1.    COUNTRY:        INDIA

2.    FOCAL AREA :         Climate Change

3.    OPERATIONAL PROGRAMME:     OP- 5; Removal   of Barriers to  Energy Efficiency and  Energy Conservation

4.    PROJECT TITLE:        Energy efficiency improvement in Steel rerolling Sector in India

5.    TOTAL COST:        US $ 340,000

6.    PDF REQUEST:        US $ 280,000

7.    IN-KIND CONTRIBUTION:    US$ 60,000 (Government of India)

8.    REQUESTING AGENCY:    UNDP, India

9.    EXECUTING AGENCY:    Ministry of Steel, Government of India

10.    DURATION:        Twelve months

11.    PROJECT OBJECTIVE:
The primary objective of this project is to introduce energy efficient technology packages for the steel rerolling Sector of India, and thereby facilitate removal of barriers to energy efficiency and energy conservation in this sector. The PDF - B project aims at evolving suitable energy efficient technical packages through 1) designing energy efficient packages for clusters of different categories of steel rerolling mills (based upon the existing gaps between the current and expected energy efficient practices), 2) removal of key barriers, including technical and financial barriers to the adoption of the energy efficient packages, 3) identifying capacity building issues and training needs and 4) putting in place institutional mechanisms, which would facilitate in replicating the proposed packages.

12.    GLOBAL SIGNIFICANCE:  

Steel, with a global production of over 784 million tonnes per annum, is second only to cement in the world of materials. Steel in India is considered a prime mover of the modern Indian economy. Since the policy reforms in 1991, the steel industry in India has been placed in a new environment.  Steel production has increased from 14.2 million tonnes of finished steel in 1991-92 to 23.5 million tonnes in 1996-97.  The Ninth Five Year Plan (1997-2002) has envisaged an estimated demand of 38 million tonnes in the year 2001-02.

The production of steel in India is an energy and waste intensive process and requires a large consumption of raw materials These include coal, iron ore, limestone, scrap, wide range of other materials such as thermal coals, gas, furnace oil, refractories, chemicals, alloys, power, refining materials, and water. The production of 1 tonne of crude steel from iron ore generates about 1.2 tonnes of solid waste, 2.5 tonnes of CO2 and other polluting gases to the atmosphere. Therefore, the industry has an appreciable influence on society and the environment.   The global environmental concerns include air emissions and related impacts of climate change.

In the case of steel re-rolling industry in the country, a comprehensive survey was conducted in 1996.  The survey provided insight into various crucial parameters. It was found that the usage of energy (in terms of consumption of power/electricity, coal and furnace oil), the product yield, and labour productivity varied considerably from one category of steel rerolling mills to another depending upon the technology employed and level of investment.

     The proposed project is expected to lead to both direct reduction in the energy inputs such as electricity, coal, and furnace oil and indirect energy savings through improved processes for better yields (output). The estimated energy saving is approx. 30.8 PJ for a production of 10.62 million tonnes of steel. Correspondingly, about 3.6 million tonnes of CO2 emissions would be avoided every year (Please refer to Annex for details). The savings are approximately equivalent to 42% of total energy bill valued at US $ 72.2 million and about US $ 21.6 per tonne of steel, which is nearly 46% of the value addition by an average re-rolling mill unit (Annexure - 8).  As further capacity addition is envisaged in the steel sector, the impact on future GHG emission reduction and fuel savings is likely to be greater.

13.    BACKGROUND:

Steel rerolling is one of the most important segments of the steel industry. It provides employment to more than 68000 people. Due to sheltered market economy in the pre-economic liberalisation phase, this industry grew up haphazardly adopting the old conventional technologies.  However, the industry has been successful in meeting low tonnage requirements in various steel grades, sizes and shapes to a variety of customers. According to the "Comprehensive Survey on Steel Rerolling Industry", July 1996, carried out by the Organisation of Development Commissioner of Iron and Steel, the steel rerolling sector comprises 1167 (working) re-rolling mills of various sizes.  Some mills are composite {with electric arc furnaces (EAFs) and Induction Furnaces (IFs)}. The cumulative average annual growth rate from 1966 to 1996 was around 4.7%. Correspondingly, the production grew from 4.7 million tonnes (431 mills) up to 19.4 million tonnes (1167 units).

The re-rolling mills with the overall average size of 16625 tonnes per annum are scattered all over the country. The maximum concentration is in the northern and the western parts of the country. The small-scale units with an average capacity of 11,550 tonnes per annum account for 52.8% share of the total capacity. The small units of size up to 5000 TPA are most labour-intensive. Medium and large-scale mills with an average capacity of 32,050 tonnes per annum constitute the balance. The large and medium scale market segments are likely to continue with an increasing market share in the future. This is mainly as a result of the liberalisation of the economy and dismantling of the administered prices, leading to competition.

The main equipment generally used in the rolling units comprise 2-Hi / 3-Hi conventional rolling mill stands working in tandem; roughing, intermediate and finishing mills with common and multiple drives; associated auxiliary facilities such as guides, manipulators, pinch rolls, etc; cooling beds, coiling facilities, and reheating furnaces; both batch and continuous pusher type with combustion equipment like burners; and heat recovery units like recuperators.  Some of the units are using heat recovery devices like recuperators, which are of metallic shell and tube type.  The combustion system is mainly of two types.  For coal-firing, both horizontal and step grate systems are used.  Coal is fired either manually or mechanically via screw feeder systems, the latter giving higher combustion efficiency. A stationary grate coal firing system, with a forced draft is commonly used in rerolling mill furnaces in India. In oil fired reheating furnaces (RHFs), the burners used are mainly of low-air pressure type.  The industry has employed different types of  burners in RHFs, both locally made and those of imported makes.  Most of the rolling mills are of open train 2-Hi/3-Hi type having roll diameters ranging between 180 mm to 450 mm in the roughing stage.  The mill speed is in the range of 90 to 275 rpm having 2 to 6 stands.  The mechanical coupling between the mill motor and stands is either of V belt and pulley type or of speed reduction gear type.  Both the systems, however, have flywheel arrangements to take care of the load fluctuations.

The primary energy sources used in the re-rolling mills are electricity, coal or fuel oil (in the form of furnace oil, R.F.O., LSHS, and LDO). Out of the total units surveyed, about 60% of the units are using oil and 40% of the units are using coal as the main thermal energy input.  Electrical energy is used by all the units to run their motive loads. The specific thermal energy consumption in oil-fired furnaces is in the range of 45 to 85 litres per tonne of finished product. In coal fired furnaces, it is in the range of 125 to above 400 Kgs.  The specific electrical energy consumption is in the range of 100 to above 300 kWh per tonne of finished product. The average energy consumption pattern reported in the Indian rerolling mills are 180 kWh of electricity/tonne of steel (Japan: 60 to 85 kWh), 61 litres of furnace oil /tonne (Japan: 13 - 14 litres of oil for 90% hot charging at 650 C and around 26 litres for 100% cold charging), and 253 kg of coal /tonne (not used in developed countries), which is very high. The corresponding CO2 emission level in India is estimated to be 3 times higher than those of the developed countries such as Japan.  However, as the production is likely to grow, by the end of the Ninth Five Year Plan (1997-2002), this sector is expected to contribute above 15 million tonnes per annum at a capacity utilisation of 75% or more. According to several studies carried out in large number of steel rerolling mills, there is a potential scope of energy reduction through introduction of energy efficient technology packages.

Key Barriers and Project (PDF-B) Design

The steel re-rolling sector consists of small and medium units but has a large aggregate capacity. The major problem of the industry is lack of knowledge / awareness of both 'Kaizen' and 'leap frog' E3STs (energy efficient and environmentally sound technologies) as well as practices that have been introduced successfully across the globe. The means of transforming this knowledge / awareness into an operational framework is also lacking.  The major barriers to the improvement of efficiency in this sub-sector are identified as follows:
·    Low and asymmetric information base which has limited the size of technology market.
·    Low engineering, technology, innovation and R&D base.
·    Low level of human resources development;
·    Lack of access to technology & technology sharing; limited access to financial markets; weak technology market infrastructure; and limited technology commercialisation through bulk procurement, agreements, and other demand-pull mechanism;
·    Dominance of technical and financial risks in the minds of decision makers;

These barriers have led to a stage of technological regression of the industry and have, therefore, emerged as weak links between the overall national sustainable development programmes and efforts to protect the global environment. So far, the early approaches were not only undertaken in a piece-meal manner but also sporadic in nature. These efforts were broadly confined to energy audit studies of RHFs, which permitted only 10 to 15% of direct improvement.  Indirect energy efficiency improvement measures linked to improving yield and quality (to minimise scale loss, end croppings, rejections, cobbles, etc) were largely ignored.  In other countries, various technological measures were taken that reduced specific energy levels of similar rolled products by a factor of 2 to 3 times (for example, South Korea, Japan, Germany, U.K., etc.).

The preliminary assessment of some economically viable options as applicable to steel re-rolling sector in India is given below. The project will evaluate which of these options can be used singly or in combination as part of technology packages to be promoted through project efforts.

Combustion    Furnace Oil, Coal, Natural gas    ·    High efficiency recuperators, self regenerative burners, oxy-fuel burners, pulverised coal injection / cyclone combustion burners, etc.·    50-90% hot charing - Intermediate door charge furnaces in case of composite mills ·    QST (Quenching & Self Tempering) on-line process to improve material & energy efficiency and product quality.
Motive loads    Power    ·    Energy efficient drives.·    Improved mill design such as pre-stressed, 3-cone mill, etc.·    Computer aided Roll Pass Design, Virtual Rolling Mill Concept to reduce roll passes to minimum.·    Application of high efficiency rolls.·    Hot mill lubrication to reduce motive loads, etc.
Yield    Indirect material & Energy Saving    ·    Mainly through quality & process audits - reduction in mill scale, end-cutting / cropping, rolling defects, metallurgical defects, geometric defects, cobbles, etc.

    The preliminary analysis of the investments (depending upon size, mill configuration and product) shows that specific investment level is in the range of $ 20 to $ 60 per annual tonne of capacity with an average of $ 40 per annual tonne.  Cost of conserved energy (CCE in $/GJ) works out to $ 12/GJ for a specific energy saving of 3GJ/Te with a pay back of approximately 1.8 years.  Although industry, by and large, is aware of the challenges and opportunities posed by free trade and globalisation, it is not able to overcome the barriers as listed above at present.

Project Design

The project is designed to provide an effective technology interface with the steel re-rolling sector.  A multi-disciplinary team will be constituted to carry out a comprehensive energy assessment study.   This will address the totality of the issues and shall  take into account both direct and indirect measures, including shortening of the process cycle by eliminating superfluous steps which consume energy (for example on-line treatment of steel by avoiding additional heat treatment step).  In the PDF-B, a three dimensional integration approach shall be adopted: 1) removal of barriers, 2) providing effective technology interface and 3) sustainable growth & development parameters including financing.  This project approach shall help in developing  3-4 energy efficient packages  by "tailoring" the technologies to the needs by appropriate size and configuration of the steel rerolling sector in a manner that will match and provide balance-of-system so as to develop low cost integrated technology packages for the industry. These projects, including their financing through available sources, will be demonstrated as part of GEF project. Depending upon the size and number of demonstration (pilot) units selected across the country (80 to 100), the investment resources required for this demonstration phase are estimated to be of the order of US$ 40 to 60 million. Further replication across the sector will require that the barriers are removed, and the investments are successfully financed and implemented.

Various capacity building measures are proposed to be undertaken as part of this project. The Office of the DCI&S is the nodal agency for the steel rerolling sector in India. Therefore it will focus its policy framework on investments aimed at enabling unsupported replication of win/win technologies even after GEF support has ended. This will include the development of technology market infrastructure and support to commercialization through bulk procurement, negotiated agreements and so forth.

In addition to financial support from UNDP/GEF and the steel Development Fund (SDF)--a major captive source of co-financing in the Office of DCI&S, the Ministry of Steel will secure access to other funds. These will include seeking the involvement of finnacial institutions (IDBI, SIDBI, ICICI, FCI and Banks), in providing assistance for the commercialisation of both indigenous and imported technologies for wider domestic applications through venture capital funds. The Department of Science and Industrial Research also provides funding (TDB, SEETOT, and PATSER) for technology development and applications.

The Project is designed to complement the efforts for the proposed technology facilitation centre, being financed through the Steel Development Fund (SDF).  This centre is expected to provide modern equipment and test facilities, and will also function as a technology park for the steel rerolling sector.  In addition to in-house testing and evaluation of various technological options for wider dissemination in India, this centre will also provide for dissemination of technical information, meeting the training needs of the industry and developing core competence of the industry to acquire:

·    A technology;
·    A methodology to make  the technology work; and
·    An embedded knowledge and means of transforming this knowledge into operational framework;

This centre will take steps to eliminate asymmetries of information that limit the size of the technology market and also to gather information for all stakeholders which will help reduce transaction costs for technology transfer and development.

The closing phase of the project design is to evolve a suitable financing package addressing the industry's incentive structure including strategic dimensions of the process with an objective to achieve accelerated adoption of the low-cost technology package by industry (refer to 15(7))

14.    PROJECT DESCRIPTION: INCLUDING IMPLEMENTATION ARRANGEMENTS

    The PDF-B proposal aims to 1) design suitable energy efficient packages for the steel rerolling sector in India; 2) suggest measures to overcome the barriers for adoption of the proposed energy efficient packages; and 3) prepare a full project proposal for GEF for technological upgradation of the steel rerolling sector through implementing the energy efficient packages.

    The project will conduct a detailed assessment of available energy efficient technologies for steel rerolling and design the package for Indian conditions. It will identify areas of energy leaks, pollution levels, operational practices and maintenance, by conducting the detailed energy and environmental assessment of the representative steel rerolling mills. A detailed study of each key parameter for effecting energy conservation in the steel re-rolling industry would be thoroughly understood. Subsequently, the areas of capacity building and institutional needs will be recognised.

    The Ministry of Steel (MoS) will take overall responsibility for the execution of the project as per the UNDP guidelines. The project will be implemented by the Office of the Development Commissioner for Iron & Steel (DCI&S), MoS and its autonomous institutions and organisations namely National Institute of Secondary Steel Technology (NISST), Economic Research Unit (ERU) of Joint Plant Committee.

    A Project Steering Committee will be constituted by the MoS to oversee the execution of the project. The Steering Committee will be comprised of representatives from the MoS (Steering Committee Chair), cross-sectoral ministries including the Department of Economic Affairs, Ministry of Environment and Forestry, Ministry of Industry, Ministry of Coal, public/private sector organizations, the National Institute of Secondary Steel Technology under MoS, NGOs, prominent experts, and UNDP. The Steering Committee will act as the coordinator for the preparation and finalization of the project brief and full document, and as such will provide the necessary guidance and oversight to the project implementation. Individual experts will be invited to provide inputs as appropriate to specific meetings. The Steering Committee will facilitate cross-sectoral involvement from the ministerial to the private sector and community levels, review outputs, and ensure that the project strategies meet national goals and objectives.

        A National Project Director (NPD) will be appointed by the MoS with the consultation with UNDP for the supervision of the project. The NPD will be responsible for the review, monitoring and clearance of the work plan, which forms the basis for project execution. The Steering Committee will establish a Selection Sub-Committee, which will finalise the selection of the project team as per the TORs. Day-to-day co-ordination will be the responsibility of the Project Manager, contracted through this project To this end, the NPD will facilitate close co-ordination among the various line ministries, state governments, nodal departments, private sector and the participating institutions.

        A Project Management Cell (PMC) will be set up in New Delhi to carry out day to day working of the project. The PMC will be headed by a Project Manager for carrying out the PDF phase. He will be assisted by the project staff comprising of two technical and support staff. The Project Manager will maintain close interaction with the institutions associated with the line ministries. He will also facilitate the work of the collaborating institutions and consultants in the preparation of the project brief and full proposal.  The Project Manager will report to the NPD and the Steering Committee for policy directions, work plan and budget approvals.

15.    DESCRIPTION OF PDF ACTIVITIES

The proposed PDF activities are the following:

1.    Constitute a Project Steering Committee and draw up appropriate linkages with national Government, State Governments, Entrepreneurs and Financial Institutions based on stakeholders analysis. This will also involve examining the policy, administrative, technical and legal hurdles in the Steel Re-Rolling Sector of the country for commercialisation of  low cost GHG emitting technologies.

2.    Conduct a detailed energy - consumption assessment of representative steel rerolling mills with the active involvement of entrepreneurs to identify various areas of energy wastages, process deficiencies and technology gaps.  The PDF will particularly assess the present energy consumption pattern to identify the areas of energy wastages and 'tailor' the technology to the needs by appropriate size & configuration of the steel rerolling sector, in a manner that will match and provide balance-of-system with an objective to develop  low cost integrated technology packages for the sector.  The PDF will also assess the ability and willingness of entrepreneurs to adopt upgraded low-cost GHG emitting technologies. For this purpose, a small sample of representative units (20/25) will be taken.  The basic criteria of selection shall be the product range of steel re-rolling sector.  According to this, units will be selected on the basis of weightage assigned to each category such as follows:

    Rebars                        8-10 mm        10-15%
                                12-22 mm        25-30%
                                22-40 mm        15-20%                                                (50 - 65%)
    Medium Structurals                             15 - 20%
    Heavy Structurals                             10 - 15%

    With respect to size, only medium and higher capacity units will be selected for their relatively high amenability and keenness to adoption of E3STs as also for their larger capacity representation. As mentioned earlier, the small-scale segments might not survive for long due to likely intense competition and environmental regulations.  The four simplified regions will be selected.  They are Delhi (Delhi/Jaipur/Ghaziabad/Faridabad), Gobindgarh (Gobindgarh/Ludhiana), Nagpur (Nagpur/Raipur) and Chennai (Chennai / Bangalore / Hyderabad).  These regions will be serviced by the regional offices and technical institutions of the DCI&S providing necessary infrastructural and logistic support.

3.    Identify proven low GHG emitting technologies, which can be employed in the Indian context. At national and international level, the PDF will assess and review the proven, commercially viable technologies in the steel re-rolling sector.

4.    Develop integrated low-cost technology packages for the re-rolling sector in India; the capabilities of instrument, plant and machinery manufacturers in the country for providing the identified components/technology packages will be assessed and reviewed so as to ensure an easy availability of the same for sustainable adoption of identified low GHG emitting technologies.

5.    Assess the financial needs of technology upgradation/integrated low-cost technology packages required for the steel rerolling sector.  Develop suitable linkages as well as financial mechanism for early adoption of the technology package with non-GEF sources such as IFC, ICICI, SIDBI, IFCI, and Banks; DSIR funds (TDB, PASTER, and SEETOT) and the Steel Development Fund - a major captive source of financing steel-related developmental projects in public and private sector. It is expected that the GEF support to these demonstration activities will be structured as "contingent financing" given the "win-win" nature of the technologies being targeted.

6.    To review the rules, regulations and norms including industrial policies of the State Governments for facilitating and encouraging the entrepreneurs and the investment institutions in adoption of  low-cost GHG emitting technologies.

7.    Study the whole gamut of incentivisation of efforts at all stakeholders' levels, both in monetary and non-monetary terms, for accelerated diffusion of the technology package in the steel rerolling sector.  The former includes rewards, trophies, prizes and other awards, which will be appropriately sized to the effort and large enough to impact behaviour.  The latter category is supposed to include voluntary agreements (VAs) between government and industry; appropriate fuel pricing, web-based and resident training modules; institutionalising if necessary collaborations for win-win solutions; promoting technology acquisition reforms; and evolving directives, instructions and guidelines.  The two dimensions of the incentivisation process, that is, 'strategic dimension' and 'realisation dimension' will be adequately addressed in the study with an objective to bring about structural change in industrial culture and environment to achieve the desired programmatic gains in energy efficiency on a sustainable basis.

8.    Analyse specific measures to eliminate these barriers (ref to Barriers and Project Design). The assessment of how to best overcome some of these barriers will be developed into a strategy to ensure financial sustainability of the investment project beyond its lifetime. The analysis will include an assessment of consumer acceptance of the proposed project package.

9.    Estimate the scope for win/win technologies in India that are not being implemented due to existence of barriers.

10.    Estimate the potential contribution of these measures of technology upgradation towards abating the emissions of greenhouse gases.

11.    Formulate and develop a detailed project proposal, the implementation of which will remove the identified barriers permanently, where the approach can sustain and replicate itself.

12.    Determine the incremental and base-line costs of the project as per the GEF guidelines; Estimate the overall financial requirements, sources of finance and the time horizon;

13.    Assess the sustainability of win/win energy-efficient technologies after GEF support has ended: the capabilities of instrument, plant and machinery manufacturers in the country for providing the identified components/technology packages will be assessed and reviewed so as to ensure an easy availability of the same for sustainable adoption of identified technologies.

14.    Finalise project brief based on detailed stakeholder consultations.

The project preparation to date has been funded by the Organisation of DCI&S.  The recently completed UNDP/GEF ALGAS project identified steel rerolling sector as one of the thrust areas for mitigation of GHG emissions. The project concept has been identified keeping in view the GEF operational project guidelines and the thrust areas stipulated in Government of India policies.

14.    PDF B BLOCK OUTPUTS

PDF outputs will be as follows:

a)    Report on assessment of the state of technologies for the steel rerolling sector;
b)    Energy efficient packages; equipment / design packages for Indian steel rerolling mills; and
c)    A Full proposal or a project brief for submission to GEF.

14.    ELIGIBILITY:  

    This proposed project is responsive to the goals of GEF Operational Programme No.5 "Removal of Barriers to Energy Efficiency and Energy Conservation". The PDF phase will facilitate successful implementation of energy efficient package in steel rerolling sector. India ratified the UNFCCC in November, 1993.

15.    NATIONAL LEVEL SUPPORT:  

    The necessary support will be available from the Ministry of Steel, SAILCON, DCI&S, through budgetary allocations. Additional funding as appropriate will be identified as a part of the PDF activity in conjunction with determination of incremental cost.

    This proposal is fully consistent with the national priorities of the Government of India towards the adoption of energy efficient technologies for reducing pollution.  A major thrust of this goal is promotion and dissemination of sustainable viable technologies throughout India.  This project is also consistent with the UNDP's concept of sustainable human development, which supports the demonstration of sustainable technological interventions such as those proposed under this project.

16.    JUSTIFICATION

    This  PDF Grant is necessary to undertake activities to ensure that  the fianl  proposal is fully consistent with the GEF Operational Strategy for climate change.  The PDF phase will  identify fully the barriers; analyse how they can best be removed; undertake assessments of parameters which contribute to the achievement of targeted goals; obtain the involvement of the private sector and government; and determine financial sustainability and consumer acceptance.  It will also ensure that a large number of stakeholders are consulted and included in the project and their feedback is incorporated into the project's design.  The institutional arrangements for the larger project will need to be clarified through the PDF work.  In other words, the development of the full project will be guided and determined by the outcome of those activities.

    Given its promotion of self-sustaining practices, this project has the potential to significantly assist the Government of India assist in reducing its emissions of GHGs on a replicable basis.  

17.    Budget

The proposed estimated budget for the PDF-B activity is US $ 340,000.  Out of this, a grant of US $ 280,000 is requested from UNDP/GEF.  The break-up is given in the following table. All costs are in US $

S. No    Budget head    Total Budgetary requirements    PDF-B Grant sought
    Project Personnel       
1.    International Experts*    45,000     45,000
2.    International travel    33,000    22,000
3.    Local travel     39,000    25,000
    National professionals       
4.    Local Consultants/Field Experts    67,000    42,000
5.    National project personnel    40,000    40,000
6.    Subcontracts: survey of STEEL REROLLING units in the country    50,000    40,000
7.    Seminars & Workshops     50,000    50,000
8.    Reporting costs    10,000    10,000
9.    Sundry     6,000     6,000

    Total     340,000     280,000
Basis of the various estimates is provided in Annexure - 9

 For Full Details Click
1. http://www.gefonline.org/RAMON/Bilateral/2000%20July/UNDP/India%20Energy%20Steel/revised%20proposal. doc

2. http://www.gefonline.org/projectDetails.cfm?projID=1240
   
3. http://www.gefonline.org/ProjectDocs/Climate%20Change/India%20Removal%20of%20Barriers%20to%20Energy%