producing all sizes of Flats and is operational 300 days a calendar year. Geographical Location Royal Steel Rolling Mills (RSRM) is situated at Mandi Gobindgarh, Punjab , India. RSRM comes under district Fatehgarh Sahib. The distance of the unit (RSRM) from the nearest Railway Station is about 10 Kms and from the nearest Airport (Chandigarh) is about 65 Kms. The nearest Grid (PSEB) from the unit (RSRM) is about 3 Kms . 2.1 Manufacturing Process The raw material is obtained in the form of Iron & Steel (Ship Breaking) / Ingots) and fed into re-heating furnace. This re-heating furnace is coal fired, which is maintained at a temperature ranging between 500 to 1400 degrees. The time of heating a particular kind of raw material is adjusted in the furnace, to allow the material, to reach a uniform temperature (throughout its cross section). The material is charged through a pusher into one end of the furnace and the heated material is manually taken out at the other end . The heated material is fed into rolling mill for conversion into a desired output i.e squares. In the rolling mill section , the rolls are preset to achieve the required size and shape of the finished product. The finished product is then passed over the cooling bed to bring down its temperature. Moreover , in the rolling mill , the selection of rolls and number of passes, the heated material is made to make, , depends upon the size and shape of the product to be produced. Sources of raw material The raw material (Iron & steel ship Breaking / Ingots ) is procured locally through traders & commission agents .The traders/ agents get the raw
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material from places like Bhavnagar (Gujarat) , Bhilai (M.P) , Dubai , Singapore , Russia , S. Africa (Durban) ,W . Africa (Gambia , Sanagel) etc. Customers & markets The Finished product of the unit (RSRM) is mainly sold through traders / commission agents operating out of Mandi Gobindgarh . Traders / Commission agents mainly sell the finished products in the states like Punjab , Haryana , Himachal Pradesh (H.P) ,Uttar Pradesh (U.P) ,Jammu & Kashmir (J&K) ,Delhi and Rajasthan. Block Diagram of the re-rolling operation
Rolling
Cooling Bed
Storage
Dispatch
Technical Know-how & Marketing The unit is in touch with technical consulting institutions like National Institute of Secondary Steel Technology (NISST) situated at Mandi Gobindgarh (Punjab) and Punjab State Council for Science & Technology, Chandigarh to ensure quality output of its products. Experienced operators (foreman) have been employed to run the re rolling operations and also for the management of the workforce. The unit enjoys a good reputation in the steel cluster at Mandi Gobindgarh for its management skills and quality product. There has been a consistent increase in the demand of its products in the market. In other words, the unit does not experience any problems with regards to the marketing of its finished products. Hence, there are no idle inventories accumulated within the unit.
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1.2 Expansion & Energy Efficiency improvement Plans Though small expansions have been done in the past, the unit presently plans to take advantage of the growing secondary steel market by increasing its production capacity from the present 1500 tons/annum to 3000 tons/ annum. Moreover, the unit has realized that there is an ample scope in improving the Specific Fuel Consumption per ton of the product output, if control systems are placed in the furnace and heat of the furnace properly utilized. The unit is proactively considering to undertake EE interventions to improve its Specific Fuel Consumption , which in turn would also improve its capacity utilization from the present 15% to 30%. The costs of EE interventions as estimated by the unit are about Rs.30 lacs. 1.3 Constitution of the Unit The unit, Royal steel Rolling Mill (RSRM) is registered under the Constitution of Partnership (having SSI Registration no. 16/13/0034/67) and CST Registration no. 90233118 based on the provisions of Companies Act 1956. Mr. Saneeiv Sood & Mr.Anoop Sood enjoys the partnerrship of Royal Steel Rolling Mill (RSRM).
Personal details of the partners:

Name: Date of Birth: Fathers Name: Present Address: Mr. Sanjeev Sood 22-03-70 Sh. Raj Kumar Sood Royal Steel Rolling Mills G.T. Road , Township Mandi Gobindgarh , Punjab-147301 Royal Steel Rolling Mills G.T. Road , Township Mandi Gobindgarh , Punjab-147301 91-1765-500200, 257751 meetmrvickey@yahoo.com
AEEPS6901E
Permanent Address:
Telephone No.: E-mail ID: PAN No.:
Educational Qualification: Graduation Experience Details :10 Years experience of managing Steel Rolling Mill
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Name: Date of Birth: Fathers Name: Present Address: Permanent Address:
Telephone No.: E-mail ID: PAN No.: AEEPS6906D Educational Qualification: Graduation Experience Details :10 Years experience of managing Steel Rolling Mill
Mr. Anoop Sood 07-11-1971 Sh. Raj Kumar Sood Royal Steel Rolling Mills G.T. Road , Township Mandi Gobindgarh , Punjab-147301 Royal Steel Rolling Mills G.T. Road , Township Mandi Gobindgarh , Punjab-147301 91-1765-500200, 257751 meetmrvickey@yahoo.com
1.4 Financial Standing of Royal Steel Rolling Mill (RSRM) Based on the analysis of Balance Sheet, Profit & Loss Account and Trading & Manufacturing Account (copies enclosed as Annexure 1.1) following information has been tabulated to evaluate the financial standing of RSRM.
Amount in Lakh Rs 2002 2001 332.33 276.67 288.21 234.7 331.78 276.67 0.68 0.59 47.25 42.61 21.52 19.09 8.85 8.6 12.9 11.55 18.42 2.05 296.44 247.85 18.7 17.5 15.86 14.61 0 1.38 2.24 2.7 28.18 20.59 0.06 0.1 2.92 4.67 2.20 37.49 25.76 10.23 16.09 1.27 1.30 0.02 2.23 32.17 23.95 11.4 120.90 1.67 1.73 0.02
Items : Gross Sales Cost of Good Sold Net Sales Net Profit Current Assets Current Liabilities Net Fixed Assets S. Debtors & Advances S. Creditors Purchases Long Term Debt (secured & unsecured) Capital Depreciation Interest Closing Stock Loan Repayments PBDIT Ratios : Current Ratio Fixed Asset Turnover Debtors Turnover Inventory Turnover Credit Turnover DSCR Interest Coverage ROCE
2003 289.89 238.05 289..39 0.77 42.93 9.71 7.43 11.41 6.4 234.6 19.82 20.84 1.79 3.7 26.85 0.14 6.26 4.42 38.95 25.41 8.87 36.66 1.63 1.69 0.02
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Nb:
Depreciation on fixed assets has not been provided in the books of accounts during the year. Central Excise duty is accounted on the basis of debits in the PLA register.
Bankers: The unit deals with State Bank of Patiala, Mandi Gobindgarh Branch ,Punjab India. Banking Arrangements / details Name of the Bank Bank Limits (Lac Rs.) 10 Rte of Interest (%) 13 Amount Outstanding (Lac Rs.) 9.82
State Bank of Patiala C/C
1.5 Analysis of Audited Balance Sheet (for 3 years) and Financial Ratios
Item Audited Results (Amount in Lac Rs.) Year 1 Year 2 Year 3 2003 2002 2001 20.84 15.86 14.61 40.66 34.56 32.11 6.98 7.12 7.18 12.85 11.58 10.33 40.66 34.56 32.11 7.43 8.85 8.6 50.37 56.09 51.21 0.95 1.18 1.20 2.25 2.88 3.05 1.63 1.27 1.67 4.42 2.20 2.23 289.89 332.33 276.67 16% 15% 14% 6.26 2.92 4.67 0.77 0.68 0.59 4% 4% 4% 2% 2% 2%
Paid-up Capital Net Worth Term Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio (Current) Debt equity Ratio (After Proposed Loan from IREDA) Debt Service Coverage Ratio (DSCR) of the Company Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Net Profit % Net Profit to Total Equity % Net Profit to Total Capital Employed
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PROPOSED PROJECT
3.0 Project Objective : Improving Specific Fuel Consumption (SFC) Objective of the project is to reduce Specific Fuel Consumption (SFC) per ton of the product output at Royal Steel Rolling Mill (RSRM) by improving furnace efficiency. Presently the SFC of reheating furnace is about 85 kg of pulverized coal per ton of material heated. After implementing the Energy Efficiency (EE) improvement, interventions it is estimated that the SFC would reduce to 45 kg/Ton. EE interventions proposed to improve SFC at RSRM include : 1. Installation of recuperators to recover waste heat from the exiting flue gases 5 Installation of air / fuel ratio control systems to achieve efficient combustion 6 Installation of temperature control system to reduce scale losses and 7 Changing the insulation/ refractory in the furnace to conserve the heat losses from the skin of the furnace It is important to note that apart from the improvements in SFC, the implementation of EE improvement measures would also result in reduction of scale losses. The scale losses are the loss of top surface metal due to flaking / burning of the top crystalline metallic layer of the metal. Presently the average scale loss in the unit is 7%. It is expected that there would be at least 1-2 % reduction in scale loss by maintaining optimum desired furnace temperature. 2.1 Energy Efficiency (EE) Improvement Interventions EE interventions proposed to increase the SFC in the unit are discussed briefly here. For details please refer the energy audit report. Air / fuel ratio controller In the existing re heating furnace there is no provision to vary air/fuel flow rate and to control the excess air levels. This leads to inefficient combustion inside the furnace leading to higher fuel consumption. Moreover , the excess air( more than theoretical air requirement) in the furnace leads to excessive heat loss thus increasing fuel consumption. It is proposed to replace the existing combustion system with a self proportionating burner system that minimizes excess air level thus reducing the corresponding dry flue gas losses.
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The proposed air / fuel ratio control system consists of a motorized butterfly valve for air/fuel control. A feedback impulse signal is taken by the system from the temperature controller which senses the furnace temperature. After the desired/ set temperature is achieved, flow of both air and fuel is reduced. Thus leading to improvements in Specific Fuel Consumption. Saving in fuel on account of reduction in dry flue gas loss has been estimated to be 16Tons per annum and the corresponding monetary saving would be about Rs.0.84 lac per annum. Installation of a recuperator A recuperator is a heat exchanger that can capture the waste heat from the exiting flue gases. The captured waste heat can be used to preheat the air that is utilized for combusting the fuel through a burner system in a furnace. At RSRM , no recuperator has been installed to recover heat from flue gases for preheating the combustion air . It is recommended to install a recuperator so that heat of flue gases may be recovered for pre-heating combustion air. Installation of recuperator also helps in increasing flame temperature which improves combustion and increases heat transfer efficiency. Combustion air temperature of 300 oC can be achieved by installing the recuperator. Annual fuel saving on this account has been estimated to be about 15.5Tons of coal. Corresponding monetary saving would be Rs. 0.81 lac per annum. Specification details provided at Annexure 2.1 Changing the refractory / furnace insulation Average skin temperature of the reheating furnaces at RSRM was found to be about 148 oC , resulting in higher radiation losses. The radiation losses account for higher fuel consumption as more fuel is required to maintain the desired temperature in the furnace. It is proposed to improve furnace insulation by changing refractory/insulation to reduce the radiation loss and heat-up time. Annual fuel saving by changing the refractory / furnace insulation has been estimated to be about 48 tons. Corresponding monetary saving on implementation of this EE intervention has been estimated to be about Rs. 2.48 lac per annum. Specification details provided as Annexure 2.2 & 2.3. Installation of temperature Control system For steel re rolling operation , the input raw iron / steel needs to be heated to the rolling temperature , wherein the metallurgical properties of iron allow a change in the crystalline structure making it possible to form the metal into a desired shape , a flat, bar or a rod. This rolling temperature varies from 1175 1200 degrees Centigrade. However , maintaining a temperature higher than above stated rolling temperature leads to metal loss in form of iron losses as well as results in higher fuel consumption. Hence , it is appropriate to maintain the temperature in a reheating furnace to a desired level. At RSRM ,no temperature control system has been installed to control operating temperature of furnace. Operating temperature of furnace was found about 1400 oC while desired operating temperature is about 1180 oC.
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An automatic low & high firing temperature control system may be installed in furnace to control the operating temperature. After installing the controller, operating temperature can be maintained at 1180 oC. Annual monetary saving on this account has been estimated to be about Rs. 0.96 lac. 2.2 Reduction in Scale Loss Apart from the energy savings, the energy efficiency measures suggested would also result in reduction of scale losses. Scale losses (ie. loss of material due to burning of the top layer of the steel ; calculated as difference of material at input of furnace and finished product) vary depending upon quality and the size of raw material being used. Scale losses for various types of input materials vary between 5 to 7%. At RSRM , the annual average of scale losses is about 6%. It is expected that there would be at least 1-2 % reduction in scale loss by maintaining optimum desired furnace temperature through installation of a temperature control system. Average annual production of the mill is about 1500 tons. Taking a conservative estimate even if there is 1% reduction in scale losses, there would be about 15 tons of material saving per annum.
2.3 Sustainability Check : Impacts of EE interventions on Energy , Environment & Economics For Sustainable Development of the unit , it is essential to evaluate the impacts of the proposed EE interventions on the energy , environment and economics of the project. Impact on Energy Consumption Due to reduction in SFC of reheating furnace from 85 kg/ton to 45 kg/ton there would be reduction in coal consumption by about 60 tons/annum. It is a positive impact leading to conservation of scarce energy resources. Environmental Impact: Since there would be reduction in coal consumption of the mill , it would result in annual CO2 reduction of about 136 tons/annum. The reduction in the emissions of carbon dioxide ( a Global Warming gas) is a positive impact. Economic Impact: The proposed project would bring in monetary saving of about Rs. 6.87 lacs/annum. Also there would be rise in capacity utilization of mill resulting in enhanced productivity. The enhanced productivity would have a positive impact on generation of new employment opportunities in the sector. 2.4 Proposed Project Cost & Financial details of EE interventions
Investment Cost of proposed EE interventions Cost of installation, comissioning Taxes (sales tax + excise) @20% Total investment Promoters investment (20%) Loan (80%) Lac Rs. Lac Rs. Lac Rs. Lac Rs. Lac Rs. Lac Rs. 17 6.5 3.40 26.90 5.38 21.52
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Schedule of Depreciation
Depreciation Calculation Year 1 Year 2 Year 3 Burner Lac Rs. Years % Lac Rs./annum % Lac Rs./annum 3 5 20 0.6 35 0.21 20 0.6 35 0.21 Recuperator Lac Rs. Years % Lac Rs./annum % Lac Rs./annum 3 5 20 0.6 35 0.21 20 0.6 35 0.21 20 0.6 35 0.21 20 0.6 35 0.21 20 0.6 35 0.21 B 20 0.6 35 0.21 20 0.6 35 0.21 20 0.6 35 0.21 ...A Year 4 Year 5
Equipment Name Investment Equipment life Depreciation
Temperature Control System 3.5 5 20 20 20 0.7 35 0.25 0.7 35 0.25 0.7 35 0.25
20 0.7 35 0.25
20 0.7 35 0.25 C
Lac Rs. Years % Lac Rs./annum % Lac Rs./annum Lac Rs./annum
Refractory & Insulation 7.5 5
No depreciation & hence no tax benefit
Total tax benefit (A+B+C)
0.67
0.67
0.67
0.67
0.67
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Proposed Repayment Schedule

Payment Structure Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Principal 0 4.30 4.30 4.30 4.30 4.30 Interest Lac Rs. 0 1.94 1.55 1.16 0.77 0.39 Total 0.00 6.24 5.85 5.47 5.08 4.69 Balance 21.52 17.22 12.91 8.61 4.30 0.00
Calculation of Debt Service Coverage Ratio (DSCR) , Payback Period & IRR
Assumptions Average production per annum (average of year 2001-2003) Cost of fuel (Coal) - current rate Average selling price of finished product - current rate Pre Implementation Status Specific fuel consumption Annual fuel consumption Scale losses Expected Post Implementation Status Specific fuel consumption Annual fuel consumption Saving in scale losses Annual reduction in fuel consumption Annual reduction in scale losses Saving on account of reduced fuel consumption Saving on account of reduced scale losses Total annual saving by improving energy efficiency Investment Cost of proposed EE interventions Cost of installation, commissioning Taxes (sales tax + excise) @20% Total investment Tonnes/annum Rs./ton Rs./ton kg./ton Tons/annum % tons/annum 1500 5200 25000 85 128 6 90
kg/ton Tons/annum % tons/annum
45 68 1 15
tons/annum tons/annum Lac Rs./annum Lac Rs./annum Lac Rs./annum
60 15 3.12 3.75 6.87
Lac Rs. Lac Rs. Lac Rs. Lac Rs.
17 6.5 3.40 26.90
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Financial Analysis Particulars Investment Promoters investment (20%) Loan (80%) Estimated saving by improving energy efficiency
Lac Rs. Lac Rs. Lac Rs. Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum Lac Rs./annum % Lac Rs./annum Years
Yr 0 26.90 5.38 21.52
Yr 1
Yr 2
Yr 3
Yr 4
Yr 5
6.87
6.87
6.87
6.87
6.87
Amount of principal repayment Interest @ 9% Repair & maintenance expenditure Total expenses
4.30 1.94 0.50 6.74
4.30 1.55 0.50 6.35
4.30 1.16 0.50 5.97
4.30 0.77 0.50 5.58
4.30 0.39 0.50 5.19
Net savings Tax benefit on depreciation Cash inflow Depreciation
0.13 0.67 0.79 20 3.40 1.0
0.52 0.67 1.18 20 3.40 1.0
0.90 0.67 1.57 20 3.40 1.1 3.92
1.29 0.67 1.96 20 3.40 1.2
1.68 0.67 2.34 20 3.40 1.3
DSCR Payback IRR Calculation Total Investment Net Cash Inflow - Year 1 Net Cash Inflow - Year 2 Net Cash Inflow - Year 3 Net Cash Inflow - Year 4 Net Cash Inflow - Year 5 IRR
Lac Rs Lac Rs /annum Lac Rs /annum Lac Rs /annum Lac Rs /annum Lac Rs /annum %
26.90 6.87 6.87 6.87 6.87 6.87 9%
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2.5 Projected Balance Sheet after implementation of EE interventions

Item Paid-up Capital Net Worth Term Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio Debt Service Coverage Ratio (DSCR) of the Company
1.63 1.11 4.35 543.5 4 30% 1.18 4.23 543.5 4 30% 1.26 4.18 543.5 4 30% 1.36 4.09 543.5 4 30% 1.47 4.31 543.5 4 30% 1.70 4.03 543.5 4 30%
Year 1
20.84 40.66 6.98 12.85 40.66 7.43 50.37 0.95
2
25.84 70.17 28.48 15.85 70.17 24.43 67.37 1.72
3
24.84 64.47 24.18 15.45 64.47 21.13 63.97 1.60
4
23.84 58.77 19.88 15.05 58.77 17.53 60.47 1.47
5
22.84 53.07 15.58 14.65 53.07 14.03 56.97 1.32
6
21.84 47.37 11.28 14.25 47.37 10.5 53.42 1.17
7
20.84 41.67 6.98 13.85 41.67 8.03 51.87 1.00
Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT)
4.42 289.8 9 16%
6.26
6.9 1.56 6%
6.9 1.95 8%
6.9 2.34 10%
6.9 2.73 12%
6.9 3.11 14%
7.29 3.89 19%
Net Profit % Net Profit to Total Equity % Net Profit to Total Capital Employed
0.77 4%
2%
2%
3%
4%
5%
7%
9%
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Annexure 2.1 Technical Detail of Recuperator Heating surface area Surface Fluid through the tubes Fluid outside the tubes No. of passes of flue gases No. of passes for combustion air Max. Temp. of flue gases entering the recuperator Temp. of flue gases leaving the recuperator (When entering at 700 oC) : : : : : : : 50 m2 S. S. Steel Tubes Combustion air Flue gases Single Double 700 oC
: 350 oC
Temp. for combustion air entering the : Ambient (20 oC) recuperator Temp. of combustion air leaving the recuperator : 300 oC Pressure drop on flue recuperator Pressure drop on air side gas side of the : 5mm w.g (max) : 150mm w.g(max)
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Annexure 2.2 Thickness of refractory/insulation lining (mm) Soaking Heating Pre-heating zone zone zone Hearth High Alumina Bricks 88% High Heat Duty Fire Bricks (IS-8) Insulation Brick Side Wall High Alumina Bricks (45-50% Alumina) High Heat Duty Fire Bricks (IS-8) Light fire bricks (Hot Face Insulation Bricks) Supercera Ceramic Fibre Hysil Sheet Aluminium sheet Crown (Arch Roof) High Alumina Bricks (45 to 50% Alumina) High Heat Duty Fire Bricks (IS-8) Supercera Ceramic Fibre Flue Channel Medium Heat Duty Fire Bricks (IS6) Cold Face Insulation Brick Burner Walls High Alumina Bricks (45-50% Alumina) Light fire bricks (Hot Face Insulation Bricks) 115 230 190 230 190 230 190
230 190 75 25 0.5
230 119 75 25 0.5
230 119 75 25 0.5
230 .150
230 150
230 150
115 115
230 115
Supercera Ceramic Fibre (1425 oC 200 Grade, Density 128 kg/m3) Supercera Ceramic Fibre Board RTZ Grade 25 Burner Block Burner Block (18" x 18") - 60% Alumina 2 Nos.
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Annexure 2.3 Proposed Insulation/Refractory for Reheating furnace
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The monitoring & verification protocol will use the following definitions of monitoring & verification. Monitoring The systematic surveillance of the projects performance by measuring and recording performance-related indicators relevant in the context of the project agreements. Verification The periodic ex-post auditing of monitoring results, the assessment of improved energy efficiency of the projects continued conformance with the relevant project criteria. There are mainly two types of Monitoring and verification required in Steel rerolling SME units. Technical Monitoring & Verification This project is an energy efficiency project to reduce specific energy consumption of steel re-rolling mills. SEC can be directly measured through the fuel/energy consumption and quantities of the product output. Fuel (coal) consumption will be directly measured through weighment. The quantities of the product output can be also measured by weight. Procurement records and production logs can be used for cross verification purposes. For further verification, periodic energy use studies can be carried out at the unit level and validated through theoretical calculations based on heat / mass balance of specific fuel consumption. Hence, Technical M & V would formulate a list of variables from records of which the actual savings can be calculated. This would help in tracking the project w.r.t. objective of EE. Parameters identified and suggested methods/frequency to for checking these parameters is presented below in a tabular form.
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Data Variable
Unit
Source of data
Recording frequency
Fuel consumed
kg
Field measurement/log book
Raw Material heated
tonnes Field measurement/log book

o
Supply air temperature Surface temperature of different zones Exit flue gas temperature
Measured Remarks (M), Calculated (C)or Estimated (E) Daily M Data will be aggregated on monthly & yearly basis Daily M Data will be aggregated on monthly & yearly basis Continuously M Data averaging daily Weekly M Data aggregation weekly Continuously M Data averaging daily Data averaging daily Data will be aggregated on monthly & yearly basis Data will be aggregated on monthly & yearly basis
o Furnace C operating temperature Specific fuel kg/ton consumption
Continuously M
Field Weekly measurement/sells & procurement records Field Weekly measurement/sells & procurement records
Scale losses
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Financial Monitoring & Verification: This would help the financial institution to monitor payment schedule. A financial M&V has been proposed which can include following in consultation with the financing institution(FI)/ Bank. 1. Early Warning Reports: These reports can be generated on a weekly or monthly basis depending on the Financial Institutions policy. These reports would facilitate the Financial Institution in monitoring any default in repayment of principal or interest amounts due to the Financial Institution on a regular basis. Periodic Reviews: This would entail a detailed credit review of the units financial statements. These reviews can be conducted periodically by the Financial Institution on financial ratios which would indicate the financial health of the units.
2.
3.
Project Progress Reports: Periodic (time interval agreed with the Financial Institution) progress reports can provide information on production, sales, inventory, receivable, profitability, etc. of the project funded by the Financial Institution. Any externalities affecting/ expected to affect energy savings such as low capacity utilization, decline in sales, accumulation of inventory, decrease in orders in hand or lower profits than anticipated can be taken up with the unit by the Financial Institution. Periodic Visits: Each assisted unit can be visited as per the FIs policy on periodical project / company visits. Such a visit would provide the Financial Institution with a first hand view of the project progress to date. The visiting team may review energy consumption bills pre and post EE project implementation, examine the utilization of funds, understand the companys operations, organizational set-up, provide a random check of the correctness of the progress report submitted by the company.
4.
Energy Audit Report

Mandi Gobindgarh ( Khanna), Punjab, India
Lakshmi Steel Rolling Mills
of
Submitted to
&
80
October 2004
Energy Audit Report Lakshmi Steel Rolling Mill
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Table of Contents
Acknowledgement List of Abbreviations Executive Summary 1 2 3 4 5 Introduction Production Process Energy and Utility Systems Data Collection and Analysis Recommendations for Energy Efficiency Improvements List of suppliers
82 83 84 86 87 89 91 - 88 - 90 - 95 - 85
96 102
- 101
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ACKNOWLEDGEMENT The study team thankfully acknowledges the co-operation extended and help rendered to it by the officers and staff of the Lakshmi Steel Rolling Mills., during the energy audit. The team is grateful to Shri. Vinod Vashisht Mg. Director, Heads of different functions, other officials and staff of the plant, for helping us in collection, collation and analysis of data. Deloitte Team
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LIST OF ABBREVIATIONS SME GHG FO SEC SFC ECM LT FTL HSD PSEB APFC LSRM Small and Medium Enterprises Green House Gas Furnace Oil Specific Energy Consumption Specific Fuel Consumption Energy Conservation Measure Low Tension Fluorescent Tube Light High Speed Diesel Punjab State Electricity Board Automatic Power Factor Controller Lakshmi Steel Rolling Mill
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EXECUTIVE SUMMARY Introduction Lakshmi Steel Rolling Mills (LSRM) is located at Khanna, Punjab. Energy audit of the company was carried out as a part of project Development of Financial Intermediation Mechanisms for Energy Efficiency Investments in Developing Countries Brazil, India and China, supported by the World Bank / UN Foundation / UN Environment Program (UNEP). The project seeks to address two of the most critical barriers facing the Small & Medium Enterprises (SME) Steel sector i.e. Technological and Financial. Production process The production process starts with cutting of the raw material (iron scrap of various types) into different lengths , depending upon size/shape of finished product required. The raw material is heated in the reheating furnace to a temperature of 1250-1300 oC. The heated material is then fed into rolling mills to make the finished product, in this case the flats. These flats are used in fabrication of steel items in the building sector. Energy Sources & Consumption Coal & electricity are the major sources of energy in the steel re rolling mills. Electricity is used to drive various motors of rolling mills and for lighting. Presently , at LSRM, pulverized coal is being used as fuel in the reheating furnace, whereas in past the Furnace Oil (FO) was being used as fuel. The average annual FO consumption (average of year 2001-2003) in furnace was about 107 kL . Based on the energy audit study , recommendations have been made on the various Energy Efficiency (EE) improvement interventions , estimated to bring in annual monetary saving worth Rs 8.74 Lacs . Major recommendations are provided below. Furnace The Reheating furnace installed at LSRM is of conventional design manufactured locally, fitted with local burners/blowers. There are no control systems provided to monitor/control furnace temperature and air fuel ratio. No heat recovery devices has been installed to recover heat from exiting flue gases. Furnace insulation is in poor condition leading to an existence of very high skin temperature and radiation losses. Specific Fuel Consumption (SFC) of the furnace is about 75 kg of pulverized coal per ton of material heated. Operating efficiency of furnace was checked by measuring various operational parameters like excess air level, flue gas exit temperature, furnace skin temperature, operating temperature of furnace etc. The furnace efficiency was found to be about 29%. The interventions recommended for improving energy
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efficiency of furnaces are replacement of burners/combustion system, installation of recuperators, improving insulation and installation of temperature control systems. These recommendations are briefly explained below. In the existing fuel firing system there is no provision to control air/fuel flow rate and excess air level. Pulverized coal is pneumatically conveyed to furnace and fed at fixed flow rate irrespective of load on the furnace. Excess air level in furnace was measured and was found to be 58 %. Optimum desired excess air level for combustion of pulverized coal is 15-20 %. It is proposed to replace the existing combustion system to minimize excess air level and corresponding dry flue gas losses. The proposed system consists of a motorized butterfly valve for air/fuel control. The motorized valve would take the signal from temperature controller to monitor the air / fuel ratio. After the set temperature is achieved, flow of both air and fuel is reduced leading to reduction in the fuel consumption as well as losses due to loss of sensible heat with the exit flue gases. Saving in fuel on account of reduction in exit (dry) flue gas loss has been estimated to be 17 Tons per annum. Corresponding monetary saving would be about Rs.0.91 lac per annum. There is no heat recovery device as recuperator installed to recover heat from the exhaust flue gases. Exit flue gas temperature was found to be 700-750 o C. It is proposed to install a recuperator so that heat of flue gases may be recovered and used for pre-heating the combustion air. Installation of recuperator would also help in increasing the flame temperature which in turn would improve combustion and also increase heat transfer efficiency. Combustion air temperature of 300 oC can be achieved by installing the recuperator. Annual fuel saving on this account has been estimated to be about 21 Tons of coal. Corresponding monetary saving would be Rs. 1.10 lac per annum. Average skin temperature of furnace was found to be about 168 oC, thus resulting in higher radiation losses. It is proposed that the furnace insulation be improved by changing refractory/insulation . This would lead to reduction in the radiation losses and heat-up time. Annual fuel saving by improving insulation has been estimated to be about 53 tons of coal. Corresponding monetary saving has been estimated to be about Rs. 2.74 lac per annum No temperature control system has been installed to control operating temperature of the reheating furnace. Operating temperature of furnace was found between 1350 -1400 oC while desired operating temperature is about 1180 oC. An automatic low & high firing temperature control system may be installed in furnace to control the operating temperature. After installing the controller, operating temperature can be maintained at 1180 oC. Annual monetary saving on this account has been estimated to be about Rs. 1.35 lacs. Details are provided in the chapters 3,4&5 of the report.
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INTRODUCTION
1.1 General plant details Lakshmi Steel Rolling Mills is engaged in manufacturing flats of various sizes. These flats are used by construction industry and also by fabricators of steel items like gates, doors, windows, grills etc. Main plant facilities include a reheating furnace and a rolling mill. 1.2 Energy audit team The assignment was executed by:1. 2. 3. 4. Dr. Naval Karrir Director, Deloitte Touche Tohmatsu, New Delhi Mr. Upendra Pratap Singh Energy Consultant, DTT, New Delhi Mr. Prem Shankar Energy Consultant, DTT, New Delhi Mr. Tarun Jindal Financial Consultant, DTT, New Delhi
Note:This report is based on the present operating status of the plant. The recommendations are based on the measured parameters and observations of the team and the data/ information supplied to the team by the management of Lakshmi Steel Rolling Mills (LSRM). 1.3 Energy Sources Coal and electricity are the major energy sources for the steel re rolling mill at LSRM. Punjab State Electricity Board (PSEB) supplies electricity. Coal is procured locally through trading/commission agents for using in the reheating furnaces. Landed cost of coal during the study period was Rs. 5.2 /kg. 1.4 Electricity Supply The LSRM gets 11 kV supply from Punjab State Electricity Board. It is being stepped down to operating voltage (433 V) by a transformer of capacity 500 kVA. 1.5 Electricity Billing The electricity billing of the plant is under one part tariff, the charges being Rs. 3.66 per unit consumed (excluding other charges as meter rent etc). The annual electricity consumption at LSRM for the year - 2003 was 539500 kWh.
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PRODUCTION PROCESS
2.1 Major raw material inputs, quantity & costs Scraps of various types like ship breakings, rejected rails, ingots etc are being used as raw material. Average annual production of flats for the year 2001-2003 was 2300 Tons. Procurement cost of raw material at existing rates varies between Rs. 20,000-22,000 per ton. 2.2 Brief description of manufacturing process Raw material being used for steel re rolling at LSRM consists of steel scraps of various types like ship breakings, rejected rails, ingots etc. Raw material is cut into different lengths/sizes depending upon required final size of rolled product . These pieces are then loaded on rollers at charging side of the reheating furnace and pushed into pre-heating zone of furnace by an electromechanical pusher. Subsequently material passes through heating & soaking zones in the re heating furnace. The heated material is drawn out at a temperature of 1200-1250 oC and fed to rolling mill. After rolling, the rolled product is kept on the cooling bed from where it is sent to storage where bunching & bundling is done before dispatch. 2.3 Scale losses Scale losses (ie. loss of material due to burning of the top layer of the steel ; calculated as difference of material at input of furnace and finished product) vary depending upon quality and the size of raw material being used. Scale losses for various types of input materials vary between 6 to 8%. Annual average of scale loss is about 7%.
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2.4 Process flow diagram & major unit operations
Rolling
Cooling Bed
Storage
Dispatch
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ENERGY & UTILITY SYSTEM
3.1 Energy Sources Consumption & Costs Energy sources of the plant may be broadly categorized as electricity & fuel. Electricity is being consumed in motors of rolling mill, coal crusher, blowers, fans, pumps & lighting. Presently fuel being used in reheating furnace is pulverized coal. Previously FO was being used as fuel in re-heating furnace. Main reason of shifting from FO to coal is low operating cost of fuel in the furnace. FO was being purchased at rate of about Rs.14,500 per kL ( Gross Calorific Value 10200 Kcal /Kg) whereas coal is being purchased at rate of about Rs. 5200 per ton ( Gross Calorific Value 6,700 Kcal / Kg). Annual energy (electricity + fuel) cost of the plant during year 2003 was Rs. 35 lacs. During year 2003 about 5.39 lac units of electricity was purchased form PSEB. Average annual fuel consumption (average of year 2001-2003) in furnace was about 107 kL . 3.2 Utility System Steel re rolling requires heating of raw material in reheating furnace up to temperature of about 1180 oC for processing it in the rolling mill. Utilities of the plant may be categorized as Thermal Utilities & Electrical Utilities. These utilities are discussed below in detail. 3.2.1 Thermal Utilities Thermal utility installed in the plant is Reheating Furnace which is discussed below. Reheating Furnace Reheating furnace installed is of local make without a recommended standard fuel consumption parameter. In past the furnace was being operated on Furnace Oil (FO) but currently it is being operated on pulverized coal. Fuel cost is the main reason of shifting from FO to coal. A coal pulverizing plant, consisting of a coal crusher (to pulverize the coal) and a blower (to convey pulverized coal from hopper to furnace), has been installed to supply pulverized coal to furnace. Coal firing system is very crude and there is no mechanism to control air fuel ratio. Also there is no temperature control system to control/maintain desired furnace temperature in the different zones of the reheating furnace. There is no recuperator provided to recover heat from exiting flue gases. Furnace insulation is poor due to which skin temperature was found much higher than recommended values. Specific fuel consumption of the furnace is about 75 kg/ton.
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3.2.2 Electrical Utilities Electrical utilities of the plant consist of Transformer, Motors, Capacitors & Lighting. These utilities are discussed below. Transformer A 500 kVA transformer has been installed to step down the incoming 11 kV supply of PSEB to operating voltage of 433 V. The LT side of the transformer is connected to the bus bar of the main LT panel which supplies power to different sections. Capacitors 240 kVAr capacitors have been installed in the plant to improve power factor. Power factor being maintained is 0.97. Standard minimum power factor requirement of PSEB is 0.88. Motors Motors are being used as drives to various equipments. Major motors and their rated power consumption is given below: Main mill motor Furnace pusher motor Coal crusher motor Blower motor 500 HP 20 HP 40 HP 10 HP
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DATA COLLECTION & ANALYSIS
Introduction Data collection & analysis was done with specific objective of assessing energy performance of various equipments/utilities and to evaluate specific energy consumption per ton of output at LSRM. Both Primary and secondary data were collected for analyzing the Specific Fuel Consumption at LSRM. The secondary sources included : catalogues of various equipments / machines, log books maintained at the plant and available technical literature. Primary data was collected based on the actual field measurements during the audit study. Furnace Both direct & indirect methods were used to calculate the efficiency of reheating furnace . It was found to be 25 % (by heat loss method indirect method) and 29 % by the direct method. Data collected and measurements taken on furnaces is given in Data Sheet -4.1. Calculation of furnace efficiency has been provided in Calculation Sheet 4.1. Factors affecting furnace efficiency and methods to improve efficiency are discussed below: Excess air level Every fuel needs a specified quantity of stoichiometric air for combustion. In actual practice, since mixing of fuel with air is never perfect, a certain amount of excess air is always needed to complete the combustion and ensure the release of entire heat contained in the fuel. Too much of excess air results in excessive heat loss as the superfluous air does not take part in combustion but carries away valuable heat to the atmosphere from the furnace. Besides, surplus air lowers the furnace temperature and thereby resulting in lowering the heat transfer rate, and also the combustion efficiency. Likewise, if the excess air is too less than the optimum quantity, combustion would be incomplete again ,resulting in overall low efficiency. This also leads to the formation of gases like carbon monoxide etc. in the flue gases and the total heat content of the fuel is not released in the furnace. In the existing system there is no provision to control the excess air level. Desired excess air level in pulverized coal fired furnaces is 15-20 %. Excess air level in furnace was found to be 58% . Exit flue gas temperature Exit flue gas temperature of furnaces was found between 700 - 750 oC. This flue gas may be used to pre-heat the combustion air which would result in reduced fuel consumption and increased furnace efficiency.
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Furnace skin temperature Skin temperature of furnace at various zones was measured to find the heat loss due to radiation. Average surface temperature of the furnace was found to be 168 oC while desired surface temperature is about 70oC. Surface temperature of different zones/locations is tabulated below: Average surface temperature - Roof Average surface temperature - Side Wall 1 Average surface temperature - Side Wall 2 Average surface temperature - Charging side Average surface temperature - Burner side 110 120 130 200 280
o o
C C o C o C o C
Main reason of high surface temperature is degraded/poor insulation provided for construction. The furnace wall is 15.5 thick having 13.5 of insulation brick, 1.5 of tiles and 1 of mud backed by mild steel plate. The skin temperature and hence radiation loss may be reduced by replacing the existing insulation by better quality (low thermal conductivity) refractory/insulation bricks. Refractory/insulation details have been provided in next chapter. Furnace operating temperature & Stock temperature Operating temperature of furnace in soaking zone was checked by a optical pyrometer and was found to be about 1400 oC. Stock temperature at furnace discharge was measured to be 1250-1300 oC. Desired stock temperature for rolling is about 1180 oC for which furnace temperature in soaking zone may be kept at about 1225 oC. Presently there is no temperature control system installed to monitor and control the furnace temperature. Controlling the furnace temperature is very important because at higher operating temperature associated losses would also be higher. Apart from reduction in fuel consumption other benefit of controlling furnace temperature is the reduction in scale losses which would result in increased yield/productivity of the mill. Specific Fuel Consumption (SFC) SFC of re-heating furnace was calculated based upon data supplied by management of LSRM on production and corresponding coal consumption. It was found that SFC varies between 75 to 80 kg/ton of steel produced. Various measures recommended to reduce the SFC have been elaborated in chapter 5. It is expected that after implementing the suggested technological interventions, SFC can be reduced to about 45 kg of coal per ton of material heated.
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Data Sheet 4.1 General Details Name of company Furnace Make & Year Type of furnace Type of draft Rated capacity of furnace Average production Specific heat of material Average furnace operation Annual furnace operation Fuel Details Type of fuel Fixed carbon Hydrogen content Sulfur content Oxygen content Nitrogen content Moisture content Ash content Gross calorific value Specific gravity Fuel consumption per hour Fuel consumption per day Fuel consumption per annum Cost of fuel Measured Data Ambient air temperature : (DBT) Ambient air temperature : (WBT) Initial temperature of charge Final temperature of charge Operating temperature of furnace Temp. of supply air for combustion Average Oxygen level Average CO level Exit flue gas temperature Average surface temperature - Roof Average surface temperature - Side Wall 1 Average surface temperature - Side Wall 2 Average surface temperature - Charging side Average surface temperature - Burner side Surface area -Roof Surface area -Side Wall 1 Surface area -Side Wall 2 Surface area -Front Surface area -Back Lakshmi Steel Rolling Mills Local Pusher type Natural 35 TPD 7667 kg/day 0.12 kcal/kg/oC 10 hrs./day 300 days/annum Coal 67.30 5.40 0.80 4.62 1.16 6.47 14.25 6700 1 57.5 575 172500 5.2 27 22 27 1250 1400 27 7.7 300 700 110 120 130 200 280 16 9.10 9.10 0.72 2.24
% by mass % by mass % by mass % by mass % by mass % by mass % by mass kcal/kg kg/hr. kg./day kg./annum Rs./kg C C o C o C o C o C % ppm o C o C o C o C o C o C
o o
m2 m2 m2 m2 m2
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Shape of opening Dia or least width D Wall thickness of furnace X Area of opening D/X Standard Data Specific Heat of water Specific Heat of water vapor Latent heat of water Enthalpy of steam at flue gas temperature Enthalpy of water at supply air temperature Factor of radiation Black body radiation at operating temp.of furnace Emissivity Specific Heat of flue gas Moisture content of supply air
square 35 45 1400 0.78 1 0.48 540 967.46 27 0.65 35 0.8 0.2655 0.014
cm cm cm2
kcal/kg oC kcal/kg oC kcal/kg kcal/kg kcal/kg kcal/cm2/hr kcal/kg oC kg/kg of air
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Calculation Sheet 4.1 Efficiency Calculation of Furnace(s) Name of company Furnace Make & Year Type of furnace Type of draft Rated capacity of furnace Furnace Efficiency by Direct Method Average production Initial temp. of charge before entering furnace Final temp.of charge Mean specific heat of material Fuel burnt GCV of fuel Operating temperature of furnace Heat input Heat output Furnace Efficiency Total losses Furnace Efficiency by Heat Loss Method Stoichiometric air required for combustion Theoretical max. CO2 Measured O2 in flue gas Measured CO in flue gas Excess air used for combustion Corresponding CO2 Total air used for combustion Heat loss due to dry flue gas Heat loss due to moisture in fuel Heat loss due to Hydrogen in fuel Heat loss due to moisture in air Heat loss due to CO formation Heat loss due to radiation Heat loss due to openings Total losses Furnace Efficiency Lakshmi Steel Rolling Mills Local Pusher type Natural 35 7667 27 1250 0.12 575 6700 1400 3852500 1125160 29.21 70.79 9.414 18.09 7.7 300 58 11.46 14.86 43.60 0.908 6.54 1.00 0.15 16.04 6.61 74.84 25.16
TPD kg/day o C o C kcal/kg/oC kg/day kcal/kg o C kcal/day kcal/day % % kg/kg of fuel % % ppm % % kg/kg of fuel % % % % % % % % %
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RECOMMENDATIONS FOR ENERGY EFFICIENCY IMPROVEMENT
Based on the data analyzed from both primary & secondary sources it was concluded that reheating furnace is the most potential area for improving Specific Fuel Consumption at LSRM . Suggestions/recommendations proposed to improve SFC at LSRM consists of installation of recuperators, temperature control system, burners & change of insulation/ refractory. The Energy Conservation Measures (ECMs) envisaged with simple payback period calculations are elaborated in subsequent pages of this chapter. The implementation costs for these ECMs has been assessed based on quotations collected from potential suppliers. A summary of recommendations is presented below in a tabular form.
Recommendation Replacement of burners Installation of recuperator Installation of temperature controller Replacing refractory & insulation
Annual saving Coal (Tons) Rs. (Lac) 17 0.91 21 1.10 26 1.35 53 2.74
Investment Rs. (Lac) 3.00 3.00 3.50 7.50
Payback Period (Months) 40 33 31 33
It is important to note that apart from the energy savings, the energy efficiency measures would also result in reduction of scale losses. Presently the average scale loss is 7%. It is expected that there would be at least 1-2 % reduction in scale loss by maintaining optimum desired furnace temperature.
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ECM 5.1
Replacement of burners/combustion system to optimize excess air level in furnace
Existing System In the existing system there is no provision to vary air/fuel flow rate and control the excess air level. Pulverized coal is pneumatically conveyed to furnace by a 10 HP blower through a pipe and fed at fixed flow rate irrespective of load on the reheating furnace. Excess air level in furnace was measured and found to be 55-60 %. Optimum desired excess air level for combustion of pulverized coal is 15-20 %. Proposed Intervention It is proposed to replace the existing combustion system with self proportionating burner to minimize excess air level and corresponding dry flue gas loss. The proposed system consists of a motorized butterfly valve for air/fuel control. Feedback impulse signal is taken from the temperature controller. After the set temperature is achieved, flow of both air and fuel is reduced. Saving in fuel on account of reduction in dry flue gas loss has been estimated to be 17 Tons per annum. Corresponding monetary saving would be about Rs.0.91 lac per annum. Detailed calculation is provided below.
Excess air being used for combustion Corresponding dry flue gas loss Optimum desired excess air level ( max ) Corresponding dry flue gas loss Reduction in dry flue gas loss Hence saving in fuel consumption Annual fuel consumption Fuel saved per annum Cost of fuel Annual monetary saving Investment Cost of combustion system Payback period 58 43.6 20 33.50 10.10 10.10 172500 17421 5.20 0.91 3.00 40 % % % % % % kg/annum kg Rs./kg Lac Rs. Lac Rs. Months
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ECM 5.2
Installation of recuperator in furnace
Existing System Exit flue gas temperature of furnaces was measured and found between 700 750 oC. No recuperator has been installed to recover heat from flue gases for preheating the combustion air for the reheating furnace. Proposed Intervention It is recommended to install a recuperator so that heat of flue gases may be recovered for pre-heating combustion air. Installation of recuperator also helps in increasing flame temperature which improves combustion and increases heat transfer efficiency. Combustion air temperature of 300 oC can be achieved by installing the recuperator. Annual fuel saving on this account has been estimated to be about 21 Tons of coal. Corresponding monetary saving would be Rs. 1.10 lac per annum. Detailed calculation is shown below.
Average exit flue gas temperature Temp. of supply air for combustion in existing condition Temp. of supply air for combustion after installation of recuperator Rise in supply air temperature Total air used for combustion @ 20% excess air Fuel firing rate Mass of air supplied for combustion Heat recovered from flue gas Corresponding saving in fuel consumption Percentage saving in fuel consumption Average furnace operation Annual saving in fuel Cost of fuel Annual monetary saving Investment on installation Payback period 700 27 300 273 11.3 57.5 650 47078 7.03 12.22 10 300 21080 5.20 1.10 3.00 33
o o
C C o C
o
kg/kg of fuel kg/hr. kg/hr. kcal/hr. kg/hr. % hrs/day days/annum kg/annum Rs./kg Lac Rs. Lac Rs. Months
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ECM 5.3
Minimizing radiation losses by improving insulation Existing System Average skin temperature of furnaces was found to be about 168 oC, resulting in higher radiation losses. Desired surface temperature for furnace is about 70 o C. Radiation loss for furnace was found to be 16%. Proposed Intervention It is proposed to improve furnace insulation by changing refractory/insulation to reduce the radiation loss and heat-up time. Proposed refractory and insulation details are tabulated below:
Thickness of refractory lining (mm) Soaking zone Heating zone Hearth High Alumina Bricks 88% High Heat Duty Fire Bricks (IS-8) Insulation Brick Side Wall High Alumina Bricks (45-50% Alumina) High Heat Duty Fire Bricks (IS-8) Light fire bricks Ceramic fibre 115 230 190 230 190 75 230 190 230 119 75
Pre-heating zone 230 190 230 119 75
Annual fuel saving by improving insulation has been estimated to be about 53 tons. Corresponding monetary saving on this intervention has been estimated to be about Rs. 2.74 lac per annum. Detailed calculation is shown below.
Saving on account of reduced radiation losses Surface area of furnace Existing average surface temperature of furnace Surface temperature of furnace after providing lining Radiation loss at existing condition Radiation loss after providing lining Reduction in radiation loss ie. Saving in fuel consumption Average fuel firing rate Average furnace operation Annual saving in fuel Cost of fuel Annual monetary saving Saving on account of reduced furnace startup time Time required to heatup furnace in existing condition Time required to heatup furnace after changing refractory/insulation Fuel consumption to heatup existing furnace
37.2 168 70 16.04 4.01 12.02 57.5 10 300 20739 5.20 1.08 45 20 190
m2 o C o C % % % kg/hr hrs/day days/annum kg/annum Rs./kg Lac Rs. minutes minutes kg
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Fuel consumption to heatup after changing refractory/insulation Saving in fuel per day Annual saving in fuel @ 300 days/annum Corresponding annual monetary saving Total monetary saving Investment Cost of changing refractory/insulation Payback period
84 107 31970 1.66 2.74 7.5 33
kg kg./day kg./annum Lac Rs. Lac Rs. Lac Rs. Months
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ECM 5.4
Installation of temperature control system
Existing System Presently workers/furnace operator just observe the color of heated material before taking it out of furnace for rolling. The decision is entirely based on their experience. There is no temperature indicator to monitor furnace/stock temperature. No control system has been installed to control working temperature of furnace. Operating temperature of furnace was found about 1400 oC while desired operating temperature is about 1180 oC. Proposed Intervention An automatic low & high firing temperature control system may be installed in furnace to control the operating temperature. After installing the controller, operating temperature can be maintained at 1180 oC. Annual monetary saving on this account has been estimated to be about Rs. 1.35 lac. Detailed calculation is provided below.
Saving on account of heating the stock Existing average working temperature of furnace Working temperature of furnace after installing controller Average production per day Saving in energy by reduced operating temperature Average furnace operation Annual saving in fuel Saving on account of reduced flue gas loss Average fuel firing rate Total air used for combustion @ 20% excess air Mass of air supplied for combustion Heat content of flue gases at existing condition Heat content of flue gases after installing controllers Equivalent saving in energy Annual saving in fuel Total fuel saving Cost of fuel Annual monetary saving Investment Cost of control system Payback period
1400 1180 7667 202400 300 9063 57.5 11 650 236769 198831 37938 16987 26050 5.20 1.35 3.5 31
C C kg/day kcal/day days/annum kg/annum

o
kg/hr. kg/kg of fuel kcal/hr. kcal/hr. kcal/hr. kcal/hr. kg/annum kg/annum Rs./kg Lac Rs. Lac Rs. Months
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Addresses of Suppliers
Combustion control systems Temperature control systems Refractory& Insulation Recuperator Furmat Engineers (India) Pvt. Ltd. Plot No. 423 Village :Jonapur, Mehrauli Delhi - 110047 Tel: +91-11-25880402, Fax: +91-11-25882109 E-mail: furmat@indiatimes.com Ubbi Engineering Works M-31, Shyam Nagar Khyala Gram Delhi Tel: +91-11-26658246 Mercury Electricals 21/32 West Patel Nagar New Delhi - 110008 Tel: +91-11-51207934 Lloyd Insulation (India) Ltd. Kalkaji Industrial Area New Delhi - 110019 Tel: +91-11-26430746, 26430747 Fax: +91-11-26478601 E-mail:lloyd@del2.vsnl.net.in
Energy Audit Report
Royal Steel Rolling Mills

Mandi Gobindgarh, Punjab, India
of
Submitted to
&
October 2004
Energy Audit Report Royal Steel Rolling Mill
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Table of Contents
Acknowledgement List of Abbreviations Executive Summary 1 2 3 4 5 Introduction Production Process Energy and Utility Systems Data Collection and Analysis Recommendations for Energy Efficiency Improvements List of suppliers
105 106 107 - 108 109 110 - 111 112 - 113 114 - 117
118 - 123 124
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ACKNOWLEDGEMENT The study team thankfully acknowledges the co-operation extended and help rendered to it by the officers and staff of the Royal Steel Rolling Mills., during the energy audit. The team is grateful to Sh. Sanjeev Sood Managing Partner, Sh. Anoop Sood Managing Partner, Sh. Rajiv Sood , other officials and staff of the plant, for helping us in collection, collation and analysis of data.
Deloitte Team
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LIST OF ABBREVIATIONS SME GHG FO SEC SFC ECM LT FTL HSD PSEB APFC RSRM Small and Medium Enterprises Green House Gas Furnace Oil Specific Energy Consumption Specific Fuel Consumption Energy Conservation Measure Low Tension Fluorescent Tube Light High Speed Diesel Punjab State Electricity Board Automatic Power Factor Controller Royal Steel Rolling Mill
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EXECUTIVE SUMMARY Introduction Royal Steel Rolling Mills (RSRM) is located at Mandi Gobindgarh, Punjab. Energy audit of the company was carried out as a part of project Development of Financial Intermediation Mechanisms for Energy Efficiency Investments in Developing Countries Brazil, India and China, supported by the World Bank / UN Foundation / UN Environment Program (UNEP). The project seeks to address two of the most critical barriers facing the Small & Medium Enterprises (SME) Steel sector i.e. Technological and Financial. Production process The production process starts with cutting of the raw material (iron scrap of various types) into different lengths , depending upon size/shape of finished product required. The raw material is heated in the reheating furnace to a temperature of 1250-1300 oC. The heated material is then fed into rolling mills to make the finished product, in this case squares. These squares are used in fabrication of steel items in the building sector. Energy Sources & Consumption Coal & electricity are the major sources of energy in the steel re rolling mills. Electricity is used to drive various motors of rolling mills and for lighting. Presently , at RSRM, pulverized coal is being used as fuel in the reheating furnace, whereas in past the Furnace Oil (FO) was being used as fuel. The average annual FO consumption (average of year 2001-2003) in furnace was about 108 kL . Based on the energy audit study, recommendations have been made on the various Energy Efficiency (EE) improvement interventions , estimated to bring in annual monetary saving worth Rs 6.87 Lacs . Major recommendations are provided below. Furnace The Reheating furnace installed at RSRM is of conventional design manufactured locally, fitted with local burners/blowers. There are no control systems provided to monitor/control furnace temperature and air fuel ratio. No heat recovery devices has been installed to recover heat from exiting flue gases. Furnace insulation is in poor condition leading to an existence of very high skin temperature and radiation losses. Specific Fuel Consumption (SFC) of the furnace is about 85 kg of pulverized coal per ton of material heated. Operating efficiency of furnace was checked by measuring various operational parameters like excess air level, flue gas exit temperature, furnace skin temperature, operating temperature of furnace etc. The furnace efficiency was found to be about 22%. The interventions recommended for improving energy
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efficiency of furnaces are replacement of burners/combustion system, installation of recuperators, improving insulation and installation of temperature control systems. These recommendations are briefly explained below. In the existing fuel firing system there is no provision to control air/fuel flow rate and excess air level. Pulverized coal is pneumatically conveyed to furnace and fed at fixed flow rate irrespective of load on the furnace. Excess air level in furnace was measured and was found to be 68 %. Optimum desired excess air level for combustion of pulverized coal is 15-20 %. It is proposed to replace the existing combustion system to minimize excess air level and corresponding dry flue gas losses. The proposed system consists of a motorized butterfly valve for air/fuel control. The motorized valve would take the signal from temperature controller to monitor the air / fuel ratio. After the set temperature is achieved, flow of both air and fuel is reduced leading to reduction dry flue gas losses and hence in the fuel consumption. Saving in fuel on account of reduction in exit (dry) flue gas loss has been estimated to be 16 Tons per annum. Corresponding monetary saving would be about Rs.0.84 lac per annum. There is no heat recovery device as recuperator installed to recover heat from the exhaust flue gases. Exit flue gas temperature was found to be 700-750 o C. It is proposed to install a recuperator so that heat of flue gases may be recovered and used for pre-heating the combustion air. Installation of recuperator would also help in increasing the flame temperature which in turn would improve combustion and also increase heat transfer efficiency. Combustion air temperature of 300 oC can be achieved by installing the recuperator. Annual fuel saving on this account has been estimated to be about 15.6 Tons of coal. Corresponding monetary saving would be Rs. 0.81 lac per annum. Average skin temperature of furnace was found to be about 148 oC, thus resulting in higher radiation losses. It is proposed that the furnace insulation be improved by changing refractory/insulation . This would lead to reduction in the radiation losses and heat-up time. Annual fuel saving by improving insulation has been estimated to be about 48 tons of coal. Corresponding monetary saving has been estimated to be about Rs. 2.48 lac per annum No temperature control system has been installed to control operating temperature of the reheating furnace. Operating temperature of furnace was found between 1350 -1400 oC while desired operating temperature is about 1180 oC. An automatic low & high firing temperature control system may be installed in furnace to control the operating temperature. After installing the controller, operating temperature can be maintained at 1180 oC. Annual monetary saving on this account has been estimated to be about Rs. 0.96 lacs. Details are provided in the chapters 3,4&5 of the report.
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INTRODUCTION
1.1 General plant details Royal Steel Rolling Mills is engaged in manufacturing Squares of various sizes. These are used by construction industry and also by fabricators of steel items like gates, doors, windows, grills etc. Main plant facilities include a reheating furnace and a rolling mill. 1.2 Energy audit team The assignment was executed by:5. 6. 7. 8. Dr. Naval Karrir Director, Deloitte Touche Tohmatsu, New Delhi Mr. Upendra Pratap Singh Energy Consultant, DTT, New Delhi Mr. Prem Shankar Energy Consultant, DTT, New Delhi Mr. Tarun Jindal Financial Consultant, DTT, New Delhi
Note:This report is based on the present operating status of the plant. The recommendations are based on the measured parameters and observations of the team and the data/ information supplied to the team by the management of Royal Steel Rolling Mills (RSRM). 1.3 Energy Sources Coal and electricity are the major energy sources for the steel re rolling mill at RSRM. Punjab State Electricity Board (PSEB) supplies electricity. Coal is procured locally through trading/commission agents for using in the reheating furnaces. Landed cost of coal during the study period was Rs. 5.2 /kg. 1.4 Electricity Supply The RSRM gets 11 kV supply from Punjab State Electricity Board. It is being stepped down to operating voltage (433 V) by a transformer of capacity 500 kVA. 1.5 Electricity Billing The electricity billing of the plant is under one part tariff, the charges being Rs. 3.66 per unit consumed (excluding other charges as meter rent etc). The annual electricity consumption at RSRM for the year - 2003 was 640000 kWh.
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PRODUCTION PROCESS
2.1 Major raw material inputs, quantity & costs Scraps of various types like ship breakings, rejected rails, ingots etc are being used as raw material. Average annual production of flats for the year 2001-2003 was 1500 Tons. Procurement cost of raw material at existing rates varies between Rs. 20,000-22,000 per ton. 2.2 Brief description of manufacturing process Raw material being used for steel re rolling at RSRM consists of steel scraps of various types like ship breakings, rejected rails, ingots etc. Raw material is cut into different lengths/sizes depending upon required final size of rolled product . These pieces are then loaded on rollers at charging side of the reheating furnace and pushed into pre-heating zone of furnace by an electromechanical pusher. Subsequently material passes through heating & soaking zones in the re heating furnace. The heated material is drawn out at a temperature of 1200-1250 oC and fed to rolling mill. After rolling, the rolled product is kept on the cooling bed from where it is sent to storage where bunching & bundling is done before dispatch. 2.3 Scale losses Scale losses (ie. loss of material due to burning of the top layer of the steel ; calculated as difference of material at input of furnace and finished product) vary depending upon quality and the size of raw material being used. Scale losses for various types of input materials vary between 5 to 7%. Annual average of scale loss is about 6%.
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2.4 Process flow diagram & major unit operations
Rolling
Cooling Bed
Storage
Dispatch
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ENERGY & UTILITY SYSTEM
3.1 Energy Sources Consumption & Costs Energy sources of the plant may be broadly categorized as electricity & fuel. Electricity is being consumed in motors of rolling mill, coal crusher, blowers, fans, pumps & lighting. Presently fuel being used in reheating furnace is pulverized coal. Previously FO was being used as fuel in re-heating furnace. Main reason of shifting from FO to coal is low operating cost of fuel in the furnace. FO was being purchased at rate of about Rs.14,500 per kL ( Gross Calorific Value 10200 Kcal /Kg) whereas coal is being purchased at rate of about Rs. 5200 per ton ( Gross Calorific Value 6,700 Kcal / Kg). Annual energy (electricity + fuel) cost of the plant during year 2003 was Rs. 33 lacs. During year 2003 about 6.40 lac units of electricity was purchased form PSEB. Average annual fuel consumption (average of year 2001-2003) in furnace was about 108 kL . 3.2 Utility System Steel re rolling requires heating of raw material in reheating furnace up to temperature of about 1180 oC for processing it in the rolling mill. Utilities of the plant may be categorized as Thermal Utilities & Electrical Utilities. These utilities are discussed below in detail. 3.2.1 Thermal Utilities Thermal utility installed in the plant is Reheating Furnace which is discussed below. Reheating Furnace Reheating furnace installed is of local make without a recommended standard fuel consumption parameter. In past the furnace was being operated on Furnace Oil (FO) but currently it is being operated on pulverized coal. Fuel cost is the main reason of shifting from FO to coal. A coal pulverizing plant, consisting of a coal crusher (to pulverize the coal) and a blower (to convey pulverized coal from hopper to furnace), has been installed to supply pulverized coal to furnace. Coal firing system is very crude and there is no mechanism to control air fuel ratio. Also there is no temperature control system to control/maintain desired furnace temperature in the different zones of the reheating furnace. There is no recuperator provided to recover heat from exiting flue gases. Furnace insulation is poor due to which skin temperature was found much higher than recommended values. Specific fuel consumption of the furnace is about 85 kg/ton.
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3.2.2 Electrical Utilities Electrical utilities of the plant consist of Transformer, Motors, Capacitors & Lighting. These utilities are discussed below. Transformer A 500 kVA transformer has been installed to step down the incoming 11 kV supply of PSEB to operating voltage of 433 V. The LT side of the transformer is connected to the bus bar of the main LT panel which supplies power to different sections.
Motors Motors are being used as drives to various equipments. Major motors and their rated power consumption is given below: Main mill motor Furnace pusher motor Coal crusher motor Blower motor 450 HP 20 HP 40 HP 12.5 HP
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DATA COLLECTION & ANALYSIS
Introduction Data collection & analysis was done with specific objective of assessing energy performance of various equipments/utilities and to evaluate specific energy consumption per ton of output at RSRM. Both Primary and secondary data were collected for analyzing the Specific Fuel Consumption at RSRM. The secondary sources included : catalogues of various equipments / machines, log books maintained at the plant and available technical literature. Primary data was collected based on the actual field measurements during the audit study. Furnace Both direct & indirect methods were used to calculate the efficiency of reheating furnace . It was found to be 22 % (by heat loss method indirect method) and 25.7 % by the direct method. Data collected and measurements taken on furnaces is given in Data Sheet -4.1. Calculation of furnace efficiency has been provided in Calculation Sheet 4.1. Factors affecting furnace efficiency and methods to improve efficiency are discussed below: Excess air level Every fuel needs a specified quantity of stoichiometric air for combustion. In actual practice, since mixing of fuel with air is never perfect, a certain amount of excess air is always needed to complete the combustion and ensure the release of entire heat contained in the fuel. Too much of excess air results in excessive heat loss as the superfluous air does not take part in combustion but carries away valuable heat to the atmosphere from the furnace. Besides, surplus air lowers the furnace temperature and thereby resulting in lowering the heat transfer rate, and also the combustion efficiency. Likewise, if the excess air is too less than the optimum quantity, combustion would be incomplete again ,resulting in overall low efficiency. This also leads to the formation of gases like carbon monoxide etc. in the flue gases and the total heat content of the fuel is not released in the furnace. In the existing system there is no provision to control the excess air level. Desired excess air level in pulverized coal fired furnaces is 15-20 %. Excess air level in furnace was found to be 68% . Exit flue gas temperature Exit flue gas temperature of furnaces was found between 700 - 750 oC. This flue gas may be used to pre-heat the combustion air which would result in reduced fuel consumption and increased furnace efficiency.
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Furnace skin temperature Skin temperature of furnace at various zones was measured to find the heat loss due to radiation. Average surface temperature of the furnace was found to be 168 oC while desired surface temperature is about 70oC. Surface temperature of different zones/locations is tabulated below: Average surface temperature - Roof Average surface temperature - Side Wall 1 Average surface temperature - Side Wall 2 Average surface temperature - Charging side Average surface temperature - Burner side 105 108 120 165 240
o o
C C o C o C o C
Main reason of high surface temperature is degraded/poor insulation provided for construction. The furnace wall is 17 thick having 13.5 of insulation brick, 2.5 of tiles and 1 of mud backed by mild steel plate. The skin temperature and hence radiation loss may be reduced by replacing the existing insulation by better quality (low thermal conductivity) refractory/insulation bricks. Refractory/insulation details have been provided in next chapter. Furnace operating temperature & Stock temperature Operating temperature of furnace in soaking zone was checked by a optical pyrometer and was found to be about 1400 oC. Stock temperature at furnace discharge was measured to be 1250-1300 oC. Desired stock temperature for rolling is about 1180 oC for which furnace temperature in soaking zone may be kept at about 1225 oC. Presently there is no temperature control system installed to monitor and control the furnace temperature. Controlling the furnace temperature is very important because at higher operating temperature associated losses would also be higher. Apart from reduction in fuel consumption other benefit of controlling furnace temperature is the reduction in scale losses which would result in increased yield/productivity of the mill. Specific Fuel Consumption (SFC) SFC of re-heating furnace was calculated based upon data supplied by management of RSRM on production and corresponding coal consumption. It was found that SFC varies between 80 to 85 kg/ton of steel produced. Various measures recommended to reduce the SFC have been elaborated in chapter 5. It is expected that after implementing the suggested technological interventions, SFC can be reduced to about 45 kg of coal per ton of material heated.
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Data Sheet 4.1 General Details Name of company Furnace Make & Year Type of furnace Type of draft Rated capacity of furnace Average production Specific heat of material Average furnace operation Annual furnace operation Fuel Details Type of fuel Fixed carbon Hydrogen content Sulfur content Oxygen content Nitrogen content Moisture content Ash content Gross calorific value Specific gravity Fuel consumption per hour Fuel consumption per day Fuel consumption per annum Cost of fuel Measured Data Ambient air temperature : (DBT) Ambient air temperature : (WBT) Initial temperature of charge Final temperature of charge Operating temperature of furnace Temp. of supply air for combustion Average Oxygen level Average CO level Exit flue gas temperature Average surface temperature - Roof Average surface temperature - Side Wall 1 Average surface temperature - Side Wall 2 Average surface temperature - Charging side Average surface temperature - Burner side Surface area -Roof Surface area -Side Wall 1 Surface area -Side Wall 2 Surface area -Front Surface area -Back Shape of opening Dia or least width D Wall thickness of furnace X Area of opening D/X Royal Steel Rolling Mills Local Pusher type Natural 30 TPD 5000 kg/day 0.12 kcal/kg/oC 10 hrs./day 300 days/annum Coal 67.30 5.40 0.80 4.62 1.16 6.47 14.25 6700 1 42.5 425 127500 5.2 27 22 27 1250 1400 27 8.5 500 700 105 108 120 165 240 16 8.94 8.94 0.77 2.17 square 35 50 1225 0.70
% by mass % by mass % by mass % by mass % by mass % by mass % by mass kcal/kg kg/hr. kg./day kg./annum Rs./kg C C o C o C o C o C % ppm o C o C o C o C o C o C
o o
m2 m2 m2 m2 m2 cm cm cm2
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Calculation Sheet 4.1 Efficiency Calculation of Furnace(s) Name of company Royal Steel Rolling Mills Furnace Make & Year Local Type of furnace Pusher type Type of draft Natural Rated capacity of furnace 30 TPD Furnace Efficiency by Direct Method Average production 5000 kg/day Initial temp. of charge before entering 27 oC furnace Final temp.of charge 1250 oC o Mean specific heat of material 0.12 kcal/kg/ C Fuel burnt 425 kg/day GCV of fuel 6700 kcal/kg Operating temperature of furnace 1400 oC Heat input 2847500 kcal/day Heat output 733800 kcal/day Furnace Efficiency 25.77 % Total losses 74.23 % Furnace Efficiency by Heat Loss Method Stoichiometric air required for 9.414 kg/kg of fuel combustion Theoretical max. CO2 18.09 % Measured O2 in flue gas 8.5 % Measured CO in flue gas 500 ppm Excess air used for combustion 68 % Corresponding CO2 10.77 % Total air used for combustion 15.82 kg/kg of fuel Heat loss due to dry flue gas 46.23 % Heat loss due to moisture in fuel 0.908 % Heat loss due to Hydrogen in fuel 6.54 % Heat loss due to moisture in air 1.07 % Heat loss due to CO formation 0.26 % Heat loss due to radiation 18.28 % Heat loss due to openings 4.65 % Total losses 77.93 % Furnace Efficiency 22.07 %
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RECOMMENDATIONS FOR ENERGY EFFICIENCY IMPROVEMENT
Based on the data analyzed from both primary & secondary sources it was concluded that reheating furnace is the most potential area for improving Specific Fuel Consumption at RSRM . Suggestions/recommendations proposed to improve SFC at RSRM consists of installation of recuperators, temperature control system, burners & change of insulation/ refractory. The Energy Conservation Measures (ECMs) envisaged with simple payback period calculations are elaborated in subsequent pages of this chapter. The implementation costs for these ECMs has been assessed based on quotations collected from potential suppliers. A summary of recommendations is presented below in a tabular form.
Recommendation Replacement of burners Installation of recuperator Installation of temperature controller Replacing refractory & insulation
Annual saving Coal (Tons) Rs. (Lac) 16 0.84 15.5 0.81 18 0.96 48 2.48
Investment Rs. (Lac) 3.00 3.00 3.50 7.50
Payback Period (Months) 43 44 44 36
It is important to note that apart from the energy savings, the energy efficiency measures would also result in reduction of scale losses. Presently the average scale loss is 6%. It is expected that there would be at least 1-2 % reduction in scale loss by maintaining optimum desired furnace temperature.
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ECM 5.1
Replacement of burners/combustion system to optimize excess air level in furnace
Existing System In the existing system there is no provision to vary air/fuel flow rate and control the excess air level. Pulverized coal is pneumatically conveyed to furnace by a 12.5 HP blower through a pipe and fed at fixed flow rate irrespective of load on the reheating furnace. Excess air level in furnace was measured and found to be 68%. Optimum desired excess air level for combustion of pulverized coal is 15-20 %. Proposed Intervention It is proposed to replace the existing combustion system with self proportionating burner to minimize excess air level and corresponding dry flue gas loss. The proposed system consists of a motorized butterfly valve for air/fuel control. Feedback impulse signal is taken from the temperature controller. After the set temperature is achieved, flow of both air and fuel is reduced. Saving in fuel on account of reduction in dry flue gas loss has been estimated to be 16 Tons per annum. Corresponding monetary saving would be about Rs.0.84 lac per annum. Detailed calculation is provided below.
Excess air being used for combustion Corresponding dry flue gas loss Optimum desired excess air level ( max ) Corresponding dry flue gas loss Reduction in dry flue gas loss Hence saving in fuel consumption Annual fuel consumption Fuel saved per annum Cost of fuel Annual monetary saving Investment Cost of combustion system Payback period 68 46.2 20 33.50 12.73 12.73 127500 16228 5.20 0.84 3.00 43 % % % % % % kg/annum kg Rs./kg Lac Rs. Lac Rs. Months
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ECM 5.2
Installation of recuperator in furnace
Existing System Exit flue gas temperature of furnaces was measured and found between 700 750 oC. No recuperator has been installed to recover heat from flue gases for preheating the combustion air for the reheating furnace. Proposed Intervention It is recommended to install a recuperator so that heat of flue gases may be recovered for pre-heating combustion air. Installation of recuperator also helps in increasing flame temperature which improves combustion and increases heat transfer efficiency. Combustion air temperature of 300 oC can be achieved by installing the recuperator. Annual fuel saving on this account has been estimated to be about 15.5 Tons of coal. Corresponding monetary saving would be Rs. 0.81 lac per annum. Detailed calculation is shown below.
Average exit flue gas temperature Temp. of supply air for combustion in existing condition Temp. of supply air for combustion after installation of recuperator Rise in supply air temperature Total air used for combustion @ 20% excess air Fuel firing rate Mass of air supplied for combustion Heat recovered from flue gas Corresponding saving in fuel consumption Percentage saving in fuel consumption Average furnace operation Annual saving in fuel Cost of fuel Annual monetary saving Investment on installation Payback period 700 27 300 273 11.3 42.5 480 34804 5.19 12.22 10 300 15584 5.20 0.81 3.00 44
o o
C C o C
o
kg/kg of fuel kg/hr. kg/hr. kcal/hr. kg/hr. % hrs/day days/annum kg/annum Rs./kg Lac Rs. Lac Rs. Months
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ECM 5.3
Minimizing radiation losses by improving insulation
Existing System Average skin temperature of furnaces was found to be about 148 oC , resulting in higher radiation losses. Desired surface temperature for furnace is about 70 oC. Radiation loss for furnace was found to be 18%. Proposed Intervention It is proposed to improve furnace insulation by changing refractory/insulation to reduce the radiation loss and heat-up time. Apart from reducing radiation losses it would also result in reduced startup time. Proposed refractory and insulation details are tabulated below:
Thickness of refractory lining (mm) Soaking zone Heating zone Hearth High Alumina Bricks 88% High Heat Duty Fire Bricks (IS-8) Insulation Brick Side Wall High Alumina Bricks (45-50% Alumina) High Heat Duty Fire Bricks (IS-8) Light fire bricks Ceramic fibre 115 230 190 230 190 75 230 190 230 119 75
Pre-heating zone 230 190 230 119 75
Annual fuel saving by improving insulation has been estimated to be about 48 tons. Corresponding monetary saving on this intervention has been estimated to be about Rs. 2.48 lac per annum. Detailed calculation is shown below.
Saving on account of reduced radiation losses Surface area of furnace Existing average surface temperature of furnace Surface temperature of furnace after providing lining Radiation loss at existing condition Radiation loss after providing lining Reduction in radiation loss ie. Saving in fuel consumption Average fuel firing rate Average furnace operation Annual saving in fuel Cost of fuel Annual monetary saving Saving on account of reduced furnace startup time Time required to heat up furnace in existing condition Time required to heat up furnace after changing refractory/insulation
36.8 148 70 18.28 5.92 12.36 42.5 10 300 15760 5.20 0.82 45 20
m2 o C o C % % % kg/hr hrs/day days/annum kg/annum Rs./kg Lac Rs. minutes minutes
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Fuel consumption to heat up existing furnace Fuel consumption to heat up after changing refractory/insulation Saving in fuel per day Annual saving in fuel @ 300 days/annum Corresponding annual monetary saving Total monetary saving Investment Cost of changing refractory/insulation Payback period
190 84 107 31970 1.66 2.48 7.5 36
kg kg kg./day kg./annum Lac Rs. Lac Rs. Lac Rs. Months
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ECM 5.4
Installation of temperature control system
Existing System Presently workers/furnace operator just observe the color of heated material before taking it out of furnace for rolling. The decision is entirely based on their experience. There is no temperature indicator to monitor furnace/stock temperature. No control system has been installed to control working temperature of furnace. Operating temperature of furnace was found about 1400 oC while desired operating temperature is about 1180 oC. Proposed Intervention An automatic low & high firing temperature control system may be installed in furnace to control the operating temperature. After installing the controller, operating temperature can be maintained at 1180 oC. Annual monetary saving on this account has been estimated to be about Rs. 0.96 lac. Detailed calculation is provided below.
Saving on account of heating the stock Existing average working temperature of furnace Working temperature of furnace after installing controller Average production per day Saving in energy by reduced operating temperature Average furnace operation Annual saving in fuel Saving on account of reduced flue gas loss Average fuel firing rate Total air used for combustion @ 20% excess air Mass of air supplied for combustion Heat content of flue gases at existing condition Heat content of flue gases after installing controllers Equivalent saving in energy Annual saving in fuel Total fuel saving Cost of fuel Annual monetary saving Investment Cost of control system Payback period
1400 1180 5000 132000 300 5910 42.5 11 480 175038 146991 28047 12558 18469 5.20 0.96 3.5 44
C C kg/day kcal/day days/annum kg/annum

o
kg/hr. kg/kg of fuel kcal/hr. kcal/hr. kcal/hr. kcal/hr. kg/annum kg/annum Rs./kg Lac Rs. Lac Rs. Months
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Addresses of Suppliers
Combustion control systems Temperature control systems Refractory& Insulation Recuperator Furmat Engineers (India) Pvt. Ltd. Plot No. 423 Village :Jonapur, Mehrauli Delhi - 110047 Tel: +91-11-25880402, Fax: +91-11-25882109 E-mail: furmat@indiatimes.com Ubbi Engineering Works M-31, Shyam Nagar Khyala Gram Delhi Tel: +91-11-26658246 Mercury Electricals 21/32 West Patel Nagar New Delhi - 110008 Tel: +91-11-51207934 Lloyd Insulation (India) Ltd. Kalkaji Industrial Area New Delhi - 110019 Tel: +91-11-26430746, 26430747 Fax: +91-11-26478601 E-mail:lloyd@del2.vsnl.net.in
IREDA Loan Application Form Lakshmi Steel Rolling Mill
125
IREDA
APPLICATION FOR LOAN ASSISTANCE FOR ENERGY EFFICIENCY & CONSERVATION Under Project, Equipment & ESCO Financing Schemes
(A Govt. of India Enterprise) Core 4-A, East Court, India Habitat Centre Complex, 1st Floor, Lodhi Road, New Delhi 110 003. Tel : 24682214-21 Fax : 011 24682202
E-mail: mdireda@rediffmail.com
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Date of loan application: 01.10.2004

Tick scheme under which loan is being sought Project Financing Equipment Financing
1.0 PROJECT TITLE (In block letters) : IMPROVING ENERGY EFFICIENCY OF THE REHEATING FURNACE AT LAKSHMI STEEL RE-ROLLING MILLS , MANDI GOBINDGARH , PUNJAB , INDIA . 1.1 Objective of the Project: TO IMPROVE ENERGY EFFICIENCY IN REHEATING FURNACE THROUGH TECHNOLOGICAL UPGRADATION / INTERVENTIONS .
1.2 Brief description of the project : (Process, Technology, special features and specific advantages)
Energy audit of Lakshmi Steel Rolling Mills (LSRM) was carried under the UNEP - World Bank Program to address the most critical barriers (financial & technological) of energy efficiency in steel re-rolling sector. The main area identified for improving energy efficiency was reheating furnace of the mill. It is proposed to improve specific fuel consumption of the re-heating furnace by installing retrofits like temperature control system, waste heat recovery system (recuperator) to preheat combustion air, improved combustion sytem/burner to optimize excess air level to reduce dry flue gas losses and improving insulation to minimize radiation losses. These interventions would also result in reduction of scale losses which would improve the productivity of the mill. For details please refer energy audit report.
2.0 PARTICULARS OF APPLICANT 2.1 Name (In block letters) MILLS 2.2 Address (with pin code) (Regd. Office & Admn. Office/ : : LAKSHMI STEEL RE-ROLLING : G.T. Road , Opp. Power House, Khanna - 147301 Disst. Ludhiana, Punjab
2.3 Telephone : 91-1628-226415, 226416 2.4 Fax : 91-1628-507020 2.5 Email ID : lakshmisteel@rediffmail.com 2.6 Website address : NA 2.7 Date/Place of Incorporation : 22-02-1971 2.8 Date of commencement of business : 16-05-1971 2.9 Name of the Group, the company belongs to: NA 2.10 Name & Designation of the Chief Executive : Mr. Vinod Vashisht (Prop.)
Head Office Separately)
127
(Also give the names and attach Bio-data of Key Executives of the Company )
2.11
S.No. 1. a) Share Holding pattern of the company (current as well as proposed): Name of Proprietor Mr Vinod Vashisht Pan No. AAHPV5203D Net Worth Rs 97 Lac % of Share 100
b) Share Holding of the Promoters/Directors/their relatives, friends & associates in the applicant company: S.No. Name of Promoter/ Promoter Company/ Promoter Directors/ NRI etc. NA No. of Shares Value of Share % of Share -
c) Details of investment by applicant company in the share capital of other Body Corporates: S.No. Name of Company where investment has been made NA No. of Shares Value of Share % of Share -
2.12 2.13
List of Associated/ Sister/Group Companies : NA
Name & Designation of Authorised Dealing Officer : NA (Enclose authorisation documents and attested signature, if applicable) 2.14 Constitution : Proprietorship
(Please specify whether Public/Pvt. Ltd. Co., Co-operative Society/ NGO/Trust/Society)
a) Kindly enclose copies of Memorandum & Articles of Association/ Certificate of Commencement of Business/By-laws/Registration Certificate/Certificate of Incorporation etc. as applicable to the applicant. b) Indicate Clause No. of Memorandum & Articles of Association/ Bye-laws to Undertake the Project and to borrow the loan. c) Enclose Published audited Balance Sheet and Profit and loss account for the past three years of the Applicant/Borrower
company/ firm.
d) Boards resolution to undertake the Project, if applicable.
128
e) Certificate by a Chartered Accountant indicating the net worth and borrowing capacity.
2.15 for details) Rebates/Concessions sought for (refer to IREDAs Financing guidelines a) Due to Category of Borrower (specify): NA b) Due to Location of the project (specify): NA 2.16 2.17 CRISIL/ICRA/CARE Credit rating, or any other rating, if available: NA Sector : Private
(Please specify whether Public/Joint/Private/Co-operative)

Size (Small scale/Medium scale/ Large scale / others) : Small Scale
2.18
2.19 2.20 2.21
Date/Place of Incorporation/ Registration: 22.02.1971 Date of Commencement of Business: 16.05.1971 : Current Activity/Business Lakshmi Steel Rolling Mill (LSRM) is engaged in manufacture of steel MS flats. Raw material being used for rolling consists of steel scraps of various types like ship breakings, rejected rails etc. Installed Capacity of the mill is 12000 MT per annum. Average Capacity Utilization (for last 3 years) of the mill is (20%) 2300 MT per annum.
(Please provide a small write up along with details of products, Licensed capacity, existing installed capacity, utilisation etc. for the last three years. Also enclose the Outlook/Forecast for the sector/ industry from any independent agency, if available)
2.22 Whether listed on stock exchanges : No
(give the name of exchange, current quote and 52 weeks high/low for the stock)
2.23 Management Structure Bio-data covering followings Name: Date of Birth: Fathers Name: Present Address: : Give the names of Directors and their parameters: Mr. Vinod vashisht 18-07-1953 Sh. Ramesh Chander Vashisht Lakshmi Steel Rolling Mills
129
G.T. Road , Opp. Power House Khanna , Punjab Permanent Address: Lakshmi Steel Rolling Mills G.T. Road , Opp. Power House Khanna , Punjab
Telephone No.: 91-1628-226415, 226416 E-mail ID: lakshmisteel@rediffmail.com AAHPV5203D PAN No.: Educational Qualification: Graduation Experience Details (under headings Period, Company, Designation, Nature of Work) 20 Years experience of managing Steel Rolling Mill Directorship in boards of other companies: NA Special Awards/Achievements: NA Membership of other organisations/ institutions: President AISRA (All India Steel Re-rollers Association), Chairman Golden Grain Club. 2.24 Promoters Details : Give the details of Promoters/ PromoterDirectors/ Promoter Companies covering followings parameters: NA Name of Promoter: Net Worth (Rs. In Lakhs): Available Liquid Cash (Rs. In Lakhs): Equity Shares (both face and market value) (Rs. In Lakhs): Unsecured Loans given (Rs. In Lakhs): Total Taxable Income (Rs. In Lakhs): :
2.25.1 Past Financial Performance
A) For Existing Applicant Companies: Kindly provide following details (Enclose Audited Balance Sheets and Profit & Loss Account of the applicant company for last three years and provisional accounts for the current year upto last quarter)
Item
Paid-up Capital Reserves and Surplus (excluding revaluation reserve) Revaluation reserve Net Worth Term Loans Working Capital Loans Other Loans Total Capital Employed
Audited Results (Amount in Lac Rs. ) Year 1 Year 2 Year 3 2003 2002 2001 67.94 82.42 73.22 NA NA NA NA NA NA 97.02 97.39 128.49 22.08 7.88 24.93 NA NA NA 6.99 7.09 30.35 97.02 97.39 128.49
Provisional Current year (NA)
130
Fixed Assets Total Assets Debt equity Ratio (Current) Debt equity Ratio (After Proposed Loan from IREDA) Debt Service Coverage Ratio (DSCR) of the Company Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Tax Paid Net Profit Earnings per share Dividend % Net Profit to Total Equity % Net Profit to Total Capital Employed Contingent Liabilities (as per the annual report) Disputed Income Tax Demand Disputed Sales Tax Demand Disputed Custom/Excise Duty Demand Guarantee issued and outstanding Other contingent liabilities
23.47 123.75 0.43 0.81 3.01 3.73 323.44 21% 10.21 NA 1.9 NA NA 3% 2% No No No No No
In addition to the applicant company, above details are also to be provided for the sister/ group concerns of the applicant company. NA B) For New Applicant Companies: Kindly provide following details for each of the promoter/sister/group companies (Enclose Audited Balance Sheets and Profit & Loss Account of the promoter companies for last three years and provisional accounts for the current year upto last quarter) NA
Item Audited Results Year 1 Year 2 Year 3 Provisional Current year
Paid-up Capital Reserves and Surplus (excluding revaluation reserve) Revaluation reserve Net Worth Term Loans Working Capital Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio (Current) Debt equity Ratio (After Proposed Loan from IREDA) Debt Service Coverage Ratio (DSCR) of the Company Current Ratio
131
Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Tax Paid Net Profit Earnings per share Dividend Return on Equity (ROE) Return on Investment(ROI) Contingent Liabilities (as per the annual report) Disputed Income Tax Demand Disputed Sales Tax Demand Disputed Custom/Excise Duty Demand Guarantee issued and outstanding Other contingent liabilities
(Also provide following details for each of individual promoter/ promoter companies) NA
Name of the Promoter/ Promoter Companies NA
Income Tax Assessment Assessed Taxable Income NA Income Tax Paid NA
Wealth Tax Assessment Wealth Wealth Assessed Tax Paid NA NA
Sales Tax Assessment Sales Tax Assessed NA Sales Tax Paid NA
Also submit IT Returns and CA Certificate for Net Worth for Promoters/Promoter Companies. NA
2.25.2 Projected Financial Performance (year 1)
Item Paid-up Capital Reserves and Surplus (excluding revaluation reserve) Revaluation reserve Net Worth Term Loans Working Capital Loans Other Loans Total Capital Employed
: Start with current financial year
1
68 NA NA 97 22 NA 7 97
2
78 NA NA 131.5 43.5 NA 10 131.5
3
76.5 NA NA 125.2 39.2 NA 9.5 125.2
Year 4
75 NA NA 118.9 34.9 NA 9 118.9
Amount in Lac Rs.

5
73.5 NA NA 112.6 30.6 NA 8.5 112.6
6
72 NA NA 106.3 26.3 NA 8 106.3
7
70.5 NA NA 100 22 NA 7.5 100

Fixed Assets Total Assets Debt equity Ratio Debt Service Coverage Ratio (DSCR) of the Company Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Tax Paid Net Profit Earnings per share Dividend % Net Profit to Total Equity % Net Profit to Total Capital Employed
132
23.5 124 0.43 3.01 3.73 323.44 21% 10.21 NA 1.9 NA NA 3% 2%
40.5 141 0.69 0.97 3.68 462.06 30% 8 NA 2.66 NA NA 3% 2%
37.5 138 0.64 1.02 3.57 462.06 30% 8 NA 3.05 NA NA 4% 2%
32 133 0.59 1.07 3.46 462.06 30% 8 NA 3.44 NA NA 5% 3%
28 129.5 0.53 1.13 3.31 462.06 30% 8 NA 3.83 NA NA 5% 3%
23 125 0.48 1.20 3.26 462.06 30% 8 NA 4.21 NA NA 6% 4%
21 122.5 0.42 1.25 3.30 462.06 30% 7.9 NA 4.50 NA NA 6% 5%
2.26 No
Have you given any corporate guarantee for any other loan/purpose:
(If yes, please provide complete details)
2.27 Convictions/Pending Litigation (against the Applicant/Group Companies and/or Main Promoters of the Applicant Company) under any (Please criminal/ economic offence or under national security laws:
provide complete details) NA
133
2.28
Whether Existing Borrower of IREDA : No If yes, please give following details: a) b) c) d) e) f) g) Name of the Project for which loan applied/sanctioned: Project No./Date of issue of Sanction Letter by IREDA: Date of signing of Loan Agreement: Amount Sanctioned (Rs.Lakhs): Amount Disbursed (Rs.Lakhs): Amount Repaid (Rs.Lakhs): Amount over due (Rs.Lakhs):
2.29
Whether any of your group company is existing borrower of IREDA: No If yes, please give following details: a) b) c) d) e) f) g) h) Name of Company Name of the Project for which loan applied/sanctioned: Project No./Date of issue of Sanction Letter by IREDA: Date of signing of Loan Agreement: Amount Sanctioned (Rs.Lakhs): Amount Disbursed (Rs.Lakhs): Amount Repaid (Rs.Lakhs): Amount over due (Rs.Lakhs):
2.30
Kindly provide details of each of the loans availed by your company from other financial institutions/banks: NA a) b) c) d) e) f) g) h) i) j) k) l) m) Name of the financial institutions/banks: Name of the Project for which loan applied/sanctioned: Project No./Date of issue of Sanction Letter: Date of signing of Loan Agreement: Amount Sanctioned (Rs.Lakhs): Amount Disbursed (Rs.Lakhs): Amount Repaid (Rs.Lakhs): Interest Rate (%) Moratorium: Repayment Period: Security given for loan: Reschedulement/ Restructuring availed, if any (give details): One Time Settlement availed, if any (give details):
2.31
Do you figure in RBI Defaulters List? : No
134
3.0
PARTICULARS OF THE PROJECT : Project Highlights 3.1.1 3.1.2 DPR and Energy Audit Report (
3.1 Enclosed)
Installed Capacity of Plant (Designed): 12000 Tonnes/annum Estimated Savings: Fuel Saving - 57.5 Tonnes of coal /annum (Unit/annum) Material Saving 23 Tonnes/annum Capacity / Utilisation Factor : 20% ( Average for 3 Audited Equipments proposed to be installed : (enclose detailed specifications, copies of quotations obtained) Combustion system, Temperature Controller, Recuperator & Insulation. (for details refer energy audit report, Chapter 5 & DPR)
3.1.3 Financial Years) 3.1.4
3.1.5
Employment Generation Man-hour for Construction
: : 1600
No. of people for operation : Nil (in this project) The EE interventions shall improve the capacity utilization of the unit resulting in productivity enhancement. However there is no additional manpower required for enhancing productivity gains.
3.2 Location Features 3.2.1 Plant Location :
: G.T.Road, Opp. Power House : Khanna : Khanna : Ludhiana : Punjab : 141401 : Tel. 91-1628-226415, 226416 Fax.91-1628-507020
Village Tehsil District State Pin Code Phone & Fax no.
3.2.2 Location Classification : NA
area/Coastal
3.2.3
(Please indicated whether Tribal Area/Backward area/Hilly area/Island/ Estuary or other)

Accessibility
Name/ Distance from nearest Tehsil/Block HQ (Km) 5 KM Name/ Distance from nearest Road Head (Km): 0 KM from GT Road
135
Name/ Distance from nearest Railway Station (Km): 5 KM from Khanna Name/ Distance from nearest Airport (Km): 70 KM from Chandigarh Airport Name/ Distance from nearest Grid/Substation: 5 KM
3.3
Name of the Equipment where Retrofit/ Modification is Proposed
Energy conservation details

Date of Installation Expected Remaining Life (Years) Designed Energy Consumption (Electrical/Thermal) KWh/Kcal per year Current Energy Consumption (KWh/Kcal per year) Expected Consumption after retrofit (KWh/Kcal per year) Expected Monetary Saving (Give calculations)
lac/annum
Furnace
22.02.1971
Highly inefficient, needs immediate replaceme nt
Non standard design
75 kg pulverised coal/Ton of material being heated
45 kg pulverised coal//Ton of material heated
8.74 (refer detailed project report)
Name/Contact Person/Phone/Fax of the Consultant Who has conducted Energy Audit
Dr. Naval Karrir, U.P.Singh. Deloitte Touche Tohmatsu India Pvt. Ltd. Tel. 91-11-55622081, Fax. 91-11-55622011 Dr. Naval Karrir, U.P.Singh, Tarun Jindal Deloitte Touche Tohmatsu India Pvt. Ltd. Tel. 91-11-55622081, Fax. 91-11-55622011
Name/Contact Person/Phone/Fax of Consultant, who has prepared the DPR
3.4
Tie-up of raw materials, electricity, water etc. for the project NA
No 3.5
Raw materials NA
Arrangements of supply :
Quantity / month -
cost/ unit (Rs.) -
Commercial Features
3.5.1 Cost currency costs
: Provide both foreign and local
(Please provide break-up in the following headings, also provide justifications for cost estimates, quotations etc.)
Cost (Rs.lakhs) Nil Nil 17 Nil Nil Nil
Item Land and Site Development
Building and Civil Works Plant and Machinery Training and Technical Know-how fee Miscellaneous Fixed Assets Preliminary Expenses
Taxes/Duties (Rs.lakhs) Nil Nil 3.40 Nil Nil Nil
Total (Rs.Lakhs) Nil Nil 20.40 Nil Nil Nil
136
Installation, Engineering, Consultancy Fee Project Management Fee Pre-operative Expenses Contingency (............%) Interest During Construction (IDC)* Margin Money for Working Capital Others Total
6.50 Nil Nil Nil Nil Nil Nil 23.50
Nil Nil Nil Nil Nil Nil Nil 3.40
6.50 Nil Nil Nil Nil Nil Nil 26.90
* Installation of EE intervention would not affect the production of the unit (LSRM). Moreover, the project would be completed within the moratorium period .
Proposed Means of Finance: Source Promoters Contribution

3.5.2
Amount NA 5.38 NA No 21.52 No NA 26.90
Fresh Equity (Please give break-up of sources) Internal Accruals (Please give break-up of sources) Unsecured/Subordinate Loans (Principal and Interest payable after repayment of IREDAs Loan) Grant/Subsidy(if any) Loan Assistance sought from IREDA Other Term Loan (Please give details like name of agency/bank, loan amount, interest rate, moratorium, repayment period and current status of sanction) Others Total
20
80
100
137
3.5.3 securities
Security Offered
: Tickmark on appropriate set of EQUIPMENT FINANCING Bank Guarantee/Pledge of FDR from Scheduled Commercial Bank State Government Guarantee Unconditional and irrevocable guarantee of All India Public Financial Institution with AAA or equivalent rating.
OPTION SET 1 SET 2 SET 3
SET 4
PROJECT FINANCING Bank Guarantee/Pledge of FDR from Scheduled Commercial Bank State Government Guarantee Unconditional and irrevocable guarantee of All India Public Financial Institution with AAA or equivalent rating. Equitable Mortgage (Mortgage by deposit of title deeds) of all immovable properties Hypothecation of movable assets, both existing and future, subject to prior charge of Banks on specified current assets Guarantees by promoters/ promoter directors and promoter companies Deposit of post dated cheques in accordance with repayment schedule of principal loan amount and interest.
Demand
Promissory Note for the amount of loan hypothecation of all movable assets acquired/ to be acquired out of IREDAs loan and Borrowers own funds under the project, both existing and future Guarantees by promoters/ promoter directors and promoter companies
Exclusive charge by way of
Deposit of post dated
cheques in accordance with repayment schedule of principal loan amount and interest.
Note: 1) All equipment financing loans (where mortgage of immovable properties either on exclusive or pari-passu or second charge basis is not stipulated) will have to be secured by additional security in the form of equitable mortgage of immovable non-agricultural properties located either in urban or rural areas (excluding waste/barren lands) belonging to promoters/directors of the borrower company and/or close relatives and friends of the promoters having market value equivalent to at least 33% of IREDAs Loan. The valuation of the property shall be arranged from any of the approved and registered valuers/architects at the cost of the borrowers to the satisfaction of IREDA and the borrower shall establish the title of such property to the satisfaction of IREDA. Alternatively, Bank Guarantee from a scheduled bank or pledge of Fixed Deposit Receipt (FDR) can be submitted. 2) In case the Borrower is loss making/having accumulated losses or individual/ partnership concerns, security of only Bank Guarantee for the amount of loan shall be accepted.
138
3) In case of Set 4, also provide the names, address, net worth (in Format attached at Annexure V) and percentage shareholding of promoter directors/ promoters companies whose personal/ corporate guarantees are proposed to be offered covering minimum 50% of paid up capital (In case of government companies, the securities of personal/corporate guarantees are not applicable). 4) Kindly note that above set of securities are only minimum and IREDA can stipulate additional securities on case to case basis taking into account the risk perception, nature of the industry and background of applicant. 3.5.4 3.5.5 3.5.6
Moratorium (Years) proposed for IREDAs Loan : 1 Loan repayment (Years) Name of Bankers
:5 : State Bank of India
3.5.7 Return against Energy: Payback of 3.1 Years (refer Detailed Project Report)
Credits/Sale price(Rs. per kWh) (Please give details/proof for the figure)
Cost of Generation : NA
(Applicable only for power generation projects Give first year cost & Levelised cost and enclose the calculations)
3.6 Performance Indicators calculations) : (enclose detailed financial
3.5.8
3.6.1 DSCR of the Project : 3.01 (for year 2003) ,and after EE Intervention 0.97 (year 1) ,1.02 (year 2) , 1.07 (year 3) , 1.13 (year 4) , 1.20 (year 5)
(For details refer DPR)
3.6.2 IRR (Financial) - of the Project Before Tax/After Tax: 19% (Tax component ignored) 3.6.3 3.7
Pay Back Period

:
: 3.1 Years (for details refer DPR)
(Enclose copies of the clearances/documents mentioned below)

3.7.1
Licenses/Permissions
empowers the
3.7.2
Relevant Article of the Memorandum of Association, that Applicant to undertake the proposed project: NA Relevant Article of the Memorandum of Association, that
empowers the
139
Applicant to borrow the loan: NA the

3.7.3
Relevant Article of the Articles of Association, that empowers Board of the Company to Borrow loans and offer Security Allotment of Resources by State Govt. Environment Clearance Forest Clearance Local Body Clearance SEB Clearance State Irrigation Deptt. Clearance
: NA : Not Required : Not Required : Not Required : Not Required : Not Required : Not Required a) EPC b) Split Packages
thereof: NA
3.7.4 3.7.5 3.7.6 3.7.7 3.7.8 3.7.9
3.7.10 Other Clearance 3.8.1 Implementation Arrangement:
3.8.2
Implementation Schedule
Event Land Acquisition Finalisation of Procurement Contract Completion of Civil Work Delivery of Equipments Installation of Equipment Test Run Technical Commissioning Commercial Commissioning
: (give pert chart separately)

Expected date of Completion NA Within 1 week of getting loan NA Within 3 weeks of loan disbursement Within 8 weeks of loan disbursement Within 9 weeks of loan disbursement Within 10 weeks of loan disbursement Within 12 weeks of loan disbursement
3.9
Fund Drawl Schedule

Amount Rs 26.90 Lac
:
Expected date of Drawl 15-10-04 IREDA Loan Rs 21.52 Lac Promoters Contribution Rs 5.38 Lac
3.10
Applicants Perception of the Risk Involved in the Project:
140
No. a b c d e f g h I
Risk Factors Completion Risk Operating Risk Regulatory Risk Technology Risk Fuel Supply Risk Off-take Risk Price Risk Collection Risk Diversion Risk
Risk Category (Low/Medium /High) Low Low Low Low Low Low Low Low Low
Applicants Perception of the Risk and its mitigation
* 1. The equipment supplier / manufacturer has provided guarantee on savings wrt installation of EE equipment. 2. The equipment supplier / manufacture shall get into AMC with the unit (LSRM) for monitoring the EE equipment to ensure guaranteed savings.
IREDA
APPLICATION FOR LOAN ASSISTANCE FOR ENERGY EFFICIENCY & CONSERVATION Under Project, Equipment & ESCO Financing Schemes
(A Govt. of India Enterprise) Core 4-A, East Court, India Habitat Centre Complex, 1st Floor, Lodhi Road, New Delhi 110 003. Tel : 24682214-21 Fax : 011 24682202
E-mail: mdireda@rediffmail.com
Date of loan application: 01.10.2004

Tick scheme under which loan is being sought Project Financing Equipment Financing
1.0 PROJECT TITLE (In block letters) : IMPROVING ENERGY EFFICIENCY OF THE REHEATING FURNACE AT ROYAL STEEL RE-ROLLING MILLS , MANDI GOBINDGARH , PUNJAB , INDIA . 1.1 Objective of the Project: TO IMPROVE ENERGY EFFICIENCY IN REHEATING FURNACE THROUGH TECHNOLOGICAL UPGRADATION / INTERVENTIONS . 1.2 Brief description of the project : (Process, Technology, special features and specific advantages)
Energy audit of Royal Steel Rolling Mills (RSRM) was carried under the UNEP World Bank Program to address the most critical barriers (financial & technological) of energy efficiency in steel re-rolling sector. The main area identified for improving energy efficiency was reheating furnace of the mill. It is proposed to improve specific fuel consumption of the re-heating furnace by installing retrofits like temperature control system, waste heat recovery system (recuperator) to preheat combustion air, improved combustion sytem/burner to optimize excess air level to reduce dry flue gas losses and improving insulation to minimize radiation losses. These interventions would also result in reduction of scale losses which would improve the productivity of the mill. For details please refer energy audit report.
2.0
PARTICULARS OF APPLICANT 2.1 Name (In block letters) MILLS 2.2 Address (with pin code) (Regd. Office & Admn. Office/
: : ROYAL STEEL RE-ROLLING
: G.T. Road , Township Mandi Gobindgarh Punjab-147301 Head Office Separately) 2.3 Telephone : 91-1765-500200, 257751 2.4 Fax : 91-1765-257751 2.7 Email ID : meetmrvickey@yahoo.com 2.8 Website address : NA 2.7 Date/Place of Incorporation : 29-05-1973 2.8 Date of commencement of business : 18-09-1973 2.10 Name of the Group, the company belongs to: NA 2.10 Name & Designation of the Chief Executive : Mr. Sanjeev Sood (Mg. Partner)
(Also give the names and attach Bio-data of Key Executives of the Company )
2.11
a) Share Holding pattern of the company (current as well as proposed):
S.No. 1. 2. 3.
Name of Proprietor Mr Sanjeev Sood Mr Anoop Sood Mrs Sarla Rani
Pan No. AEEPS6901E AEEPS6906D AEEPS6920B
Net Worth 3.70 4.24 12.88
% of Share 40 40 20
b) Share Holding of the Promoters/Directors/their relatives, friends & associates in the applicant company: S.No. Name of Promoter/ Promoter Company/ Promoter Directors/ NRI etc. NA No. of Shares Value of Share % of Share -
c) Details of investment by applicant company in the share capital of other Body Corporates: S.No. Name of Company where investment has been made NA No. of Shares Value of Share % of Share -
2.12 2.13
List of Associated/ Sister/Group Companies : NA
Name & Designation of Authorised Dealing Officer : NA (Enclose authorisation documents and attested signature, if applicable) 2.14
(Please specify whether Public/Pvt. Ltd. Co., Co-operative Society/ NGO/Trust/Society)
Constitution
: Partnership
f) Kindly enclose copies of Memorandum & Articles of Association/ Certificate of Commencement of Business/By-laws/Registration Certificate/Certificate of Incorporation etc. as applicable to the applicant. g) Indicate Clause No. of Memorandum & Articles of Association/ Bye-laws to Undertake the Project and to borrow the loan. h) Enclose Published audited Balance Sheet and Profit and loss account for the past three years of the Applicant/Borrower
company/ firm.
i) Boards resolution to undertake the Project, if applicable. j) Certificate by a Chartered Accountant indicating the net worth and borrowing capacity.
2.15 for details) Rebates/Concessions sought for (refer to IREDAs Financing guidelines
c) Due to Category of Borrower (specify): NA d) Due to Location of the project (specify): NA 2.16 2.17 CRISIL/ICRA/CARE Credit rating, or any other rating, if available: No
(Please specify whether Public/ Joint/Private/Co-operative)

Size (Small scale/Medium scale/ Large scale / others)
Sector
: Private
2.18
: Small Scale
2.19 2.20
Date/Place of Incorporation/ Registration: : 29-05-1973 Date of Commencement of Business: 18-09-1973
: Royal Steel Rolling Mill (RSRM)) 2.21 Current Activity/Business is engaged in manufacture of Squares. Raw material being used for rolling
consists of steel scraps of various types like ship breakings, rejected rails etc. Installed Capacity of the mill is 9000 MT per annum. Average
Capacity Utilization (for last 3 years) of the mill is (15%) 1400 MT per annum.
Please provide a small write up along with details of products, Licensed capacity, existing installed capacity, utilisation etc. for the last three years. Also enclose the Outlook/Forecast for the sector/ industry from any independent agency, if available)
2.22 Whether listed on stock exchanges : No
(give the name of exchange, current quote and 52 weeks high/low for the stock)
2.23 Management Structure Bio-data covering followings Name: Date of Birth: Fathers Name: Present Address: : Give the names of Directors and their parameters: Mr. Sanjeev Sood 22-03-70 Sh. Raj Kumar Sood Royal Steel Rolling Mills G.T. Road , Township Mandi Gobindgarh , Punjab-147301 Royal Steel Rolling Mills G.T. Road , Township Mandi Gobindgarh , Punjab-147301 91-1765-500200, 257751 meetmrvickey@yahoo.com
Permanent Address:
Telephone No.: E-mail ID: AEEPS6901E PAN No.: Educational Qualification: Graduation Experience Details (under headings Period, Company, Designation, Nature of Work) 10 Years experience of managing Steel Rolling Mill Directorship in boards of other companies: NA
Special Awards/Achievements: NA Membership of other organisations/ institutions: NA Name: Date of Birth: Fathers Name: Present Address: Permanent Address: Mr. Anoop Sood 07-11-1971 Sh. Raj Kumar Sood Royal Steel Rolling Mills G.T. Road , Township Mandi Gobindgarh , Punjab-147301 Royal Steel Rolling Mills G.T. Road , Township Mandi Gobindgarh , Punjab-147301 91-1765-500200, 257751 meetmrvickey@yahoo.com
Telephone No.: E-mail ID: PAN No.: AEEPS6906D Educational Qualification: Graduation Experience Details (under headings Period, Company, Designation, Nature of Work) 10 Years experience of managing Steel Rolling Mill Directorship in boards of other companies: NA Special Awards/Achievements: NA Membership of other organisations/ institutions: NA 2.24 Promoters Details : Give the details of Promoters/ PromoterDirectors/ Promoter Companies covering followings parameters: NA Name of Promoter: Net Worth (Rs. In Lakhs): Available Liquid Cash (Rs. In Lakhs): Equity Shares (both face and market value) (Rs. In Lakhs): Unsecured Loans given (Rs. In Lakhs): Total Taxable Income (Rs. In Lakhs): :
2.25.1 Past Financial Performance
For Existing Applicant Companies: Kindly provide following details (Enclose Audited Balance Sheets and Profit & Loss Account of the applicant company for last three years and provisional accounts for the current year upto last quarter)
Item
Paid-up Capital Reserves and Surplus (excluding revaluation reserve) Revaluation reserve Net Worth Term Loans Working Capital Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio (Current) Debt equity Ratio (After Proposed Loan from IREDA)
Audited Results (Amount in Lac Rs.) Year 1 Year 2 Year 3 2003 2002 2001 20.84 15.86 14.61 NA NA NA NA NA NA 40.66 34.56 32.11 6.98 7.12 7.18 NA NA NA 12.85 11.58 10.33 40.66 34.56 32.11 7.43 8.85 8.6 50.37 56.09 51.21 0.95 1.18 1.20 2.25 2.88 3.05
Provisional Current year (NA)
Debt Service Coverage Ratio (DSCR) of the Company Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Tax Paid Net Profit Earnings per share Dividend % Net Profit to Total Equity % Net Profit to Total Capital Employed Contingent Liabilities (as per the annual report) Disputed Income Tax Demand Disputed Sales Tax Demand Disputed Custom/Excise Duty Demand Guarantee issued and outstanding Other contingent liabilities
1.63 4.42 289.89 16% 6.26 NA 0.77 NA NA 4% 2% No No No No No
In addition to the applicant company, above details are also to be provided for the sister/ group concerns of the applicant company. NA C) For New Applicant Companies: Kindly provide following details for each of the promoter/sister/group companies (Enclose Audited Balance Sheets and Profit & Loss Account of the promoter companies for last three years and provisional accounts for the current year upto last quarter) NA
Item Audited Results Year 1 Year 2 Year 3 Provisional Current year
Paid-up Capital Reserves and Surplus (excluding revaluation reserve) Revaluation reserve Net Worth Term Loans Working Capital Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio (Current) Debt equity Ratio (After Proposed Loan from IREDA) Debt Service Coverage Ratio (DSCR) of the Company Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Tax Paid Net Profit Earnings per share Dividend
Return on Equity (ROE) Return on Investment(ROI) Contingent Liabilities (as per the annual report) Disputed Income Tax Demand Disputed Sales Tax Demand Disputed Custom/Excise Duty Demand Guarantee issued and outstanding Other contingent liabilities
(Also provide following details for each of individual promoter/ promoter companies) NA
Name of the Promoter/ Promoter Companies NA
Income Tax Assessment Assessed Taxable Income NA Income Tax Paid Nil
Wealth Tax Assessment Wealth Wealth Assessed Tax Paid NA NA
Sales Tax Assessment Sales Tax Assessed NA Sales Tax Paid NA
Also submit IT Returns and CA Certificate for Net Worth for Promoters/Promoter Companies. NA
2.25.2 Projected Financial Performance (year 1)
Item Paid-up Capital Reserves and Surplus (excluding revaluation reserve) Revaluation reserve Net Worth Term Loans Working Capital Loans Other Loans Total Capital Employed Fixed Assets Total Assets Debt equity Ratio Debt Service Coverage Ratio (DSCR) of the Company Current Ratio Turnover Capacity utilisation Profit before Depreciation and Taxes (PBDT) Tax Paid Net Profit Year 1
20.84 NA NA 40.66 6.98 NA 12.85 40.66 7.43 50.37 0.95 1.63 4.42 289.89 16% 6.26 NA 0.77
: Start with current financial year

Amount in Lac Rs.
2
25.84 NA NA 71.17 28.48 NA 16.85 71.17 24.43 67.37 1.72 0.79 4.35 543.54 30% 6.13 NA 0.79
3
24.84 NA NA 65.37 24.18 NA 16.35 65.37 21.13 63.97 1.60 0.83 4.23 543.54 30% 6.13 NA 1.18
4
23.84 NA NA 59.57 19.88 NA 15.85 59.57 17.53 60.47 1.47 0.88 4.18 543.54 30% 6.13 NA 1.57
5
22.84 NA NA 53.77 15.58 NA 15.35 53.77 14.03 56.97 1.32 0.93 4.09 543.54 30% 6.13 NA 1.96
6
21.84 NA NA 47.97 11.28 NA 14.85 47.97 10.5 53.42 1.17 0.99 4.31 543.54 30% 6.13 NA 2.34
7
20.84 NA NA 42.17 6.98 NA 14.35 42.17 8.03 51.87 1.00 1.05 4.03 543.54 30% 6.3 NA 2.72
Earnings per share Dividend % Net Profit to Total Equity % Net Profit to Total Capital Employed
NA NA 4% 2% NA NA 3% 1% NA NA 5% 2% NA NA 7% 3% NA NA 9% 4% NA NA 11% 5% NA NA 13% 6%
2.26 No
Have you given any corporate guarantee for any other loan/purpose:
(If yes, please provide complete details)

2.27 Convictions/Pending Litigation (against the Applicant/Group Companies and/or Main Promoters of the Applicant Company) under any (Please criminal/ economic offence or under national security laws:
provide complete details) NA
2.28
Whether Existing Borrower of IREDA : No If yes, please give following details: h) i) j) k) l) m) n) Name of the Project for which loan applied/sanctioned: Project No./Date of issue of Sanction Letter by IREDA: Date of signing of Loan Agreement: Amount Sanctioned (Rs.Lakhs): Amount Disbursed (Rs.Lakhs): Amount Repaid (Rs.Lakhs): Amount over due (Rs.Lakhs):
2.29
Whether any of your group company is existing borrower of IREDA: No If yes, please give following details: i) j) k) l) m) n) o) p) Name of Company Name of the Project for which loan applied/sanctioned: Project No./Date of issue of Sanction Letter by IREDA: Date of signing of Loan Agreement: Amount Sanctioned (Rs.Lakhs): Amount Disbursed (Rs.Lakhs): Amount Repaid (Rs.Lakhs): Amount over due (Rs.Lakhs):
2.30
Kindly provide details of each of the loans availed by your company from other financial institutions/banks: NA
n) o) p) q) r) s) t) u) v) w) x) y) z)
Name of the financial institutions/banks: Name of the Project for which loan applied/sanctioned: Project No./Date of issue of Sanction Letter: Date of signing of Loan Agreement: Amount Sanctioned (Rs.Lakhs): Amount Disbursed (Rs.Lakhs): Amount Repaid (Rs.Lakhs): Interest Rate (%) Moratorium: Repayment Period: Security given for loan: Reschedulement/ Restructuring availed, if any (give details): One Time Settlement availed, if any (give details):
2.31
Do you figure in RBI Defaulters List? : No
3.0
PARTICULARS OF THE PROJECT : Project Highlights 3.1.1 3.1.2 : DPR and Energy Audit Report
3.1 (Enclosed)
Installed Capacity of Plant (Designed): 9000 Tonnes/annum
(Unit/annum)
Estimated Savings: Fuel Saving - 60 Tonnes of coal /annum Material Saving 15 Tonnes/annum
3.1.3 financial years) 3.1.4
Capacity / Utilisation Factor : 15% (Average for 3 Audited Equipments proposed to be installed : (enclose detailed specifications, copies of quotations obtained) Combustion system, Temperature Controller, Recuperator & Insulation. (for details refer energy audit report, Chapter 5 & DPR)
3.1.5
Employment Generation Man-hour for Construction
: : 1800
No. of people for operation : Nil (in this project) The EE interventions shall improve the capacity utilization of the unit resulting in productivity enhancement. However there is no additional manpower required for enhancing productivity gains.
3.2 Location Features :
3.2.1
Plant Location
: G.T.Road, Township : Mandi Gobindgarh : Amloh : Fatehgarh Sahib : Punjab : 147301 : Tel. 91-1765-251101, 251102
Village Tehsil District State Pin Code Phone & Fax no.
3.2.2 Location Classification : NA
area/Coastal
(Please indicated whether Tribal Area/Backward area/Hilly area/Island/ Estuary or other)

Accessibility
3.2.3
Name/ Distance from nearest Tehsil/Block HQ (Km) 8 KM Name/ Distance from nearest Road Head (Km): 1 KM from GT Road Name/ Distance from nearest Railway Station (Km): 10 KM from Sirhind Jn Name/ Distance from nearest Airport (Km): 65 KM from Chandigarh Airport Name/ Distance from nearest Grid/Substation: 3 KM
3.4
Name of the Equipment where Retrofit/ Modification is Proposed
Energy conservation details

Date of Installation Expected Remaining Life (Years) Designed Energy Consumption (Electrical/Thermal) KWh/Kcal per year Current Energy Consumption (KWh/Kcal per year) Expected Consumption after retrofit (KWh/Kcal per year) Expected Monetary Saving (Give calculations)
lac/annum 6.87 (refer detailed project report)
Furnace
15.09.1973
Highly inefficient, needs immediate replaceme nt
Non standard design
85 kg of pulverized coal/Ton of material being heated
45 kg of pulverized coal/Ton of material heated
Name/Contact Person/Phone/Fax of the Consultant Who has conducted Energy Audit
Dr. Naval Karrir, U.P.Singh Deloitte Touche Tohmatsu India Pvt. Ltd. Tel. 91-11-55622081, Fax. 91-11-55622011
Name/Contact Person/Phone/Fax of Consultant, who has prepared the DPR
Dr. Naval Karrir, , U.P.Singh, Tarun Jindal Deloitte Touche Tohmatsu India Pvt. Ltd. Tel. 91-11-55622081, Fax. 91-11-55622011
3.4
Tie-up of raw materials, electricity, water etc. for the project: NA
No
Raw materials
Arrangements of supply
Quantity / month
cost/ unit (Rs.)
3.5
Commercial Features 3.5.1 Cost currency costs
: : Provide both foreign and local
(Please provide break-up in the following headings, also provide justifications for cost estimates, quotations etc.) Item Cost Taxes/Duties (Rs.lakhs) (Rs.lakhs) Land and Site Development Nil Nil Building and Civil Works Nil Nil Plant and Machinery 17 3.40 Training and Technical Know-how fee Nil Nil Miscellaneous Fixed Assets Nil Nil Preliminary Expenses Nil Nil Installation, Engineering, Consultancy Fee 6.50 Nil Project Management Fee Nil Nil Pre-operative Expenses Nil Nil Contingency (............%) Nil Nil Interest During Construction (IDC) * Nil Nil Margin Money for Working Capital Nil Nil Others Nil Nil Total 23.50 3.40 * Installation of EE intervention would not affect the production of the unit (RSRM). Moreover, the project would be completed within the moratorium period . Proposed Means of Finance: Source Promoters Contribution
3.5.2
Total (Rs.Lakhs) Nil Nil 20.40 Nil Nil Nil 6.50 Nil Nil Nil Nil Nil Nil 26.90
Amount NA 5.38 NA No 21.52 No NA 26.90
Fresh Equity (Please give break-up of sources) Internal Accruals (Please give break-up of sources) Unsecured/Subordinate Loans (Principal and Interest payable after repayment of IREDAs Loan) Grant/Subsidy(if any) Loan Assistance sought from IREDA Other Term Loan (Please give details like name of agency/bank, loan amount, interest rate, moratorium, repayment period and current status of sanction) Others Total
20
80
100
3.5.3 securities
Security Offered
: Tickmark on appropriate set of EQUIPMENT FINANCING Bank Guarantee/Pledge of FDR from Scheduled Commercial Bank State Government Guarantee Unconditional and irrevocable guarantee of All India Public Financial Institution with AAA or equivalent rating.
OPTION SET 1 SET 2 SET 3
SET 4
PROJECT FINANCING Bank Guarantee/Pledge of FDR from Scheduled Commercial Bank State Government Guarantee Unconditional and irrevocable guarantee of All India Public Financial Institution with AAA or equivalent rating. Equitable Mortgage (Mortgage by deposit of title deeds) of all immovable properties Hypothecation of movable assets, both existing and future, subject to prior charge of Banks on specified current assets Guarantees by promoters/ promoter directors and promoter companies Deposit of post dated cheques in accordance with repayment schedule of principal loan amount and interest.
Demand
Exclusive charge by way of
Promissory Note for the amount of loan hypothecation of all movable assets acquired/ to be acquired out of IREDAs loan and Borrowers own funds under the project, both existing and future Guarantees by promoters/ promoter directors and promoter companies
Deposit of post dated
cheques in accordance with repayment schedule of principal loan amount and interest.
Note: 5) All equipment financing loans (where mortgage of immovable properties either on exclusive or pari-passu or second charge basis is not stipulated) will have to be secured by additional security in the form of equitable mortgage of immovable non-agricultural properties located either in urban or rural areas (excluding waste/barren lands) belonging to promoters/directors of the borrower company and/or close relatives and friends of the promoters having market value equivalent to at least 33% of IREDAs Loan. The valuation of the property shall be arranged from any of the approved and registered valuers/architects at the cost of the borrowers to the satisfaction of IREDA and the borrower shall establish the title of such property to the satisfaction of IREDA. Alternatively, Bank Guarantee from a scheduled bank or pledge of Fixed Deposit Receipt (FDR) can be submitted. 6) In case the Borrower is loss making/having accumulated losses or individual/ partnership concerns, security of only Bank Guarantee for the amount of loan shall be accepted.
7) In case of Set 4, also provide the names, address, net worth (in Format attached at Annexure V) and percentage shareholding of promoter directors/ promoters companies whose personal/ corporate guarantees are proposed to be offered covering minimum 50% of paid up capital (In case of government companies, the securities of personal/corporate guarantees are not applicable). 8) Kindly note that above set of securities are only minimum and IREDA can stipulate additional securities on case to case basis taking into account the risk perception, nature of the industry and background of applicant. 3.5.4 3.5.5 3.5.6 3.5.7
Moratorium (Years) proposed for IREDAs Loan : 1 Loan repayment (Years) Name of Bankers
:5 : State Bank of Patiala
Return against Energy: Payback of 3.92 Years (refer DPR) Credits/Sale price(Rs. per kWh) (Please give details/proof for the figure)
Cost of Generation : NA
(Applicable only for power generation projects Give first year cost & Levelised cost and enclose the calculations)
3.6 Performance Indicators calculations) : (enclose detailed financial
3.5.8
3.6.1 DSCR of the Project : 1.63 (for year 2003) ,and after EE Intervention 0.79 (year 1) , 0.83 (year 2) , 0.88 (year 3) , 0.93 (year 4) , 0.99 (year 5) (For details refer DPR) 3.6.2 IRR (Financial) - of the Project Before Tax/After Tax: 9% (Tax component ignored) 3.6.3 DPR) 3.7
Pay Back Period

:
: 3.92 Years (for details refer
(Enclose copies of the clearances/documents mentioned below) 3.7.1 Relevant Article of the Memorandum of Association, that empowers the Applicant to undertake the proposed project: NA empowers the
3.7.3 3.7.2
Licenses/Permissions
Relevant Article of the Memorandum of Association, that Applicant to borrow the loan: NA Relevant Article of the Articles of Association, that empowers
the
thereof: NA
3.7.4 3.7.5 3.7.6 3.7.7 3.7.8 3.7.9 3.7.10
Board of the Company to Borrow loans and offer Security Allotment of Resources by State Govt.
: NA : : : : : : Not Not Not Not Not Not Required Required Required Required Required Required
Environment Clearance Forest Clearance Local Body Clearance SEB Clearance State Irrigation Deptt. Clearance Other Clearance
3.8.1
Implementation Arrangement:
a) EPC
b) Split Packages
3.8.2
Implementation Schedule
Event Land Acquisition Finalisation of Procurement Contract Completion of Civil Work Delivery of Equipments Installation of Equipment Test Run Technical Commissioning Commercial Commissioning
: (give pert chart separately)

Expected date of Completion NA Within 1week of getting loan NA Within 3 weeks of loan disbursement Within 8 weeks of loan disbursement Within 9 weeks of loan disbursement Within 10 weeks of loan disbursement Within 12 weeks of loan disbursement
3.9
Fund Drawl Schedule

Amount Rs 26.90 Lac
:
Expected date of Drawl 15-10-04 IREDA Loan Rs 21.52 Lac Promoters Contribution Rs 5.38 Lac
3.10
No. a b c d e f g h
Applicants Perception of the Risk Involved in the Project:

Risk Category (Low/Medium /High) Low Low Low Low Low Low Low Low Applicants Perception of the Risk and its mitigation
Risk Factors Completion Risk Operating Risk Regulatory Risk Technology Risk Fuel Supply Risk Off-take Risk Price Risk Collection Risk
No. I
Risk Factors Diversion Risk
Risk Category (Low/Medium /High) Low
Applicants Perception of the Risk and its mitigation
* 1. The equipment supplier / manufacturer has provided guarantee on savings wrt installation of EE equipment. 2. The equipment supplier / manufacture shall get into AMC with the unit (LSRM) for monitoring the EE equipment to ensure guaranteed savings.

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Developing Financial Intermediation Mechanisms for Energy Efficiency Projects in the Steel Re-rolling Cluster at Mandi Gobindgarh, Punjab,

INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY LIMITED

Undertake Preliminary Energy Audit Preliminary Financial Due Diligence

Identifying potential units

Secure Energy Management & Implementation commitment

Conduct Detailed Energy Audit

CHAPTER 1- INTRODUCTION 1.0 Energy Efficiency Background

extensively in the SME units environment protection.

to improve energy efficiency leading to

Structure of the Report

Loan Application Form M&V Protocol

Techno Economic Feasibility study

2 Bankable Project Report

Secure Financial Commitment

Preparation of Bankable Project

Undertake Preliminary Energy Audit Preliminary Financial Due Diligence

Identifying potential units

Secure Energy Management & Implementation commitment

Conduct Detailed Energy Audit

Observations from field visits ( walk through audits Deloitte team)

Bhambri Steel 27 Furnace Oil 10 8 40 2.5% Angles, Channels and Flats

Vivek Rerolling 5.6 Pulverized Coal 10 4 60 5% Bars

Lakshmi Steel 4 Pulverized Coal 10 2.5 65 7.5% Flats

Thakur Steel 2.9 Furnace Oil 10 2.5 40 6% Bars

Royal Steel 3 Pulverized Coal 10 3 45 5% Squares and Rounds

BANKABLE PROJECTS DEVELOPED

Detailed Project Report (DPR)

Lakshmi Steel Rolling Mills

Detailed Project Report Lakshmi Steel Rolling Mills

1.0 1.1 1.2

PROJECT OBJECTIVE : IMPROVING SPECIFIC ENERGY CONSUMPTION

SUSTAINABILITY CHECK : IMPACTS OF EE INTERVENTIONS ON ENERGY/ENVIRONMENT/ECONOMICS)

MONITORING & VERIFICATION PROTOCOL

Detailed Project Report Lakshmi Steel Rolling Mills

Detailed Project Report Lakshmi Steel Rolling Mills

Detailed Project Report Lakshmi Steel Rolling Mills

Detailed Project Report Lakshmi Steel Rolling Mills

17 6.5 3.40 26.90 5.38 21.52

Detailed Project Report Lakshmi Steel Rolling Mills

Projected Balance Sheet after implementation of EE interventions

5 73.5 112.6 30.6 8.5 112.6 28 129.5 0.53

6 72 106.3 26.3 8 106.3 23 125 0.48

7 70.5 100 22 7.5 100 21 122.5 0.42

3.01 3.73 323.44 21% 10.21 1.9 3% 2%

0.97 3.68 462.06 30% 8 2.66 3% 2%

1.02 3.57 462.06 30% 8 3.05 4% 2%

1.07 3.46 462.06 30% 8 3.44 5% 3%

1.13 3.31 462.06 30% 8 3.83 5% 3%

1.20 3.26 462.06 30% 8 4.21 6% 4%

1.25 3.30 462.06 30% 7.9 4.50 6% 5%

Detailed Project Report Lakshmi Steel Rolling Mills

Detailed Project Report Lakshmi Steel Rolling Mills

Detailed Project Report Lakshmi Steel Rolling Mills

Gas Cutting of Raw Material

Loading at Charging Pusher

Heating in Reheating Furnace at 1200-1250 oC

Hot Material Exit from Furnace

Bunching and Bundling

Detailed Project Report Lakshmi Steel Rolling Mills

Detailed Project Report Lakshmi Steel Rolling Mills

13.32 6.65 5.16 9.88 3.01 3.11 0.02

Detailed Project Report Lakshmi Steel Rolling Mills

Banking Arrangements / details