DRP On Setting Up A Steel Scrap Shredding Unit - Draft Report

Detailed project report on
setting up a steel scrap

shredding unit (Draft
report)
August 2022
Contents
1 Availability of ferrous scrap in India and Maharashtra ..................................................................................................... 3
1.1 Ship-breaking industry................................................................................................................................................... 5
1.2 Railway scrap industry .................................................................................................................................................. 8
1.3 Consumer durables scrap industry .............................................................................................................................. 11
1.4 Automotive scrap industry ........................................................................................................................................... 14
1.5 Others ......................................................................................................................................................................... 17
2 Assessment of steel scrap trade....................................................................................................................................... 19
3 Technical appraisal for proposed plant............................................................................................................................ 21
3.1 Project overview (Some inputs to be taken from the client)......................................................................................... 21
3.2 Capacity of proposed plant .......................................................................................................................................... 22
3.3 Infrastructure and site.................................................................................................................................................. 26
3.4 Land details (to be provided by the client) ................................................................................................................... 26
3.5 Raw material ............................................................................................................................................................... 26
3.6 Provisions of central and state pollution control boards .............................................................................................. 27
3.7 Company promoters .................................................................................................................................................... 30
4 Impact of key policies ........................................................................................................................................................ 31
4.1 Key objectives of steel scrap recycling policy .............................................................................................................. 31
4.2 Key objectives of the national vehicle scrappage policy .............................................................................................. 32
5 Policy and incentives relevant to plants in Maharashtra ................................................................................................ 34
6 Financial assessment ........................................................................................................................................................ 40
6.1 Key assumptions ......................................................................................................................................................... 40
6.2 Financial feasibility of the project ................................................................................................................................ 42
6.3 Financial statements ................................................................................................................................................... 46
6.4 Annexure – Revenue and cost estimate details .......................................................................................................... 49
6.5 Key monitorables ........................................................................................................................................................ 52
2
1 Availability of ferrous scrap in India and Maharashtra
India replaced Japan as the world’s second-largest steel producer in fiscal 2018. India produced 106.5 million
tonne (MT) of steel in fiscal 2018, while Japan produced 104.3 MT. As of fiscal 2022, production of finished steel
and crude steel is estimated at around 112 MT and 120 MT, respectively, in the country.
Iron and steel scrap is one of the key raw materials for steel-making. It improves efficiency, minimises production
cost and reduces emissions. Thus, availability of the right quantity and quality of scrap is one of the critical factors
in the growth of India’s steel industry. Demand for ferrous scrap from the steel-making industry in the country rose
to 16.3 MT in fiscal 2022 from 14.4 MT in fiscal 2018.
India imported about 5 MT of ferrous scrap in fiscal 2022, accounting for about 31% of the total scrap requirement
by the steel-producing industry in the country. The remaining demand was met by domestically generated scrap.
In India, sources of scrap generation primarily include home scrap, new scrap and old scrap.
• Home scrap: Scrap generated at various stages during the manufacturing of steel/steel products in steel plants
• New scrap: Scrap generated in downstream processing during manufacturing and fabrication of steel products,
such as auto components, white goods, machine tools and equipment. It is also called prompt or industrial
scrap
• Old scrap: Scrap generated from discarded end-of-life steel products such as appliances, machinery, buildings,
bridges, ships, cans, railway coaches and wagons. It is the scrap steel that is extracted when steel products
have served their useful lives. End-of-life vehicles (ELVs) also fall under this category
At 50-55%, new scrap accounted for the largest share of the total scrap generated in the country in fiscal 2022.
India generated about 6.3 MT of new scarp in fiscal 2022, followed by old scrap (3.5 MT) and home scrap (2.3 MT).
Total scrap generated in India, by category

Total scrap generated (domestic) in FY22: 12.1 MT
Old scrap
28-30%
New scrap
50-55%
Home scrap
18-20%
Source: Industry, CRISIL Research
As envisaged in the National Steel Policy, 2017, India’s steel production capacity is expected to reach 300 MT by
2030. This will increase the demand for scrap. CRISIL Research expects scrap demand in India to expand at a
compound annual growth rate (CAGR) of 7-8% to 41-42 MT by fiscal 2035.
3
Ferrous scrap demand outlook (MT): India
41-42
12.5-13
18.3
16.3
14.3
6.8 5.0 28.5-29
4.5
11.5 9.8 11.3
FY20 FY21 FY22 FY35

Import Domestic
Availability of domestic scrap is a major issue in India. The ferrous scrap industry in the country is unorganised, and
India lacks adequate collection and dismantling centres. That said, various government initiatives such as national
steel policy, steel scrap recycling policy and vehicle scrappage policy, are expected to provide a major thrust to the
industry. The domestic production of scrap is estimated to grow, albeit at a slower rate of 6.5-7.5%, and reach
~28.5 MT by fiscal 2035.
Currently, imports meet ~31% of the total scrap demand of the country. India is expected to import 12.5-13 MT of
scrap to fulfil the scrap requirement for steel-making in India in fiscal 2035.
India is estimated to have generated 12.1 MT of total domestic scrap (old, new and home) in fiscal 2022.
Maharashtra accounted for 10-11% of this scrap, having generated about 1.3 MT of scrap (old and new).
Total domestic scrap generation (MT): India (old+new+home) and Maharashtra (old+new)
28-29
11.1 10.9 12.1
1.2 1.3 2.5-3.5

1.2
FY20 FY21 FY22 FY35

India Maharashtra
Steel scrap generation in the country is expected to increase at a CAGR of 6-7% over fiscals 2022-35 to 28-29 MT.
Maharashtra is expected to generate 2.5-3.5 MT of scrap in fiscal 2035.
4
Scrap in India is available through auctions, direct purchase and imports. Organised segments such as railways
conduct auctions for scrap purchases, whereas scrap from vehicles, consumer durables and the ship-breaking
segment is handled by regional scrap dealers.
The launch of FerroHaat by Tata Steel is a step towards consolidating the market through e-portals for scrap sale
in India. Furthermore, the Government of India operates Ferro Scrap Nigam Ltd, a subsidiary of MSTC Ltd, which
collects scrap from multiple steel companies sold through e-auctions.
There are five key sources of old scrap generation: ship-breaking, railways, consumer durables, automotive and
demolition of building & construction and infra structures/buildings. Each source is discussed in detail in the
subsequent sections.
1.1 Ship-breaking industry

Alang-Sosiya ship-breaking yards are located in Gujarat and are roughly 50 km from Bhavnagar. These yards were
constructed in 1983 on a 10-km coastline with a significant tidal range. The Gujarat Maritime Board (GMB), a
government entity overseeing all ports in the state, controls the ship-breaking yards in Alang-Sosiya. The GMB
leases ship-breaking sites to ship-breakers for 10 years.
The current annual capacity of the Indian ship-breaking industry is 4,500 thousand light displacement tonnage
(LDT), which means, on average, 300-450 obsolete vessels can be dismantled every year in the country. About 40-
45% of the ships broken in the country are dry cargo ships, while the remaining 55-60% are wet cargo, tanker and
specialised ships. The average life of these ocean-going ships is around 25 years, and when obsolete these are
bought by Indian ship-breakers and brought to India for dismantling and further processing.
The ship-breaking industry in India is highly regulated, and there are multiple licensing bodies. However, the
breaking practices are still labour-intensive, and usage of sledgehammers and oxy-acetylene gas-torches can be
observed.
The Indian ship-breaking industry follows International Maritime Organization (IMO) and Hong Kong Convention
(HKC) guidelines. HKC aims to handle all difficulties associated with ship recycling, including the possibility that
ships sold for scrap may include ecologically dangerous compounds such as asbestos, heavy metals,
hydrocarbons and ozone-depleting substances. It also tackles issues related to labour and environmental
conditions at several ship-recycling facilities across the globe.
Currently, 200-220 ships are dismantled every year in India. The numbers have reduced significantly due to illegal
breaking and a higher number of legal documentations involved earlier. Many ship traders have routed towards
Chittagong in Bangladesh, which does not comply with HKC guidelines. Hence, the number of ships broken in
Bangladesh has increased significantly. About 1,411 thousand LDT or 209 ships were broken in fiscal 2022 in
India. In the future, the number of ships recycled in India is expected to increase.
5
Review of LDT and number of ships broken in India
4000 415 450

394
3500 400
313 350
3000 298
275
249 258 300
2500 230
199 209 250
2000 190
200
1500
150
1000 100
500 50
3847 3848 3060 2490 2432 3448 2677 2119 1526 1879 1411
0 0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
000 LDT No. of ships
Key stakeholders in the ship-breaking industry
Shipowners are predominantly Europeans and Asians (primarily Japanese) and take the support of local ship
selling agents for abandoning end-of-life ships. Ship selling agents further find dismantling units for ship recycling
and trade abandoned ships. Dismantlers in India purchase these ships and begin the process of dismantling.
6
Recovery from ship-breaking
Steel scrap obtained during the dismantling process accounts for 75-80% of the ship’s LDT. End-of-life ships also
have various types of machinery in working condition, which account for 8-10% of its total LDT. This machinery
includes engines, generators, pumps, motors, shafts, cylinders, etc., which are sold to salvage dealers and the
secondhand market to be reused. During its life time, a ship also has some weight loss as it goes through multiple
maintenance and overhauling processes. Also, during the dismantling process, weight loss due to rusting, wear
and tear is observed. Weight loss during dismantling, cutting and surface cleaning, such as removal of paint, is
estimated to be 7-8%. A ship also has non-ferrous scrap and other components, which account for 4-7% of the total
LDT. The non-ferrous scrap includes aluminium, copper, furniture, etc.
The steel scrap obtained is segregated into three categories: re-rollable steel, plates and melting scrap. Plates and
re-rollable scrap obtained from breaking of ships are of superior quality and sold directly to end-users such as the
construction and equipment manufacturing industries. Scrap that cannot be re-used or re-rolled is sent to blast
furnaces to be melted down into ingots and used as feed material, or the charge mix for the steel-making process.
Punjab (Mandi Gobindgarh) is the largest consumer of ship melting scrap in India, followed by Gujarat (Rajkot) and
Kanpur (Uttar Pradesh). The supply of melting scrap from the ship-breaking industry to Maharashtra (Jalna and
Satara) is limited to 2-5%.
7
Melting steel scrap from the ship-breaking industry: India and Maharashtra
000 tonne (KT)
800
675
700
600
500
400
300
182
200 148 137
100 6 24
5 5
0
FY20 FY21 FY22 FY35
India Maharashtra
Melting steel scrap extracted from dismantled ships in fiscal 2020 was 148 KT, and the demand dipped largely due
to Covid-19. The generation of melting scrap grew in fiscal 2021 and reached 182 KT, primarily due to latent
demand. Generation normalised in fiscal 2022 and was later impacted by the Russia-Ukraine war, resulting in
limited ship-breaking. Ship-breaking activities are expected to grow in the future as India plans to double its steel
breaking capacity.
1.2 Railway scrap industry

Scrapped material from Indian Railways is exclusively sold via e-auctions, eliminating the need for physical
presence/physical bidding by customers.
Railways generates steel scrap primarily through end-of-life equipment/material and accidents (premature). This
includes condemned rolling stock (condemned coaches, locomotives and wagons) and P-Way materials, including
sleepers, fixtures, fastenings, fish plates and condemned machinery.
Railways also maintains a surplus stock in the inventory, which is also scraped if not used for two years. During
overhauling of railway equipment and materials, which takes place every 18 months, a few components in good
condition and quality are preserved, and the rest are discarded as scrap.
Wheels and axles of condemned rolling stock are retained by railways and sent to the rail wheel factory to be re-
melted and reused in manufacturing of new wheels and axles.
8
Scrap recycling process and key stakeholders involved
Steel scrap generated by railways is stocked at regional stock yards in assembled conditions and offered to third-
party vendors. Scrapped components are made public via an online tender on the Indian Railways E-Procurement
System (IREPS) and MSTC Ltd (formerly known as Metal Scrap Trade Corporation Ltd) for dismantling and
breaking. Railway dismantling tenders are categorised under dismantling, stripping, repairing, etc. IREPS has a
materials management information system (MMIS), which is a software suite for integrated material management
and also includes steel scrap. A bidder must be registered by paying a one-time fee of Rs 10,000 through net
banking from a State Bank of India account as earnest money with Indian Railways.
In fiscal 2021, there were around 100,866 km of running tracks in India with an estimated replacement rate of 4-5%
every year. Condemned railway tracks, due to their quality, are primarily reused or rerolled for alternative
applications such as construction, infrastructure, electric overhead travelling or EOT cranes, ship building support
for electric poles, etc. 13-metre long rails, also called as long welded rails (LWRs), are replacing fish plates across
railways in India. India is also replacing meter-gauge and narrow-gauge rails with broad-gauge ones across the
country for better speed and increased passenger capacity per coach. P-way scrap measuring less than 1 metre is
primarily used for remelting and sold on a per-kg basis to scrap melting units.
Other abandoned materials such as rail wagons, coaches, locomotives and infrastructure scrap (angles, channels,
etc.) are examined, and materials that could be reused or refurbished are retained and the rest sent to scrap yards
for dismantling. Further, ferrous scrap is procured by auction winners at their own expense from regional scrap
yards.
9
Indian Railways is also advancing towards replacing Integral Coach Factory’s (ICF) steel-intensive coaches with
modern Linke Hofmann Busch (LHB) coaches, which are stainless steel-based. LHB coaches are lighter and
faster compared with ICF coaches. LHB coaches are also more durable as they are made from stainless steel,
compared with hot-rolled steel in the case of ICF coaches. ICF coaches are less safe primarily due to a poor
suspension, and have witnessed many derailments. Codal life is around 25 years for ICF coaches and 35 years for
LHB coaches. Thus, LHB coaches will not come under the cycle of scrappage until fiscal 2035.
In fiscal 2021, there were about 79,835 active in-service coaches in Indian Railways, and about 2,374 coaches
were condemned during the year. Demand for rail wagons has grown as rail freight is cheaper than road transport.
In fiscal 2021, there were around 302,624 in-service wagons, and about 1,837 wagons were condemned during the
year. Locomotives are limited in number — there were about 12,734 diesel and electric locomotives in fiscal 2021.
Indian Railways is reducing its dependence on diesel locomotives, with a majority of the rail routes being converted
into electric locomotive routes. About 440 locomotives were condemned in fiscal 2021.
Key railway scrap generators and recovery rates
Coaches, wagons and locomotives are categorised under rolling stock, which accounted for 75-80% of ferrous
scrap generated from the railways segment in fiscal 2022. P-ways accounted for 18-22% of the total scrap
generated during the year. Other scrap from the railways segment includes surplus scrap and scrap from
workshops, which is limited in quantity and accounts for 2-5% of the total scrap.
10
Share of various scrap-generating sources (fiscal 2022): India
Other scrap
133 MT
Locomotives 2-5% P-ways
16-18% 18-22%
Wagons
26-28%
Coaches
33-35%
The Ministry of Railways is promoting the sale of scrap to reduce inventory and gain some capital. Steel scrap
generated from railways in India has been estimated at 133 thousand tonne in fiscal 2022. Maharashtra is
estimated to have accounted for around 11% of the ferrous scrap generated by the railways segment in fiscal 2022.
India would continue to generate significant scrap as it is replacing traditional ICF coaches with LHB ones, diesel
locomotives with electric ones, and meter gauges with broad ones. Steel scrap generation in India is expected to
expand at a CAGR of 2.5-3% over fiscals 2022-35 to 190-195 thousand tonne.
Melting steel scrap from railways: India and Maharashtra

'000 tonne (KT)
250
190-195
200
150 126 133

111
100
50 21-22
12 14 15
0
FY20 FY21 FY22 FY35
India Maharashtra
1.3 Consumer durables scrap industry

Refrigerators, air conditioners and washing machines account for most of the steel scrap generated from the
consumer durables segment in the country.
11
The consumer durables scrap industry is highly fragmented and is majorly characterised by unorganised players.
The lack of a proper scrap collection channel results in local scrap collectors dismantling and cannibalising
components.
Roles of various stakeholders in the consumer durables scrap industry
Primary scrap generators under consumer durables segment include individual consumers (households) and bulk
consumers (government institutes, private establishments, hospitals, educational institutes, etc.). These consumers
abandon the used consumer durables, which are collected by organised retail chains, local retail shops and
dealers, and local kabadiwalas (door-to-door scrap collectors).
In India, consumers tend to use an appliance until it breathes its last. Consumer durables in the country undergo
change of hands multiple times (two to three times is common). Once the appliance reaches a dismantler or
consumer durables dealer, it is checked for its functionality. If found in a working condition, it is sold to the next
consumer in the used-appliances market.
The consumer durables found unfit for use are dismantled. The dismantling generally takes place at local scrap
dealers or wholesalers. Also, a few standalone e-waste recyclers extract scrap and sell to smelters or scrap
wholesalers. Scrap sellers sell the ferrous scrap mostly to secondary steel producers to build steel ingots.
To cut cost and make lighter equipment, consumer durables companies use light components, resulting in
reduction in steel scrap intensity.
Modern washing machines use stainless steel drums and fibre drums, which are generally discarded and not
recycled. Traditional front-load washing machines had a higher amount of steel scrap, which was easily consumed
by scrap owners. Semi-automatic machines usually have higher steel intensity, largely due to a dual-motor set-up.
Scrap dealers are hesitant to buy modern consumer goods scrap because of aluminium windings over copper
windings, which fetches lower returns than traditional consumer goods.
12
Dismantlers use traditional tools to dismantle the equipment, and sorting is done manually — this increases
individual effort. Dismantled parts or pieces are provided to aggregators, which are further supplied to furnaces.
Steel intensity in consumer durables

Consumer durables Steel scrap generated (kg/unit) Average life expectancy (years)
Air conditioner 25-30 10-15
Refrigerator 17-20 13-15
Front-load washing machine 20-25 10-13
Top-load washing machine 12-14 13-15
Semi-automatic washing machine 6-8 13-15

The major regions for consumer durable dismantling in Maharashtra are Mumbai (Kurla, Bhindi Bazaar,
Kumbharwada and Saki Naka), Jalna, Sangli, Ahmednagar and Aurangabad.
Demand for consumer durables is expected to grow in India, driven by increasing urbanisation, growing per-capita
income and increasing nuclear families. With consumers perceiving consumer durables as a necessity rather than
a luxury, and power supply conditions improving in Tier II and Tier III cities, sales growth is expected to be faster
from these areas. This further implies higher generation of recyclable ferrous scrap in the future. In India, ferrous
scrap generation from consumer durables segment is expected to log 11-12% CAGR between fiscals 2022 and
2035, reaching 465-475 KT in fiscal 2035.
Melting steel scrap from consumer durables: India and Maharashtra

KT
500 465-475
450
400
350
300
250
200
150 106 116
93
100 44-46
50 9 10 11
0
FY20 FY21 FY22 FY35
India Maharashtra
Maharashtra is estimated to account for 9-10% of total scrap generated from the consumer durables segment —
the state generated about 11 KT of steel scrap in fiscal 2022. It is forecasted to generate 44-46 KT of steel scrap in
fiscal 2035.
13
1.4 Automotive scrap industry
The automotive segment plays a crucial role in generating ferrous scrap in India. It generates the largest amount of
steel scrap. In fiscal 2022, it held 70-75% share in total old scrap generated in the country. In the future as well,
driven by the National Vehicle Scrappage Policy launched in 2021, it will remain the largest contributor to steel
scrap generation.
Roles of key stakeholders in automotive scrap generation and processing
Ferrous scrap is primarily generated by individuals, garages and showrooms. However, the majority of the quantity
is produced by bulk generators, including regional transport offices (RTOs), banks, state transport, auto
auctioneers, police, insurance companies and transport companies.
Large scrap wholesalers have their own dismantling facilities. They generally source automobiles from bulk
consumers. Standalone dismantlers in the value chain may sell the scrap to wholesalers or directly to smelters.
Wholesalers also get scrap from scrap dealers who primarily aggregate scrap from different sources.
After dismantling, some working parts of vehicles, such as engine, gears, axles, shafts and wheels, are retained. If
these parts are in a good working condition, they are sold in the used spare parts market. Many garages, service
centres and individual owners buy these parts for refurbishment and retrofitting. According to primary interactions
with various stakeholders, these working parts are a major source of revenue for dismantlers. Parts such as body
panels and silencers are cut into required sizes and sold to steel remelters on a per kg basis.
The major centres for dismantling ELVs are Delhi (Mayapuri), Bangalore (Shivaji Nagar), Mumbai (Kurla and Bhindi
Bazaar), Pune, Chennai, Kolkata, Ludhiana, Meerut and Indore.
As per RTOs in India, passenger vehicles can be used for 15 years, following which they have to be examined for
fitness. They can be used for another five years if a green tax certificate is obtained. Similarly, commercial vehicles
14
can be used for 10 years, post which they need to be examined for fitness. They can be used for another next five
years if a green tax certificate is obtained. In Delhi, petrol-run vehicles can be used for 15 years, while diesel
vehicles can be used for only 10 years within the city limits.
Steel scrap generation norms in India: Automotive

Steel intensity Wastage during Steel scrap Life expectancy
Category Sub-category
(kg/unit) dismantling (%) generated (kg/unit) (years)
Car 750-850 772 15-18

Passenger vehicle 3-4
Utility vehicle 900-1,000 917 15-18
Light commercial
1,400-1,600 1,425 12-15
vehicle
Commercial vehicle 4-6
Medium-heavy
2,700-3,200 2,803 12-15
commercial vehicle
Non-geared 60-70 63 13-15

Two-wheeler 2-3
Geared 80-100 88 13-15
Three-wheeler Three-wheeler 300-400 4-5 334 10-15
Tractor Tractor 1,700-1,800 4-6 1,758 6-9

Over the long run, average steel-weight reduction of about 3% can be expected across all the sub-segments of the
automotive segment, on account of usage of lightweight materials such as fibre-reinforced plastic (FRP), high-
strength steel and aluminium, and certain design and technology changes,
Share of sub-segments in total scrap generated from automotive in India (fiscal 2022): 2,605 KT
Car
Tractor 21-23%
22-25%
Three-wheeler
2-3% Utility vehicle + van
7-9%
Two-wheeler (non-geared) Two-
2-3% wheeler
(geared) Light commercial
14-16% Medium-heavy
vehicle
commercial vehicle
8-10%
16-18%
Cars and tractors, with about 23% and 22% share, respectively, contributed the highest to total steel scrap
generated from automotive segment in fiscal 2022. Medium-heavy commercial vehicles accounted for about 17%
share, followed by geared two-wheelers with about 15%.
15
Demand for automobiles is expected to grow in India. Sales of passenger vehicles are expected to be driven by low
penetration, favourable finance parameters, fast-paced infrastructure development, increasing per-capita gross
domestic product, and a modest increase in total cost of acquisition in the long run.
Factors driving long-term sales of medium-heavy commercial vehicles include the improving industrial activity,
steady agricultural output, and government’s focus on infrastructure. However, in the medium term, volume growth
will be limited due to efficiencies achieved from the Goods and Services Tax, better road infrastructure, and
commissioning of the dedicated freight corridors. Sales of light commercial vehicles are expected to grow due to
higher private consumption, lower penetration, greater availability of redistribution freight, and improved finance.
Growth in sales of buses will be supported by increasing demand for intercity/interstate travel, aided by better road
infrastructure, and higher personal disposable incomes. The unregulated segment, which primarily caters to
demand from schools, companies and intercity travel by private operators, will remain the largest end-user.
The underpenetrated rural market will be the key growth segment for the two-wheeler industry. Growth with be
further aided by rising income, better rural connectivity and rising urban demand. Scooters (non-geared two-
wheelers) are expected to witness higher penetration in the rural market (scooters have an urban market share of
65-75%), which will drive growth of the two-wheeler industry. Due to a ramp-up seen in road construction over the
last few years, consumer preference shifting towards higher cubic capacity (cc) scooters is also likely to aid
demand of the two-wheeler segment.
Currently, India has three tractors per 100-hectare area. The penetration is expected to improve driven by the
government's focus on improving farm incomes through various schemes and promoting farm mechanisation, and
investments to improve rural infrastructure.
With growth in auto sales across all sub-segments, along with policies such as the Steel Scrap Recycling Policy,
National Vehicle Scrappage Policy and National Steel Policy, the scrap collection efficiency is expected to improve.
Scrap of previous years is expected to enter the system because of various government initiatives, and the impact
is expected to be observed from fiscal 2023.
Steel scrap generation from auto segment is expected to reach 7,050-7,150 KT by fiscal 2035 from an estimated
2,605 KT in fiscal 2022, growing at a CAGR of ~8%.
Maharashtra is estimated to account for 11-12% of total scrap generated from the automotive segment — the state
generated about 302 KT of steel scrap in fiscal 2022. It is forecast to generate 710-730 KT of steel scrap in fiscal
2035.
16
Melting steel scrap from the automotive segment: India and Maharashtra
KT
8000 7,050-7,150
7000
6000
5000
4000
3000 2297 2605
2111
2000
710-730
1000 250 272 302
0
FY20 FY21 FY22 FY35
India Maharashtra
1.5 Others
Other industries that generate ferrous scrap during dismantling or breaking include building and construction (B&C)
and infrastructure. There are four sub-categories of demolition scrap generated in India: residential buildings/
houses, commercial structures/ buildings, industrial, and infrastructure.
Residential buildings/ houses include apartments, independent houses and bungalows in urban and rural areas.
Under this category, steel intensity in urban buildings/ houses is more than those in rural areas. Residential
buildings/ houses are also demolished for redevelopment — old buildings are demolished to construct towers. This
practice is gaining popularity in urban areas.
Commercial structures/ buildings include shopping malls, super markets, hotels, schools/ colleges, and shops. The
majority of the commercial complexes are concentrated in urban areas. Industrial structures include factories,
power plants, mills, foundries and other industrial buildings. Infrastructural structures include roads, bridges,
turbines, airports and tunnels. Bridges have higher steel intensity than other infrastructural structures such as
roads.
The life of buildings/ structures in India is usually 40-60 years, depending on the structure and design. Also, the
overall life of industrial structures is higher as these go through regular and periodic inspections and the damaged
structures are replaced frequently.
Barring a few structures, such as railways bridges, the B&C structures are not steel intensive. Interestingly, out of
total demolition scrap, only 5% is ferrous scrap. A large proportion, i.e. 95%, comprises concrete, bricks, soil, wood
and other components.
Ferrous scrap generated from demolition scrap includes rebars, pipes, roofing, heavy structures, safety barriers
and fences. Heavy structures in a good condition are reused by end-use industries such as small fabricators.
Instances of reusing roofing sheets, if not damaged during the process of demolition, as barriers/ cladding/
boundaries at the construction sites, can also be observed in India.
17
In fiscal 2022, total ferrous scrap generated through demolition of B&C and infrastructural structures was estimated
at about 526 KT in India. On account of various government initiatives to make the scrap collection system efficient,
collection efficiency is expected to improve. Thus, ferrous scrap generated from this demolition is expected to clock
9-10% CAGR between fiscals 2022 and 2035.
Melting steel scrap from B&C and infrastructure segment: India and Maharashtra
KT
2000 1,700-1,800
1800
1600
1400
1200
1000
800
484 526
600 445
400 200-210
200 51 56 60
0
FY20 FY21 FY22 FY35
India Maharashtra
Maharashtra is estimated to account for 11-12% to total scrap generated from demolition of B&C and infrastructural
structures in the country. In fiscal 2022, the state generated about 60 KT of demolition ferrous scrap. By fiscal
2035, it is expected to generate 200-210 KT of demolition ferrous scrap.
18
2 Assessment of steel scrap trade
India imported about 5 MT of steel scrap in fiscal 2022. Around 70-75% of alloyed steel scrap is imported, versus
25-30% of stainless steel scrap. Steel scrap largely includes non-alloyed steel, melting scrap, Light Melting Scrap
(LMS) bundle, Heavy Melting Scrap (HMS) 1 and 2 rerolled scrap, shredded steel scrap, and mild steel (MS)
turning. In stainless steel, remelt scrap and machining residue are the major scrap types imported.
Ferrous scrap imports by India (MT)
6.9 6.8
5.4
5.1 5.0
5.7 5.4
4.5 4.0 3.6
0.9 1.1 1.3 1.1 1.4
FY18 FY19 FY20 FY21 FY22
Stainless steel Steel

Source: Directorate General of Foreign Trade (DGFT), CRISIL Research
Scrap demand in India is rising, resulting in higher imports of steel scrap from various countries — scrap imports
rose a significant 28% on-year in fiscal 2019. However, scrap imports saw a major decline during the Covid-19
period, i.e., fiscal 2021, falling nearly 25% on-year.
Steel scrap accounts for most of the imports of ferrous scrap, followed by stainless steel scrap. Stainless steel
scrap imports have been consistent in the range of 0.9-1.4 MT. For steel scrap, the Middle East (the UAE, Yemen,
Kuwait, Oman and Bahrain), the UK, the Netherlands, Poland, the US, Canada, Singapore, South Africa and Brazil
were among the major exporters to India in fiscal 2022. For stainless steel scrap, the major exporting countries
were the US, Singapore, the UAE, Malaysia, South Korea, the Netherlands, Thailand, Vietnam, Turkey and
Canada.
India exports a marginal quantity of steel scrap as the country itself is a major consumer. Stainless steel scrap
accounts for nearly half of the steel scrap exported to other countries. In fiscal 2021, amid limited domestic
demand, primarily due to regional Covid-19 lockdowns, steel scrap and stainless steel scrap accounted for 91%
and 9% of total scrap exported, respectively.
19
Ferrous scrap exports from India (KT)
25.6
11.9 23.6 11.5

8.5
6.8
8.7 8.7
4.8
4.3
2.5 3.7 3.2 2.0 2.8
FY18 FY19 FY20 FY21 FY22
Stainless steel Steel
Source: DGFT, CRISIL Research
During fiscal 2022, the major steel scrap-importing countries from India are Bhutan, Nepal, Singapore, Germany,
the Netherlands, Malaysia, Thailand, Oman and Africa (Nigeria and Angola). In the stainless steel segment,
Sweden (79%) and Brazil (16%) are the major importers, followed by the UAE, Malaysia and Thailand (5%).
20
3 Technical appraisal for proposed plant
3.1 Project overview (Some inputs to be taken from the client)

1. Name of proposed unit: Steel Scrap Shredding Unit (to be provided by the client)
2. Location and office: Panvel or Khopoli (to be confirmed)
Product mix and proposed capacity:

Facility Process Capacity Remark
Raw material will be sourced from regional

Shredder and online
Steel shredding unit 60-70 tonne per hour scrap dealers; the plant will focus on
non-ferrous plant
vehicle shredding
Brief of proposal:
The proposal is for setting up a shredding unit in Panvel or Khopoli to predominantly support the JSW Dolvi plant.
Scrap generated from industries such as automotive, ship breaking, railways, and consumer goods would be
sourced from local or regional dealers to support the shredding unit. The scrap would be shredded in-house and
provided to JSW Steel and other secondary steel manufacturers in the form of baled or bundled scrap.
The plant would focus more on shredding of old scrap than new scrap. It would have a capacity of 4,00,000 tonne
per annum or 60-70 tonne per hour.
The plant would have 10-15 acres of land, with key equipment such as infeed conveyor, air separation system,
heavy-duty motors, and belt conveyor systems. The facility is also expected to have a non-ferrous online plant,
which would include an online unit and sorting separation equipment.
Manufacturing process:
The joint venture between National Steel and JSW Steel will primarily focus on shredding steel scrap. Scrap
generated from industries such as automotive, consumer durables, railways, and ship breaking will be collected
and shredded in-house. As much as 96-98% of the product will be ferrous shredded scrap as per ISRI 210/211,
and 2% will be waste.
Shredding of automobiles would also include aluminium parts such as engines and alloy wheels. Thus, the plant
will also recycle non-ferrous scrap, primarily aluminium, which will be converted into ingots by other remelting units.
The baled or bundled scrap will be sold to JSW Steel for scrap remelting. In some cases, the dismantled scrap will
be sold to other standalone steel remelting units.
21
Cost of project: (Some inputs to be taken from the client / to be incorporated post finalisation of financial
assessment)
(In $ USD)
Cost of project Cost Industry standards
Land and site development
Building and civil work
Plant and machinery, and other equipment Steel scrap shredder – $5,745,000
(Steel scrap shredder and non-ferrous online plant) Non-ferrous online – $1,595,000
Miscellaneous fixed assets
Electrical installations
Rolls
Pollution control equipment
Means of finance: (Some inputs to be taken from the client / to be incorporated post finalisation of financial
assessment)
(In Rs lakh)
Means of finance Proposed Total
Equity
Debt
3.2 Capacity of proposed plant

Plant configuration: (to be provided by the client)
Shredder unit:
Side view of shredding unit
22
Top view of shredding unit
List of machinery (refer to the side view):
1. Infeed conveyor
2. DCR 2227 heavy-duty scrap shredder
3. Fully capped rotor
4. Hydraulic equipment
5. Shredder main drive motor and drive train
6. Under mill shaker
7. Control cabin
8. Maintenance crane
9. Hammer pin puller
10. Maintenance platform
11. C1 ferrous transfer conveyor
12. Cascade air system
a. Cascade separator
b. Cyclone separator
c. Rotary valve
d. Air system fan
e. Air ductwork
f. Bag filter
g. Air system support structure
13. Under cascade shaker
14. Drum magnet and support structure
15. C2 ferrous picking conveyor
16. C3 radial stacking conveyor
17. NF1 non-ferrous conveyor
18. CD1 shredder light fraction conveyor
19. Overband magnet
23
List of machinery (refer the top view)
TOP 1) Electrical power

TOP 2) Water
TOP 3) Fire-fighting water
BL 1) Incoming scrap
BL 2) Ferrous stockpile
BL 3) Armature, foam, fluff, plastic, tyres, and longs
BL 4) Tramp ferrous
BL 5) Non-ferrous
BL 6) Tramp ferrous
BL 7) Shredder light fraction
Non-ferrous unit:
Side view of proposed machine
Top view of proposed machine
List of machinery (refer to the side view)
20. NF2 reversing conveyor

21. Vibrating batch feeder
24
22. NF3 conveyor
23. Vibrating screen
24. Ultra-high frequency ECS 1 with magnet
25. ECS 2 with magnet
26. ECS 3 with magnet
27. Screen and ECS structure
28. NF 4 conveyor
List of machinery (refer the top view)
BL 1) Online non-ferrous
BL 2) Incoming non-ferrous (re-feed)
BL 3) ZORBA 0 – 5/8”
BL 4) ZORBA 5/8” – 2”
BL 5) ZORBA 2” – 4”
BL 6) ECS drop 0 – 5/8”
BL 7) ECS drop 5/8” – 4”
BL 8) Tramp ferrous
BL 9) Oversize
Process flow chart:
Abandoned scrap
Ferrous scrap
Source: National Steel
Scrap metal will be collected from various locations. Then, it will be sorted to get quality scrap for shredding.
Products such as paper, plastic and fibre will be segregated so that only metal scrap is consumed. Also, any
hazardous material will be removed safely.
The plant will employ hydraulic machinery capable of cutting or shearing the scrap with high pressure into small
pieces. Feed rollers and hammers will crush the scrap metal, converting it into even smaller pieces. A magnetic
25
and eddy current separation unit will segregate the ferrous from non-ferrous metal. Further, the sorted metal will be
baled and bundled and sold to primary and secondary steel producing units having electric arc furnaces (EAFs)
and induction furnaces (IFs).
3.3 Infrastructure and site

Proposed civil works:
Building yard – Civil constructions
Land – 10-15 acres
Electrical connection – Installations and transformers
Water source: (to be provided by the client)
Water requirement: 100 litres per hour
Power requirement: Load is proposed at 4,000 Kw and consumption will be 3,500 Kwh (kilo watt per hour)
Fuel requirement: Estimated diesel requirement – about 100 litres per day; Material handlers would consume 25
litres of diesel per hour (material handlers include forklifts, loaders and small crane)
Site location: Khopoli or Panvel (to be confirmed)
Map of location: (to be provided by the client)
Location accessibility: (to be incorporated once location is confirmed)
Rail route: (to be incorporated once location is confirmed)
Road route: (to be incorporated once location is confirmed)
3.4 Land details (to be provided by the client)
3.5 Raw material

Raw material requirement: 70-75 tonne per hour
Raw material availability:

29. Automotive scrap: Scrap dealers in Mumbai (Kurla, Kumbharwada, Bhindi Bazaar, etc.), Pune, Nashik,
Aurangabad, etc.
30. Railway scrap: E-auction
26
31. Ship breaking: Scrap dealers in Alang (limited availability)
32. Consumer durables: Scrap dealers in Mumbai and Pune
33. Other scrap (B&C and infrastructure): Scrap dealers in Mumbai and Pune
Labour: 150 full-time staff
Number of shifts: One shift (to be confirmed)
Hours in each shift: 8 hours (to be confirmed)
Labour availability: Labour will be available from Thane district
3.6 Provisions of central and state pollution control boards

While the semi-formal ELV recycling industry offers benefits, it also has shortcomings. On the one hand, it employs
thousands of people and adds value to resources that would otherwise be discarded. On the other hand, several
concerns associated with the inefficient and destructive processing of ELVs entail large environmental costs that
are typically paid by the society. The effectiveness of the proposed plant will be enhanced if the ELV sector's
potential strengths are emphasised and current limitations addressed.
Benefits of vehicle recycling
• Employment generation
• Recycling and reuse of secondary resources to add value
• Availability of steel scrap for automobile industry
Weaknesses and threats in current vehicle recycling industry
• Adverse environmental and health effects of ELV recycling
• Low recovery rate
• Inadequate infrastructure to accommodate future ELVs
• Multiple stakeholders and value chains
Environmentally sound management of ELVs offers crucial methods for secure recycling and effective recovery of
ELV materials.
ELVs include substantial amounts of metal and other resources that, if recovered or recycled appropriately, may be
efficiently reintroduced into the economy. This decreases the environmental problems caused by the extraction of
raw materials. In comparison with the primary processing of metals, the secondary processing of metals utilises
less energy-intensive processes. This reduces the environmental implications of resource use further.
In depolluting, segregation of fluids and disposing of in a safe place is an important parameter. These include
coolants, oil, batteries, and lubricants. Materials such as rubber, textile and plastics are separated from the vehicle.
27
The vehicle hulk is generally left with the vehicle body, which is primarily fed into the shredder machine. Later, with
the magnetic separation method, steel is collected from the rest of non-ferrous remains.
ASR – automotive shredder residue
With the growing number of vehicles and consumer durables and increased consumption of steel in other end-use
industries, sufficient infrastructure for large-scale operations (shredding) is required. A steel scrap shredding plant
must adhere to the published rules, recognise best practices, and meet regulatory criteria for operations and
disposal facilities. The formal sector should be encouraged to construct this infrastructure, and activities in the
informal sector must be merged.
To build an infrastructure for scrapped steel shredding, it is necessary to find huge tracts of land with sufficient
capacity for storage, processing and other operations. The ELVs that need treatment vary from two-wheeled
vehicles to huge trucks and trailers.
Procedures for the establishment and administration of ELV recycling plants are as follows:
• To establish an ELV recycling enterprise, a licence needs to be secured from the appropriate authorities
• To construct the facility, industrial estate/area land must be developed. The required layout and design
permissions needs to be acquired from the relevant state pollution control board (SPCB) / pollution control
committees (PCC)
• Any individual who operates a collection centre or dismantling centre must meet the minimal criteria set by both
state and central government
• Environmental clearance (EC), if required, must be acquired in accordance with the size of activities outlined in
the EC announcement of September 14, 2006
28
• An environmental management plan must be developed and implemented
• Under the Water Pollution (Control and Prevention) Act, 1974, and the Air Pollution (Control and Prevention)
Act, 1981, the facility must acquire permission from the relevant SPCB/PCC
• For the processing, storage, packing, and transportation of hazardous waste to approved recyclers and
treatment and disposal facility operators, the facility must obtain permission from the applicable SPCB/PCC
under the HOWM Rules, 2016. The facility must have an arrangement with approved recyclers and operators
of treatment and disposal facilities. In addition, authorisation under the 2016 Solid Waste Management Rules
and 2016 Plastic Waste Management Rules needs to be acquired for the management of solid waste and
plastic waste created during depollution/disassembly/shredding
• Planned acceptance of ELVs and distribution of destruction certificates (at the conclusion of ELV destruction)
should follow the applicable transport department's policies or recommendations
• The facility should have a documented plan defining its risk management goals for environmental performance
and compliance, as well as its strategy for achieving these objectives, based on a ‘plan-do-check-act’ approach
of continuous improvement
• The facility should perform and record regular evaluations of environment, health and safety (EH&S) goals, and
monitoring of progress towards achieving these objectives
• The facility is required to take adequate precautions to protect occupational and environmental health and
ensure safety. These measures may be indicated by municipal, state, national and worldwide rules,
agreements, principles and standards, in addition to industry norms and recommendations
• The central pollution control board (CPCB) requirements for storage and transportation of hazardous waste
must also be followed
• Training and capacity development should be carried out for personnel of varying levels
• EH&S
‒ An up-to-date, documented hazardous materials identification and management strategy addressing the
particular hazardous materials that will be handled
‒ Appropriate precautions to safeguard employees, the general public and the environment from dangerous
dusts and emissions when materials are shredded or heated
‒ A current, documented strategy for reporting and reacting to extraordinary pollution emissions, such as
accidents, spills, fires, and explosions
‒ Liability insurance for pollution discharges, accidents and other emergency situations
‒ Annual completion of an EH&S audit, preferably by a reputable independent auditor
• The facility must have a regularly executed and recorded monitoring and recordkeeping programme that
measures important process parameters and compliance with applicable safety standards, effluents and
emissions, as well as arriving, stored and exiting materials and wastes
• As required by applicable laws and regulations, the facility must have an adequate plan for closure that is
periodically updated. Financial guarantees must be provided to ensure necessary measures are taken upon
cessation of activities to prevent environmental damage and return the site to a satisfactory condition
• Last, anybody running collection centre(s) and dismantling centre(s) may accredit their centres/units in
accordance with ISO 14001 standards (environmental management system)
29
Only approved and registered recyclers will be permitted to recycle. Recyclers of ELVs and their facilities must be
licenced by the relevant state's pollution control board.
3.7 Company promoters

Name of directors: (to be provided by the client)
DIN Directors Designation
XX Vipan Garg XX
XX XX XX
XX XX XX
30
4 Impact of key policies
4.1 Key objectives of steel scrap recycling policy

Steel recycling plays a crucial role in saving the environment and natural resources. Typically, large steel mills
employ basic oxygen furnaces (BOFs), which burn coal or natural gas to melt iron ore to extract the iron, and then
combine the iron with steel scraps to produce steel. Meanwhile, smaller units utilise EAFs to transform iron and
steel scrap into new steel.
There is a global trend to boost steel manufacturing which utilises waste as the primary raw material. This is
because recycling scrap contributes to the protection of essential natural resources, in addition to its other
advantages. Each tonne of scrap saves 1.1 tonne of iron ore, 630 kg of coking coal, and 55 kg of limestone.
The Steel Scrap Recycling Policy (issued in 2019) is expected to facilitate consolidation of the otherwise
fragmented steel scrap market in the country. Market consolidation ensures increased availability of scrap, along
with better quality standards. The government aims to enable this through various formal and scientific processes
of collection, dismantling, processing and recycling, leading to resource conservation and energy savings.
Objectives of steel scrap recycling in India
• Advance circular economy within the steel industry
• Promote formal and scientific collection, dismantling and processing activities for end-of-life products that are
sources of recyclable scrap
• Process and recycle products in an orderly, secure and environmentally beneficial manner
• Involve all stakeholders in the evolution of a responsive ecosystem
• Create high-quality ferrous scrap for steel production, thus decreasing reliance on imports
• Decongest Indian cities by reusing ELVs and ferrous trash
• Promote the 6-Rs principle of reduce, reuse, recycle, recover, redesign, and remanufacture via scientific
treatment, processing and disposal of all forms of recyclable scrap, including non-ferrous waste, at approved
facilities/centres
31
Impact of steel scrap recycling policy in India
The National Steel Policy (NSP), released in 2017, aims to increase the
capacity of steel production to 300 MT by 2030. This will result in
increasing demand for scrap, a raw material, at a higher rate in the EAF
and IF routes. The policy estimates the EAF/IF routes to account for
30-45% of production.
Thus, to cater to this demand, about 700 scrap centres,700 shredders,

2800-3000 collection and dismantling centers would be required.
Hence, the availability of raw materials for production is an important
aspect under NSP 2017.
To cater to the increasing demand, the scrap recycling policy is

expected to facilitate consolidation of the otherwise fragmented steel
scrap market in the country
Although scrap is the principal raw material for the secondary sector,
the primary sector also incorporates scrap into the charge mix of BOFs
to enhance efficiency, reduce production costs, and meet other process requirements.
With ferrous scrap being the principal raw material for EAF/IF-based steel production, the recycling policy aims to
provide a framework to facilitate and promote establishment of metal scrapping centers in the country. In addition,
technologies for producing steel from scrap have been envisioned as one of the most essential methods for
reducing the intensity of greenhouse gas emissions.
Supply of scrap is a big concern in India. There was a shortfall of ~5 million tonne in fiscal 2022, which was
imported at a cost of Rs 32.3-32.5 crore. Imports contributes to ~31% to the total steel scrap requirement of the
country. Going forward, with increase in steel consumption, the demand for scrap is set to increase. Thus, it
becomes very necessary to generate and collect steel scrap more efficiently so that the share of imports doesn’t
increase in future.
The scrapping policy is expected to ensure the availability of high-quality scrap for the steel industry. High-grade
steel scrap must be free of impurities if processed in scrap processing facilities and by shredders. High-grade steel
scrap should be recycled to create high-grade steel for use in equipment production, vehicle manufacturing, and
other downstream industries. Large numbers of end-of-life items will be generated as a result of the increasing
automobiles and consumer durable white goods scrap.
Tata Steel has already established a 5 million-tonne-per-year scrap-based steel facility in Rohtak, Haryana. The
firm obtains scrap by acquiring outmoded home, building and demolition debris, as well as from industrial waste.
4.2 Key objectives of the national vehicle scrappage policy

In India, ELV recycling has existed since the introduction of automobiles. The semi-formal sector has historically
played an important role in trash management and recycling. The bulk of recycling operations are conducted by
32
scrap merchants and dismantlers in big cities. Some of these centres, such as Mayapuri in Delhi, Pudupet in
Chennai, Ukkadam in Cochin, Mallick Bazaar in Kolkata, and Lohar Chawl in Mumbai, are well known.
The Union Minister of Finance announced the national vehicle scrappage policy on February 1, 2021. Later, the
Union Minister for MSME and Road Transport & Highways approved the scrappage policy. The policy takes effect
after the registration of a vehicle is complete. With the policy introduction, passenger vehicles that are more than 20
years old and commercial vehicles that are more than 15 years old will undergo a fitness test and need to obtain
green vehicle tax certificate to get another five years of operation.
In western nations, obsolete automobiles are hauled to scrapyards where they are disassembled, and the steel
used to construct the body is crushed and repurposed. However, India did not have a similar policy. Most
automobiles were actively operating and damaging the environment or were parked along the road as junk.
Hence, the policy has been introduced with an aim to reduce the population of old and defective vehicles, lower
vehicular air pollutants to meet India's climate commitments, enhance road and vehicle safety, improve fuel
efficiency, formalise the currently informal vehicle scrapping industry, and increase the availability of low-cost raw
materials for the automotive, steel, and electronics industries.
Key objectives of the policy include phasing out old vehicles, reduce pollution levels, stimulate automotive sales,
and build a circular economy. This policy will also ensure availability of scrap steel for automobile production,
reducing cost to a great extent. The government has plans to set up 50–70 scrapping facilities for vehicles in the
next 4–5 years.
Impact of the vehicle scrappage policy
• To reduce air pollution and improve air quality
• Demand for new vehicles will increase since the old ones would need to be replaced
• Both direct and indirect employment prospects would increase
• Ease of availability of scrap to the automobile sector
• Recycling business will be more active, resulting in increased revenue
• As an incentive to discard an old vehicle, vehicle owners may obtain tax breaks
• Comparatively safer automobiles will be produced in future
33
5 Policy and incentives relevant to plants in Maharashtra
Package Scheme of Incentives
Since 1964, the Maharashtra government has been providing a Package Scheme of Incentives (PSI) to both new
units and existing units expanding their capacity in less developed regions of the state. According to the
Government Resolution of April 1, 2013, the PSI, 2013, will be effective from April 1, 2013, to March 31, 2018.
Under the PSI, 2013, a qualifying unit in the private sector, state public sector/joint sector, co-operative sector, and
central public sector (only for mega projects) is eligible for rewards.
The Principal Secretary, Industries decides on a case-by-case basis, within the allowed limit, the quantum of
incentives provided. In addition to standard incentives, the government provides bespoke packages of incentives
and case-by-case special/additional incentives for mega and ultra-mega projects.
According to the government resolution, projects with a fixed capital investment (FCI) or employing direct regular
people according to the threshold limitations mentioned below will be categorised as mega/ultra-mega projects:
Minimum FCI Minimum direct

Type of project Taluka/area classification
(Rs crore) employment (numbers)
A&B 750 1,500
C 500 1,000
Mega
D & D+ 250 500
No industry districts and Naxalism-affected area 100 250
Ultra-mega Entire state 1,500 3,000

Source: Maharashtra Industry, Trade and Investment Facilitation Cell
Incentives
New micro and small manufacturing enterprise (MSME) / large-scale industry (LSI) units will be eligible for a
package of incentives, the total amount of which is tied to the FCI. The total amount of incentives and the eligible
period are as follows:
Ceiling as percentage of fixed capital

Number of years
Taluka / area investment
classification Medium manufacturing Medium manufacturing
MSMEs MSMEs
enterprises / LSI enterprises / LSI
A - - 7 7
B 20 - 7 7
C 40 30 7 7
D 70 40 10 7
D+ 80 50 10 7
No industry district 90 70 10 7
34
Naxalism-affected area 100 80 10 7
The total amount of incentives for the food/agro processing units covered by the GR will be 10% more than the
maximum stated above, and such units will be eligible for the incentives for an additional year.
Industrial Promotional Subsidy for MSMEs
The qualified new/expansion MSMEs, which are established in various sections of the state, are eligible for the
Industrial Promotion Subsidy (IPS) as follows:
S No Taluka/area classification Quantum of IPS annually
VAT on local sales minus input tax credit (ITC) or zero, whichever is more +
1. Naxalism-affected area
central sales tax (CST) payable + 100% of ITC
VAT on local sales minus ITC or zero, whichever is more + CST payable +
2. No industries district
75% of ITC
Entire Vidarbha and Marathwada VAT on local sales minus ITC or zero, whichever is more + CST payable +
3.
(Other than serial numbers 1 and 2) 65% of ITC
Group D+ taluka (Other than serial VAT on local sales minus ITC or zero, whichever is more + CST payable +
4.
numbers 1 and 3) 50% of ITC
Group D taluka (Other than serial VAT on local sales minus ITC or zero, whichever is more + CST payable +
5.
numbers 1 and 3) 40% of ITC
6. Group C taluka
30% of ITC
7. Group B taluka
20% of ITC
Large-scale enterprises get IPS
The qualified new/expansion large-scale manufacturing units will be eligible for the IPS under the following
conditions:
S no Taluka/area classification Quantum of IPS annually
1. Naxalism-affected area 100% VAT on local sales minus ITC or zero whichever is more + CST payable
No industries district, Vidarbha and

2. 90% VAT on local sales minus ITC or zero whichever is more + CST payable
Marathwada
Group D+ taluka (Other than serial

numbers 1 and 3)
Group D taluka (Other than serial

numbers 1 and 3)
5. Group C taluka 60% VAT on local sales minus ITC or zero whichever is more + CST payable
35
Expansion/diversification units
Existing/new MSME, medium enterprises/LSI (including information technology or IT and biotechnology or BT

manufacturing) units that qualify as expansion/diversification units will also be eligible for expansion / diversification
incentives equal to 75% of the incentives admissible for new units. In the event of expansion/diversification units,
the qualifying term for receiving incentives will be shortened by one year.
Interest subsidy
All qualified new MSME-sized manufacturing enterprises outside of Group A are eligible for interest subsidy. The
interest subsidy is only payable on the actual interest paid to banks and public financial institutions on a term loan
for the purchase of fixed capital assets. The amount of interest subsidy is the effective rate of interest (after
subtracting interest subsidy payable to any institution / under any government of India scheme or 5% p.a.,
whichever is lower).
Exemption from electricity duty
During the qualifying period, eligible new units in C, D, D+, no industry district(s), and Naxalism-affected areas are
free from paying electricity duty for up to 15 years. In Group A and B areas, all export-oriented units (EOUs), and IT
and BT units would be free from paying electricity duty for seven years.
Waiver of stamp duty
In C, D, and D+ talukas, no industry districts, and Naxalism-affected areas, both new and expanding/diversifying
units are free from the payment of stamp duty. BT and IT manufacturing units in public parks, BT and IT
manufacturing units in private parks, and mega projects are free from paying stamp duty in zones A and B to the
extent of 100%, 75%, and 50%, respectively.
Power tariff subsidy
Except for units in Group A locations, qualified new MSMEs are eligible for electricity tariff subsidies. The subsidy
of Rs 1 per unit is for the units located in Vidarbha, Marathwada, North Maharashtra, and the districts of Raigad,
Ratnagiri and Sindhudurg in the Konkan, and 0.50 per unit for units located in other areas of the state, for the
energy consumed and paid for three years from the date of commercial production commencement.
Strengthening the MSME manufacturing enterprises
The following incentives are available to encourage quality competitiveness, research and development,
technological advancement, water and energy conservation, cleaner production, and credit raising:
a. New and expanding SMEs in all relevant categories are eligible for the following incentives:
1) Subsidy of 5% on capital equipment for technological upgradation, up to a maximum of Rs 25 lakh
2) A 75% rebate on the costs of quality certification capped at Rs 1 lakh
3) A maximum of Rs 5 lakh in a 25% subsidy on capital equipment for cleaner production practices
36
4) A 75% reimbursement on the costs spent for national patent registration up to Rs 10 lakh and Rs 20 lakh
for international patent registration
b. Incentives for the credit rating of MSME-sized enterprises in all categories
75% of the cost of credit rating by the Small Industries Development Bank of India/government-accredited
credit rating agency is capped at Rs 40,000
c. New MSMEs, LSI and expansion thereof will be eligible for following incentives in all categories of
areas
1) 75% of the cost of the water audit cannot exceed Rs 1.00 lakh
2) 75% of an energy audit cannot exceed Rs 2.00 lakh
3) 50% of the cost of capital equipment under the measure to conserve/recycle water up to Rs 5.00 lakh
4) The cost of capital equipment for enhancing energy efficiency may not exceed 500,000 at a rate of 50%
Eligibility criteria
Eligibility of units (Para 1.2 of PSI-2013)
a. Industries specified in the first schedule of the industries (Development and regulation) Act, 1951, or a
letter of intent under the licencing provision of said Act, as modified from time to time
b. Manufacturing enterprise as defined by the 2006 Micro, Small, and Medium Enterprises Development Act
(MSMED Act, 2006)
c. IT manufacturing units registered with Directorate of Industries or MIDC or Development Commissioner

(SEEPZ) or STPI in the state
d. BT manufacturing units
e. Cold storages
f. Mechanised food/agricultural processing industries
g. Central public sector units qualifying as mega projects
Classification of area (Para 1.3 of PSI-2013)
For the purposes of this programme, Maharashtra has categorised several areas as follows:
● Group A ● Industrially developed area

● Group B ● Where some Industrial development has taken place but less than areas under Group A
● Group C ● Less developed other than those covered under Group B
37
● Group D ● Lesser developed area not covered under Group A, B, and C
● Group D+ ● Least developed area not covered under Group A, B, C, and D
● No industry district (NID) ● As notified in Annexure I of the GR
● Naxalism-affected area (NAA)● As described in GR NAVIKA-2008/C.R. 209/Ka. 1416, Dated May 31, 2009
Classification of type of units, investment and employment (Para 2.2 of PSI-2013)
a. MSMEs / large-scale units
S no Type of units Investment required in plant and machinery
1. Micro enterprises Up to Rs 25 lakh
2. Small enterprises Rs 25 lakh – Rs 5 crore
3. Medium enterprises Rs 5 Crores – Rs 10 crore
4. Large-scale units Rs 10 crore and above
5. Type of units Investment required in plant and machinery

b. Mega project
S no Group Investment basis Employment basis
Ultra-mega project Entire state More than Rs 1,500 crore More than 3,000 persons
Mega project A&B More than Rs 750 crore More than 1,500 persons
C More than Rs 500 crore More than 1,000 persons
D & D+ More than Rs 250 crore More than 500 persons
NID & NAA More than Rs 100 crore More than 250 persons
A mega project that meets the employment requirements must employ at least 75% of locals directly within two
years after the beginning of commercial production.
Criteria for both new and current units
a. Existing unit (Para 2.3 of PSI-2013)
‒ Which has been established and in production prior to April 1, 2013; or

‒ Which has been established and in production prior to April 1, 2013; or - Which has been issued an
eligibility certificate or benefitted from any incentives under any previous programme; or
‒ Which has been established and in production prior to April 1, 2013
38
b. Existing unit (Para 2.3 of PSI-2013)
A new unit is defined as a unit that is established for the first time by an entity in the private sector/ co-op
sector/ central or state public sector/ joint sector in any taluka where the said entity does not already have
an established unit.
‒ Which is not an existing unit

‒ At least one effective step for establishing a unit is accomplished on or after the date of the government
resolution, dated April 1, 2013
‒ It is not the consequence of re-establishment, a simple change of ownership, a new constitution,
reconstruction, or resuscitation of an existing organisation
Eligibility criteria for the expansion / diversification of a unit (Para 2.5 of PSI 2013)
The three conditions to be satisfied:
• Additional investment: The additional investment must exceed 25% of gross FCI for the provision's fiscal.
MSME enterprises Not less than Rs 25 lakh
Large enterprises Not less than Rs 500 lakh
• Expansion or growth cum diversification should result in a 25% increase in installed capacity
• Employment in the non-supervisory category should expand by 10%, of which 80% should be filled by locals
39
6 Financial assessment
6.1 Key assumptions

Assumptions Details
We have assumed the average interest rate at 9.65% for term loans. Any change in this will
Average Interest rate
impact its interest cost
The company will infuse long-term funds to the tune of Rs 1,290.6 million in the form of term
Funding for the project
loans, and Rs 553.1 million in the form of equity towards this project
We have assumed that the prices for raw material will increase at a rate of 7% on-year till
Raw material prices
fiscal. Steel demand is expected to support an increase in prices
Product prices The price of shredded scrap is expected to improve 7% over the next 10 years
The term loan is expected to be repaid in 40 equal quarterly instalments from fiscal 2026,
Debt repayment
with a moratorium of 1 year
The assumptions for working capital management are-
Raw material – 25 days
Working capital
Consumables- 5 days
Debtors- 10 days
The number of employees hired as permanent resources, contractual hires and as labourers
are kept proportionate as per the plant utilisation level
The salary/wage growth considered for the employee categories are-
Employee costs
Permanent- 10%
Contractual- 5%
Labour- 4%
Consumables/fuel Consumables prices to grow 5% on-year for fiscals 2024-35
Per unit electricity rate is assumed to grow at 2% for fiscals 2025-28, at 3% over the next two
Power and utilities fiscals, and at 5% during fiscals 2031-35
The water charges are expected to increase 2% on-year during fiscals 2024-35
Selling, general, and
It is considered to be 1% of total sales for fiscals 2024-35
administrative expense
Provision for sustainability Costs incurred for sustainability is assumed at Rs 100 per tonne of production. The rate is
cost projected to grow at 2% on-year during fiscals 2024-35
Project details
Company name National Steel Ltd
Project details Steel scrap shredder
Location of the plant Khopoli/Panvel, Maharashtra
Plant capacity 4,00,000 TPA
Expected to be commissioned January 2024
Cost of the project (Rs million) Rs 1,843.8
Debt-to-equity is 7:3
Expected debt-to-equity proportion
Equity: 30% (Rs 553.1 million); debt: 70% (Rs 1,290.6 million)
Source: Company
40
Project cost
Capital expenditure for implementing the above plan is estimated as under:
S no Description Total (Rs million)

A. Cost of project
1. Land 158
2. Civil and machinery installation 474
3. Plant and machinery 1,073.5
4. Other fixed assets 138.3
Total 1,843.8
Source: Company, CRISIL Research
Project cost is estimated to be around Rs 1,843.8 million, which will be funded by 30% equity and 70% debt
Financing means
S no Description Total (Rs million)
1. Share capital 553.1
2. Term loan 1,290.6
Total 1,843.8
Source: Company
Working capital loan taken

Units FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35
WC loan Rs million 330 560 810 750 300 - - - - - - -
Source: Company
Debt profile
New term loan
Bank debt
Amount Rs 1,290.6 million
Interest rate 9.65% pa
Repayment period 10 years with 1-year moratorium
No. of instalments 40 quarterly instalments
Source: Company
41
6.2 Financial feasibility of the project
CRISIL Research analysed the operational plan, which will help in understanding financial strength and economic viability of the project
Revenue estimates
FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35
Units
Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected
CRISIL Research's estimates
Capacity TPA 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000
Utilisation rate % 20% 40% 60% 80% 80% 80% 80% 80% 80% 80% 80% 80%
Production tons 80,000 160,000 240,000 320,000 320,000 320,000 320,000 320,000 320,000 320,000 320,000 320,000
Revenue (Rs million) 3,435.3 7,351.5 11,799.1 16,833.4 18,011.8 19,272.6 20,621.7 22,065.2 23,609.7 25,262.4 27,030.8 28,922.9
Cost of sales (Rs million) 3,309.7 7,009.3 11,231.0 15,997.0 17,093.2 18,265.5 19,525.3 20,872.7 22,313.7 23,854.9 25,503.4 27,266.5
Note: For fiscal 2024, capacity will be operational for three months.
Refer to Annexure for detailed revenue and cost estimates
Source: CRISIL Research
Profitability estimates
Units
CRISIL Research's estimates
Revenue (Rs million) 3,435.3 7,351.5 11,799.1 16,833.4 18,011.8 19,272.6 20,621.7 22,065.2 23,609.7 25,262.4 27,030.8 28,922.9
OBITDA (Rs million) 125.6 342.2 568.2 836.4 918.5 1,007.1 1,096.3 1,192.5 1,296.0 1,407.5 1,527.4 1,656.4
OBITDA margin (%) 4% 5% 5% 5% 5% 5% 5% 5% 5% 6% 6% 6%
PAT (Rs million) (12.4) 50.2 226.1 468.8 556.4 621.7 693.2 770.3 853.3 942.3 1,037.7 1,139.8
PAT margin (%) 0% 1% 2% 3% 3% 3% 3% 3% 4% 4% 4% 4%
Note: The company estimate does not account for inflation in prices of raw material and products. CRISIL Research estimates are considering inflation as mentioned in assumptions
42
Financial indicators
Operating income Rs million 3,435.3 7,351.5 11,799.1 16,833.4 18,011.8 19,272.6 20,621.7 22,065.2 23,609.7 25,262.4 27,030.8 28,922.9
Operating margins Per cent 3.7% 4.7% 4.8% 5.0% 5.1% 5.2% 5.3% 5.4% 5.5% 5.6% 5.7% 5.7%
Net profit Rs million (12.4) 50.2 226.1 468.8 556.4 621.7 693.2 770.3 853.3 942.3 1,037.7 1,139.8
Net margins Per cent -0.4% 0.7% 1.9% 2.8% 3.1% 3.2% 3.4% 3.5% 3.6% 3.7% 3.8% 3.9%
ROCE Per cent 4.6 10.0 17.0 24.4 27.4 28.7 26.9 25.3 23.8 22.5 21.4 20.3
Total debt Rs million 1,635.6 1,865.6 1,985.0 1,794.5 1,213.9 783.4 652.8 522.2 391.7 261.1 130.6 0.0
Net worth Rs million 547.1 597.3 823.4 1,292.1 1,848.5 2,470.3 3,163.5 3,933.8 4,787.1 5,729.4 6,767.2 7,907.0
Debt equity ratio Times 3.0 3.1 2.4 1.4 0.7 0.3 0.2 0.1 0.1 0.0 0.0 0.0
Interest coverage Times 1.1 1.9 2.8 4.5 7.3 12.3 15.8 21.0 29.4 44.7 80.8 262.9
Net cash
Times 0.1 0.2 0.3 0.4 0.6 1.0 1.3 1.8 2.6 4.2 9.1
accrual/total debt
Current ratio Times 5.5 8.9 6.4 5.6 5.8 6.9 8.1 9.2 10.3 11.3 15.9
Note: Debt-equity ratio includes unsecured loans
Total debt includes unsecured loans
Net profit and debt increase/ repayment schedule

(Rs million) FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35
Net profit (12.4) 50.2 226.1 468.8 556.4 621.7 693.2 770.3 853.3 942.3 1,037.7 1,139.8
Cash accruals 12.2 147.0 316.6 553.5 635.7 696.0 762.8 835.6 914.6 999.8 1,091.7 1,190.6
Long-term debt 1,305.6 1,305.6 1,175.0 1,044.5 913.9 783.4 652.8 522.2 391.7 261.1 130.6 0.0
Short-term debt 330.0 560.0 810.0 750.0 300.0 - - - - - - -
Total debt 1,635.6 1,865.6 1,985.0 1,794.5 1,213.9 783.4 652.8 522.2 391.7 261.1 130.6 0.0
Repayment of term loan - - 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6
43
Loan repayment schedule
Loan details
Opening balance - 1,305.6 1,305.6 1,175.0 1,044.5 913.9 783.4 652.8 522.2 391.7 261.1 130.6
Total repayment - - 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6
Closing balance 1,305.6 1,305.6 1,175.0 1,044.5 913.9 783.4 652.8 522.2 391.7 261.1 130.6 0.0
Interest paid 78.7 126.0 119.7 107.1 94.5 81.9 69.3 56.7 44.1 31.5 18.9 6.3
Working capital requirements

Working capital days
Debtors 10 10 10 10 10 10 10 10 10 10 10 10
Inventory 15 15 15 15 15 15 15 15 15 15 15 15
Creditors 0 0 0 0 0 0 0 0 0 0 0 0
Working capital (Rs million)
Debtors 104.1 222.8 357.5 510.1 545.8 584.0 624.9 668.6 715.4 765.5 819.1 876.5
Inventory 230.9 493.2 791.4 1,129.0 1,207.9 1,292.3 1,382.6 1,479.3 1,582.7 1,693.3 1,811.7 1,938.3
Cash 8.9 5.0 7.9 8.0 5.2 193.3 729.4 1,330.1 2,001.1 2,748.4 3,578.3 4,497.1
Current assets 335.0 715.9 1,149.0 1,639.1 1,753.7 1,876.3 2,007.5 2,147.9 2,298.1 2,458.8 2,630.8 2,814.7
Creditors - - - - - - - - - - - -
Net working capital 335.0 715.9 1,149.0 1,639.1 1,753.7 1,876.3 2,007.5 2,147.9 2,298.1 2,458.8 2,630.8 2,814.7
44
DSCR for the project expected to be 3.8 times for 2035
DSCR
Interest (term loan) 113.4 184.8 204.7 185.8 126.0 81.9 69.3 56.7 44.1 31.5 18.9 6.3
Loan repayment - - 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6
Total 113.4 184.8 335.3 316.4 256.6 212.5 199.9 187.3 174.7 162.1 149.5 136.9
Cash accruals* 12.2 147.0 316.6 553.5 635.7 696.0 762.8 835.6 914.6 999.8 1,091.7 1,190.6
Interest (term loan) 113.4 184.8 204.7 185.8 126.0 81.9 69.3 56.7 44.1 31.5 18.9 6.3
Total funds available 125.6 331.8 521.3 739.3 761.7 777.9 832.1 892.3 958.7 1,031.3 1,110.6 1,196.9
DSCR 1.1 1.8 1.6 2.3 3.0 3.7 4.2 4.8 5.5 6.4 7.4 8.7
Average DSCR 3.8
*We have not assumed any interest earned on investments
Project IRR is expected to be about 22.9% for the 11-year period

Projected ratios
Debt equity Times 2.99 3.12 2.41 1.39 0.66 0.32 0.21 0.13 0.08 0.05 0.02 0.00
Interest coverage Times 1.11 1.85 2.78 4.50 7.29 12.30 15.82 21.03 29.39 44.69 80.82 262.94
IRR (11-year period at
% 22.9%
current prices)
*We have not assumed any interest earned on investments
Note: Debt-to-equity ratio excludes unsecured loan in total debt calculation
45
6.3 Financial statements
Detailed profit and loss account (project)
Revenue 3,435.3 7,351.5 11,799.1 16,833.4 18,011.8 19,272.6 20,621.7 22,065.2 23,609.7 25,262.4 27,030.8 28,922.9
Raw material (basic
3,024.0 6,471.4 10,386.5 14,818.1 15,855.4 16,965.3 18,152.8 19,423.5 20,783.2 22,238.0 23,794.7 25,460.3
cost)
Consumable stores
120.0 192.0 302.4 423.4 444.5 466.8 490.1 514.6 540.3 567.3 595.7 625.5
and spares
Labour charges 45.7 97.8 156.9 223.8 239.7 256.8 275.3 295.2 316.9 340.3 365.6 393.1
Power and fuel 77.6 158.3 242.2 329.4 338.9 348.7 364.9 381.9 399.7 418.4 438.1 458.6
Provision for
8.0 16.3 25.0 34.0 34.6 35.3 36.0 36.8 37.5 38.2 39.0 39.8
sustainability cost
SG&A expenses 34.4 73.5 118.0 168.3 180.1 192.7 206.2 220.7 236.1 252.6 270.3 289.2
Cost of sales 3,309.7 7,009.3 11,231.0 15,997.0 17,093.2 18,265.5 19,525.3 20,872.7 22,313.7 23,854.9 25,503.4 27,266.5
OPBDIT 125.6 342.2 568.2 836.4 918.5 1,007.1 1,096.3 1,192.5 1,296.0 1,407.5 1,527.4 1,656.4
Interest 113.4 184.8 204.7 185.8 126.0 81.9 69.3 56.7 44.1 31.5 18.9 6.3
OPBDT 12.2 157.4 363.4 650.6 792.5 925.2 1,027.0 1,135.8 1,251.9 1,376.0 1,508.5 1,650.1
Depreciation 24.6 96.8 90.5 84.7 79.3 74.3 69.6 65.3 61.3 57.5 54.0 50.7
OPBT (12.4) 60.6 272.9 565.9 713.2 850.9 957.4 1,070.5 1,190.7 1,318.5 1,454.5 1,599.4
Current/MAT - 10.4 46.8 97.1 156.8 229.1 264.2 300.2 337.4 376.1 416.8 459.5
PAT (12.4) 50.2 226.1 468.8 556.4 621.7 693.2 770.3 853.3 942.3 1,037.7 1,139.8
Net cash Accruals 12.2 147.0 316.6 553.5 635.7 696.0 762.8 835.6 914.6 999.8 1,091.7 1,190.6
Source: Company, CRISIL Research
46
Balance sheet (project)
Equity share capital 559.5 559.5 559.5 559.5 559.5 559.5 559.5 559.5 559.5 559.5 559.5 559.5
Reserves and surplus (12.4) 37.8 263.8 732.6 1,289.0 1,910.7 2,603.9 3,374.3 4,227.6 5,169.9 6,207.6 7,347.5
Tangible net worth 547.1 597.3 823.4 1,292.1 1,848.5 2,470.3 3,163.5 3,933.8 4,787.1 5,729.4 6,767.2 7,907.0
Long-term debt 1,305.6 1,305.6 1,175.0 1,044.5 913.9 783.4 652.8 522.2 391.7 261.1 130.6 0.0
Short-term debt 330.0 560.0 810.0 750.0 300.0 - - - - - - -
Total debt 1,635.6 1,865.6 1,985.0 1,794.5 1,213.9 783.4 652.8 522.2 391.7 261.1 130.6 0.0
Current liabilities - - - - - - - - - - - -
Total liabilities 2,182.7 2,462.9 2,808.4 3,086.6 3,062.4 3,253.6 3,816.3 4,456.0 5,178.8 5,990.6 6,897.7 7,907.0
Gross block 1,863.4 1,863.4 1,863.4 1,863.4 1,863.4 1,863.4 1,863.4 1,863.4 1,863.4 1,863.4 1,863.4 1,863.4
Net fixed assets 1,838.8 1,742.0 1,651.5 1,566.7 1,487.4 1,413.1 1,343.5 1,278.2 1,217.0 1,159.4 1,105.4 1,054.7
Current assets
Cash 8.9 5.0 7.9 8.0 5.2 193.3 729.4 1,330.1 2,001.1 2,748.4 3,578.3 4,497.1
Debtors 104.1 222.8 357.5 510.1 545.8 584.0 624.9 668.6 715.4 765.5 819.1 876.5
Inventories 230.9 493.2 791.4 1,129.0 1,207.9 1,292.3 1,382.6 1,479.3 1,582.7 1,693.3 1,811.7 1,938.3
Total assets 2,182.7 2,462.9 2,808.4 3,086.6 3,062.4 3,253.6 3,816.3 4,456.0 5,178.8 5,990.6 6,897.7 7,907.0
47
Fund flow (project)
Sources of funds
Cash profits 12.2 147.0 316.6 553.5 635.7 696.0 762.8 835.6 914.6 999.8 1,091.7 1,190.6
Equity infusion 559.5 - - - - - - - - - - -
Issuance of long-term debt 1,305.6 - - - - - - - - - - -
Issuance of short-term
330.0 230.0 250.0 - - - - - - - - -
debt
Reduction in cash balance - 3.9 - - 2.7 - - - - - - -
Total sources 2,207.3 380.9 566.6 553.5 638.5 696.0 762.8 835.6 914.6 999.8 1,091.7 1,190.6
Uses of funds
Increase in Fixed assets 1,863.4 - - - - - - - - - - -
Repayment of long-term
- - 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6 130.6
debt
Increase in cash balance 8.9 - 3.0 0.0 - 188.1 536.1 600.6 671.0 747.3 829.9 918.8
Increase in working capital 335.0 380.9 433.1 362.9 57.9 77.4 96.1 104.4 113.0 121.9 131.3 141.2
Repayment of short-term
- - - 60.0 450.0 300.0 - - - - - -
debt
Total uses 2,207.3 380.9 566.6 553.5 638.5 696.0 762.8 835.6 914.6 999.8 1,091.7 1,190.6
48
6.4 Annexure – Revenue and cost estimate details
Revenue estimate
Production assumption
Production capacity TPA 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000
Utilisation rate % 20% 40% 60% 80% 80% 80% 80% 80% 80% 80% 80% 80%
Total production in tons 80,000 160,000 240,000 320,000 320,000 320,000 320,000 320,000 320,000 320,000 320,000 320,000
Process wastage % 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Revenue assumption
Sales volume
Downstream losses % 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
Shredded scrap in tons 79,600 159,200 238,800 318,400 318,400 318,400 318,400 318,400 318,400 318,400 318,400 318,400
Shredded scrap price Rs. per ton 43,157 46,178 49,410 52,869 56,570 60,529 64,767 69,300 74,151 79,342 84,896 90,838
Y-o-Y growth % 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7%
Total revenue Rs. millions 3,435.3 7,351.5 11,799.1 16,833.4 18,011.8 19,272.6 20,621.7 22,065.2 23,609.7 25,262.4 27,030.8 28,922.9
49
Cost estimate
Raw material cost Units FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35
Total raw material
in tonne 84,000 168,000 252,000 336,000 336,000 336,000 336,000 336,000 336,000 336,000 336,000 336,000
requirement
Scrap cost for
Rs per tonne 36,000 38,520 41,216 44,102 47,189 50,492 54,026 57,808 61,855 66,185 70,817 75,775
processing
Y-o-Y growth % 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7%
Total raw material cost (Rs mn) 3,024.0 6,471.4 10,386.5 14,818.1 15,855.4 16,965.3 18,152.8 19,423.5 20,783.2 22,238.0 23,794.7 25,460.3
Employee cost Units FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35
Total number of
69 139 208 277 277 277 277 277 277 277 277 277
employees
Permanent employees
Number of employees 12 24 35 47 47 47 47 47 47 47 47 47
Salary per annum in Rs 1,554,979 1,710,477 1,881,524 2,069,677 2,276,644 2,504,309 2,754,740 3,030,214 3,333,235 3,666,558 4,033,214 4,436,536
Y-o-Y growth % 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%
Total salary (Rs mn) 18 40 66 97 107 118 129 142 157 172 190 209
Contractual employees
No. of employees 43 85 128 170 170 170 170 170 170 170 170 170
Salary per annum in Rs 531,794 558,384 586,303 615,618 646,399 678,719 712,655 748,288 785,702 824,987 866,237 909,548
Y-o-Y growth % 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Total salary (Rs mn) 23 47 75 105 110 115 121 127 134 140 147 155
Labour
Number of employees 15 30 45 60 60 60 60 60 60 60 60 60
Wage rate per annum in Rs 324,480 337,459 350,958 364,996 379,596 394,780 410,571 426,994 444,073 461,836 480,310 499,522
Y-o-Y growth % 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4%
Total employee cost (Rs mn) 46 98 157 224 240 257 275 295 317 340 366 393
Consumables & fuel Units FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35
50
Requirement per ton of
in R 1500 1200 1,260 1,323 1,389 1,459 1,532 1,608 1,689 1,773 1,862 1,955
output
Y-o-Y growth % 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Total consumables (Rs mn) 120.0 192.0 302.4 423.4 444.5 466.8 490.1 514.6 540.3 567.3 595.7 625.5
Power and utilities Units FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35
Units consumed per ton
units 107 107 107 107 107 107 107 107 107 107 107 107
of output
Rate Rs per unit 8.0 8.2 8.3 8.5 8.7 9.0 9.5 9.9 10.4 10.9 11.5 12.1
Y-o-Y growth % 2% 2% 2% 3% 3% 5% 5% 5% 5% 5% 5%
Water estimate cost per
Rs 114 116 119 121 123 126 128 131 134 136 139 142
ton of output
Y-o-Y growth % 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%
Total electricity cost (Rs mn) 77.6 158.3 242.2 329.4 338.9 348.7 364.9 381.9 399.7 418.4 438.1 458.6
SG&A expenses Units FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35
% Of sales % 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Total SG&A expense (Rs. Mn.) 34 74 118 168 180 193 206 221 236 253 270 289
Provision for
sustainability cost
Cost for sustainability for
Rs/ tonne 100 102 104 106 108 110 113 115 117 120 122 124
production
Y-o-Y growth % 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%
Total sustainability
(Rs. Mn.) 8.0 16.3 25.0 34.0 34.6 35.3 36.0 36.8 37.5 38.2 39.0 39.8
expense
51
6.5 Key monitorables
The firm’s business potential depends on the following:
• Requirement of short-term funds for financing working capital
In order to finance working capital requirements, the company needs to raise additional short-term funds over
the initial years of operation. In the future, its ability to generate more cash accruals to funds its working capital
requirement would be a key monitorable.
• Availability of raw materials to maintain high utilisation level
Steel scrap generated is the raw material for the company to further shred it according to client’s requirement.
Non-availability of scrap would adversely impact plants’ utilisation levels, and subsequently, affect overall cost
of production. The company’s capacity utilisation in a highly competitive environment would be key success
factors.
• Rate of interest for repayment of both long-term- and short-term debt
The rate of interest for the repayment scheduled is assumed to be 9.65% for long-term debt and 10.5% for
short-term debt. Any change in this interest rate will impact company financials.
• Ability to maintain high utilisation rates
Average utilisation rates of peers have trended at 70-80% over the last few years. The company’s capacity
utilisation in a highly competitive environment would be a key success factor.
• Provision for sustainability cost
The current provision created for sustainability cost is Rs 100 per tonne of output, which is expected to
increase by 2% on-year till fiscal 2035. Any changes in government regulations regarding policies pertaining to
sustainable operations would impact company financials.
52
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DRP On Setting Up A Steel Scrap Shredding Unit - Draft Report

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DRP On Setting Up A Steel Scrap Shredding Unit - Draft Report

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Detailed project report on

setting up a steel scrap

Total scrap generated in India, by category

Source: Industry, CRISIL Research

FY20 FY21 FY22 FY35

11.1 10.9 12.1

1.2 1.3 2.5-3.5

FY20 FY21 FY22 FY35

1.1 Ship-breaking industry

4000 415 450

Key stakeholders in the ship-breaking industry

Source: Industry, CRISIL Research

Source: Industry, CRISIL Research

1.2 Railway scrap industry

Source: Industry, CRISIL Research

Key railway scrap generators and recovery rates

Source: Industry, CRISIL Research

Source: Industry, CRISIL Research

Melting steel scrap from railways: India and Maharashtra

150 126 133

1.3 Consumer durables scrap industry

Roles of various stakeholders in the consumer durables scrap industry

Source: Industry, CRISIL Research

Steel intensity in consumer durables

Air conditioner 25-30 10-15

Refrigerator 17-20 13-15

Front-load washing machine 20-25 10-13

Top-load washing machine 12-14 13-15

Semi-automatic washing machine 6-8 13-15

Melting steel scrap from consumer durables: India and Maharashtra

Roles of key stakeholders in automotive scrap generation and processing

Source: Industry, CRISIL Research

Steel scrap generation norms in India: Automotive

Car 750-850 772 15-18

Non-geared 60-70 63 13-15

Three-wheeler Three-wheeler 300-400 4-5 334 10-15

Tractor Tractor 1,700-1,800 4-6 1,758 6-9

Source: Industry, CRISIL Research

Source: Industry, CRISIL Research

Ferrous scrap imports by India (MT)

0.9 1.1 1.3 1.1 1.4

FY18 FY19 FY20 FY21 FY22

Stainless steel Steel

11.9 23.6 11.5

3.1 Project overview (Some inputs to be taken from the client)

2. Location and office: Panvel or Khopoli (to be confirmed)

Product mix and proposed capacity:

Raw material will be sourced from regional

Cost of project Cost Industry standards

Land and site development

Building and civil work

Miscellaneous fixed assets

Pollution control equipment

Means of finance Proposed Total

3.2 Capacity of proposed plant

Side view of shredding unit

List of machinery (refer to the side view):

TOP 1) Electrical power

Side view of proposed machine

Top view of proposed machine

List of machinery (refer to the side view)

20. NF2 reversing conveyor