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Augmentation of Pulverized Coal Injection System of Blast Furnace
Augmentation of Pulverized Coal Injection System of Blast Furnace
Augmentation of Pulverized Coal Injection System of Blast Furnace
Furnace#2
Project cost increased from 58.88 Crores to 61.83 Crores (Gross of GST Incl. Contingency)
Project cost increased from 50.28 Crores to 52.81 Crores (Net of GST Incl. Contingency)
Approval of escalated and additional scope cost (INR 2.53 Crores- Net of GST incld Contingency)
2. Currently, Blast Furnace#2 is having 60 TPH coal grinding unit and 71.5 TPH coal injection system (Supplied by M/s
PaulWurth). The PCI injection rate is 152 kg/thm on an average basis (Q1’20) at production level of 8700 tpd. Further,
the requirement of ground PCI coal is approx. 93 TPH to reach PCI rate of 200 kg/thm at desired production level
(9300 tpd) through Blast Furnace #2. Therefore, an additional coal grinding mill (40 TPH) and augmentation of existing
coal injection system are essential.
3. The total project cost for original scheme of 40 TPH Coal Grinding Mill along with Augmentation Of Coal Injection
system was INR 50.28 Crores. The scheme was approved by the erstwhile company and it is part of the ongoing
capital project at the time of acquisition.
a. Out of Rs. 50.28 Crore (net of GST including contingency) total project cost, Rs 36.98 Core was estimated for 40
TPH Coal preparation plant and remaining Rs 13.30 Crore was estimated for augmentation of coal injection system
for Blast Furnace#2.
b. The placement of order for grinding mill was done in Feb 2017 and the mill is expected to be commissioned by Dec
2019. The placement of order for PCI injection system is yet to be done.
c. As on date, total committed and actual incurred cost are Rs. 26.82 Crore and Rs 15.55 Crore (Net of GST)
respectively. Schematic diagram of augmentation of coal injection System is shown in slide 5.
4. On revalidation of the project cost for PCI injection system, there is an increase in capex and also change in scope as
a result the PCI injection system project cost is expected to increase by Rs. 2.95 crores (Gross of GST including
Contingency) and Rs. 2.53 Crore (Net of GST including Contingency). As this is the sanctioned and ongoing scheme,
the approval is sought for additional project cost to complete the project. The details of costs and change in scope is
provided in Annexure 1
3
B. CURRENT STATUS
A. Grinding Mill
1. Construction of additional 40TPH coal grinding mill is already in the progress (started in Feb 2017) which will increase
the grinding capacity from the present 60 TPH to 100 TPH required to reach the coal injection capacity of 93.75 T/Hr.
2. In ongoing project, 40 TPH coal preparation plant will prepare the required quality of coal for injection system and
transport the pulverized coal in existing coal preparation plant fine coal silo.
3. The installation work is expected to complete by end of this year (Dec’19)
C. Oxygen Requirement
1. For additional Oxygen requirement, Oxygen network will be linked with 350 tpd oxygen plant. It is expected to be in
operation by Dec 2019. Linkage through pipe line is already established. No capex for Oxygen pipe line is required. Till
then we will continue to source Oxygen from the market
4
C. SCHEMATIC DIAGRAM OF AUGMENTATION OF COAL INJECTION SYSTEM
EXISTING
EXISTING
NEW
NEW
EXISTING
i. Proposed scheme will increase the coal injection capacity from existing 150 kg/thm to 200 kg/thm considering peak
production of 9300 tpd with additional oxygen being available
a) Present Scenario: In the current scenario, with commissioning of 40 TPH mill, the peak value of PCI injection
can be only 71.5 TPH which at a production of 9300 tpd will be 184kg/thm and average value will be 165
kg/thm. The commissioning of the Mill will ensure grindability of the coal irrespective of the source, thus bringing
down the fluctuations in PCI injections, which is happening currently
b) Proposed Scenario: With the commissioning of proposed scheme, the peak injection rate at 9300 TPD hot
metal production will be 225 Kg/thm and average injection planned is 200 Kg/THM
ii. Further, higher PCI rates in Blast furnace will reduce the coke requirements as it will facilitate optimization of coal
blends to use more of weak coals reducing requirements of hard coking coal by upto 5% from current blend. This will
reduce the cost of coke and coal procurement.
iii. The expected savings per month is Rs. 2.63 crores at 3.09 hot metal production at BF#2 and if the project of PCI
system is delayed, this will lead to the opportunity loss.
2. Environmental Impact - 0.05 ton of CO2 emission per ton of crude steel at overall plant level will get reduced by
increasing the coal injection in blast furnace
Given the long lead time of 14 months for installation of PCI from the date of placement of order, it
is important to place the order immediately.
6
E. ALTERNATIVES
Capex /
SN Alternatives Advantages Disadvantages Remarks
Time
1. It is proposed to augment existing coal injection system from 71.5 T/Hr to 93.75 T/Hr coal injection in Blast
Furnace#2 at an overall escalated project Cost of Rs. 18.51 Cr (Gross of GST with contingency) or Rs. 15.83 (Net of
GST with contingency). The project cost of Rs. 13.30 crores is already approved. The additional cost of Rs. 2.95
Crores (Gross of GST including Contingency) or Rs 2.53 Crores (Net of GST including Contingency) is placed for
approval.
2. To enhance the capacity of existing coal injection, intermediate conveying hopper with building is introduced (Fig 1
Slide no. 5). New transfer line (Piping) from existing conveying hoppers to intermediate hopper and intermediate
hopper to main distributer will be replaced. Provision of bypassing the intermediate conveying hopper already
considered for unforeseen stoppage of newly introduced intermediate conveying hopper.
3. In addition, it is also proposed to include the new Nitrogen gas pipeline to be laid from Oxygen plant to Blast
Furnace#2 for additional Nitrogen requirement.
4. Total cost of PCI Injection Mill including the new nitrogen gas pipeline is given below.
1. M/s PaulWurth is the technology and key equipment supplier for the project. Contract will be awarded on single
party basis as its a modification in existing injection system and existing system is supplied by M/s PaulWurth.
3. Supply of Key mechanical equipment (Intermediate conveying vessel), control and manual valves, Instruments
and automation are in scope of M/s PaulWurth
4. Integration of automation for new injection system with plant DCS1 is in scope of M/s PaulWurth.
Tata Steel BSL Scope of work (the cost of the same is included in the project costs)
1. Supply of pipes, fittings, cast basalt lined long radius bend, building structure, roof sheeting, power & control
cable, manual walls, lighting, cable trays, load cell, impulse piping for instrumentation, JB’s and earthing system
are in scope of TSBSL
3. Construction of civil, structure and erection of utilities, electrical and mechanical equipment are in TSBSL Scope.
11
H. KPIs
Operational KPIs
Base Year / Benchmark
Parameters UoM “As Is”1 “To be”
Period Level
Pulverized Coal Injection Rate (A) Kg/thm 2018 152 2002 210
Lower Coke Consumption (B) Kg/thm 2018 365 322
Fuel Rate (A + B) Kg/thm 2018 517 522
Cost Savings Rs. Crs /month 2018 0 2.63
Environment KPIs
Base Year /
Parameters UoM “As Is” “To be”
Period
T/Ton of
CO2 Emission 2018 2.93 2.88
Crude steel3
1. “As Is” is based in Actual production from BF2 for Q1’FY 20
2. Considering the replacement ratio of PCI: Coke as 1: 0.9
3. Total Carbon emission will reduce by 2,39,400 Ton of CO2 per
1 12
I. PHASING OF EXPENDITURE
(For augmentation of injection system and additional scope)
Fig in INR Crs.
Gross of GST Input Tax Credit Net of GST
Year (incl. Contingency) (incl. Contingency)
2019-20 11.10 1.60 9.50
ACTIVITY TIMELINE
Activity M1 M2 M3 M4 M6 M7 M8 M9 M10 M11 M12 M13 M14
Approval of scheme
Engineering
Ordering of
equipment
Supply of equipment
Civil work
Structure fabrication
and erection
Testing &
Commissioning
13
J. RISK AND MITIGATION PLAN
Delay in project due to • Robust Review mechanism is in place to ensure project completes
3 Time overrun supply of equipment within the timelines
and construction • LD clause considered in contract
Increase in pricing of
• Contingency fund of 5% is considered in the Project Cost for any
4 Cost overrun cement and steel and
fluctuation and exigency
labour
• Contract workers are well aware and well trained with the existing
Handling of high system
pressure system • Standard Operating procedure is in place
5 Safety • Operation & Maintenance manual will be provided by the Supplier
Handling of Coal dust • Nitrogen will be used as conveying media in the system
14
K. CEC OBSERVATIONS (1/3)
1. The current proposal for PCI Mill for BF2 doesn't articulate how will installation of injection system in both
BF1 & BF2 will achieve PCI of above 200 kg/thm.
Response-
a) As per BF Team, linking of Blast Furnace#2 injection system with Blast Furnace#1 is not viable because of different
coordinates and different consumption pattern
b) Also the overall balancing of available PCI coal post installation of 40 TPH coal grinding mill will not be adequate.
E&P recommends delinking the two based on technical constraints
Explanation:
Description As on As to be
15
K. CEC OBSERVATIONS (2/3)
2. The expected PCI level that can be reached without any capital investment both at BF1 and BF2 at current and
projected production levels of Hot Metal
a) The upgrade of Injection System in BF#2 has no relationship to BF#1. At present, BF#1 can do upto 180 Kg/THM. For
increasing to +200 Kg/THM a separate proposal will be made for upgradation.
b) Pulverised coal Injection rate in Blast Furnace#2 in different scenarios illustrated below:
At Current level of At Current level of At Current level of production
Description Unit production with production with additional with capital investment (Aug.
existing facility 40 TPH coal grinding mill of injection system)
Coal injection in BF#2 kg/thm 152 160-165 +200
3. Whether the Oxygen and Nitrogen balance required to achieve the above level sufficiently available
a) With increased injection rate at BF the consumption pattern of Oxygen and Nitrogen is given below:
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K. CEC OBSERVATIONS (3/3)
b) With the installation new Nitrogen Compressor by Feb’20, additional N2 requirements will be met. However, a new
pipe line has to be laid from Oxygen Plant to the New PCI system at BF#2. It will take 8 to 10 months for completion of
pipeline work. The augmentation of injection system will take 14 months and therefore new nitrogen line will be done in
parallel post 4-6 months.
c) For the additional Oxygen requirement new pipe line has already been commissioned and additional demand will be
met through the 340 TPD Oxygen plant. Presently around 150 TPD additional oxygen is being supplied through
purchase.
4. How to bridge the gap between Point 1 above and the target of 200 & above PCI for both BF1 and BF2 and
what strategic intervention is required with regard to the capital investment to achieve that level along with
oxygen and nitrogen level
a) For BF#1, we have to upgrade the current injection system and also install coal transportation system for transferring
coal fromBF#2 Mill to support coal requirement for which the separate proposal will be placed for approval.
b) For BF#2 additional investment will be for laying of pipelines with PRS for additional nitrogen requirements (included in
the Project Scope).
c) Sustained availability of Nitrogen at high injection rates has to be ensured (will be done post installation of Nitrogen
Compressor as per the Ongoing Plan).
d) Upgrade of 340TPD oxygen plant to supply the oxygen demand of BF#2 (ongoing)
5. Associated risk and challenges in achieving and sustaining 200 level at both the Blast Furnace
a) The biggest risk for higher PCI rates is the availability of backup Nitrogen during Power failure /1120TPDOxygen Plant
tripping. Also the dependability / reliability of 340 TPD oxygen plant has to be improved as the compressor system is
old. Any failures of Nitrogen/Oxygen will seriously hamper the operations at higher PCI rate.
b) The robust standard maintenance procedure (SMP) to be deployed to prevent unplanned breakdown and shutdown.
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L. PEER REVIEW GROUP OBSERVATIONS (1/2)
S. No. Observations Clarifications
Proposal Background to remove the
1 Updated in the presentation
description of BF1
In the current scenario with commissioning of 40 tph mill the
Incorporate a table explaining peak peak value of PCI injection can be only 71.5 TPH which at a
requirement and average requirement production of 9300 tpd will be 184 and average value will be 166
2
of PCI injection in ‘current’ scenario and kg/thm. With the commissioning of new injection system the
‘to be’ scenario peak capacity at 9300 tpd production will be 225 Kg/thm and
average injection planned is 200 Kg/THM
PCI coal is a replacement of conventional fuel in Blast Furnace
How specific consumption of coal can
3 operation (Coke). Cost of Blast Furnace coke is higher than PCI
be reduced to be explained properly
coal
Diagram of PCI provided in Slide No 6
4 Modified diagram updated in the revised proposal (Slide 5)
should be explained in detail
After commissioning of40 TPH coal preparation plant in Blast
Capacity of the Mill is generally 10%
Furnace#2, the average capacity of coal injection will be
less than recorded. Proposal to clarify
5 increased due to better availability of PCI coal in the system.
that the peak capacity is not increasing
However, the injection capacity of coal injection will be same as
but the average capacity is increasing
of now(71.5 T/Hr), Peak injection rate will not change
Proposal to incorporate
6 benefits/changes from ‘current- As Is’ to Covered in Slide 11
‘Proposed – To be’
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L. PEER REVIEW GROUP OBSERVATIONS (2/2)
S. No. Observations Clarifications
Benefits of BF-1 should not be considered in There is no monetary benefit in Blast Furnace#1 by up-
7
IRR calculation gradation of BF#2 injection system
After installation of 40 TPH coal preparation plant in
Linkage of the project with BF1 to be BF#2, In case of Blast Furnace#1 Coal Preparation Plant
explained. Advantage to BF1 and what will be breakdown, surplus coal from Blast Furnace#2 can be
8
the standalone advantage - both need to be transported to Blast Furnace#1 coal preparation plant.
explained However, this provision is under evaluation and not
considered in this scheme
Cost breakup to be checked (specially
9 supervision cost)and typo to be corrected in Corrected in the revised proposal
slide no 10
Technical contract (specification) is signed with M/s
Team to check whether the Technology PaulWurth India for up-gradation of injection system only.
10
Contract is signed for both Mill or PCI or both Mill part (coal preparation plant) is under execution and
was singed with M/s Thermax in 2017
Operational KPI need to be incorporated in 2
different stages. They should be modified such Operation KPI of 40TPH coal injection system need to be
11 as: evaluated before incorporating in this project scheme.
Mill commissioning Same shall be evaluated in due course
Peak and average etc.
In Environment KPI, show total reduction post
12 implementation of the Project instead of Updated in Slide 13
‘Benchmark Level’
19
20
End of Presentation
21
ANNEXURE 1- Justification of cost escalation in PCI#2
Net of GST incl Contingency
Figures in Crores
Original Scheme New Scheme Difference Remarks
Scope Cost Scope Cost Cost
40 TPH Coal 36.98 40 TPH Coal Grinding Mill 36.98 0.00
Grinding Mill
* In the original scheme, there is a cost overrun because of delay in order placement of augmentation of coal
injection system
**To meet the enhanced nitrogen requirement in PCI#2 which was not covered in original scheme
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ANNEXURE 2: NPV & IRR Calculation
FY'20 FY'21 FY'22 FY'23 FY'24 FY'25 FY'26 FY'27 FY'28 FY'29 FY'30
Sl. No. Particulars Unit Total
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
INFLOWS:-
1. Cost Saving on 108,627
Rs. Lakhs 9,782 12,356 12,356 12,356 12,356 12,356 12,356 12,356 12,356
replacing Coke with PCI
A Total Inflows Rs. Lakhs 108,627 - - 9,782 12,356 12,356 12,356 12,356 12,356 12,356 12,356 12,356
OUTFLOWS:-
1 Maintenance & other 2,783
Rs. Lakhs 309 309 309 309 309 309 309 309 309
exp.
2 N2 Cost Rs. Lakhs 64,669 7,185 7,185 7,185 7,185 7,185 7,185 7,185 7,185 7,185
3 O2 Cost Rs. Lakhs 15,362 - 1,707 1,707 1,707 1,707 1,707 1,707 1,707 1,707 1,707
B Total Outflows Rs. Lakhs 82,814 - - 9,202 9,202 9,202 9,202 9,202 9,202 9,202 9,202 9,202
C EBIDTA (A-B) Rs. Lakhs 25,813 - - 580 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154
D Less : Depreciation Rs. Lakhs 2,215 176 168 234 224 216 210 205 201 197 194 190
E PBT (C-D) Rs. Lakhs 23,597 -176 -168 346 2,930 2,938 2,944 2,949 2,953 2,957 2,960 2,964
F Less : Income Tax Rs. Lakhs 7,305 -192 -163 -176 926 948 966 980 991 1,000 1,009 1,016
G PAT (E-F) Rs. Lakhs 16,293 16 -5 522 2,003 1,990 1,979 1,970 1,963 1,957 1,952 1,948
H Cash Inflow (G+D) Rs. Lakhs 18,508 192 163 756 2,228 2,206 2,188 2,175 2,164 2,154 2,145 2,138
I Change in Working Capital Rs. Lakhs - - - - - - - - - - - -
Capital Expenditure (Gross 6,183
J Rs. Lakhs 5,442 741 - - - - - - - - -
of Cenvat with contingency)
K Input Tax Credit Rs. Lakhs 903 795 108 - - - - - - - - -
L Sustenance Capex Rs. Lakhs 661 - - - 22 53 81 96 110 105 100 95
M Terminal value Rs. Lakhs 264 264
Net Cash Inflow 12,830
N Rs. Lakhs -4,455 -470 756 2,205 2,153 2,108 2,078 2,054 2,049 2,046 2,307
(H-I-J+K-L+M)
WACC % 12.10%
NPV Rs. Lakhs 4,107
IRR % 26.0%
Discounted Payback Period Years 6.15
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ANNEXURE 3: KEY ASSUMPTIONS
1. Cash inflows and outflows are consider from FY 22 onwards as equipment will commissioned by end of the year.
2. The operational life of the project has been considered as 20 years and accordingly SLM depreciation is
considered as per schedule II of Companies Act, 2013.
3. Income Tax rate is taken based on current Income Tax rate @ 34.608 %
4. GST rate of 18% has been considered for the working as provided by the E&P Team
5. Income Tax on capital gain on terminal value of equipment is not considered due to minimum or no impact on
project returns.
6. The capital expenditure cost is considered on the basis of budgetary quotes received from vendor.
7. The cash flows have been discounted yearly @ WACC of 12.10% provided by finance department (The same is
used by TSL).
8. No additional working capital has been considered as it is assumed that existing working capital is sufficient to
meet the additional production.
9. All the data related to production and cost along with project returns and estimates are vetted and signed off by
BAG
ANNEXURE 4a: PROJECT ASSUMPTIONS
PARTICULARS DETAILS
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ANNEXURE 4b: PROJECT ASSUMPTIONS
Scheme for new Nitrogen pipeline installation from Oxygen Plant to PCI#2, BF#2
Nitrogen
Header Additional Scope - High Pr. N2 Pipe line
(6”) for PCI#1 BF#2
Existing facilities
On-going Project
Additional Scope
CONCURRENCE FROM CFO
1. Both the schemes are highly interlinked and should be looked at together for the final optimum outcome in
benefits and more so from the incremental benefit of coal injection system .
2. Considering the total original for this entire project is Rs 50.28 crs, Team can go ahead with this marginal
increase of Rs 2.53 crs to implement this at the earliest .
3. As the Project progresses, it can see if some amount can be saved from the contingency of 5%, which is built
into the project cost already.
4. Go ahead was given by CFO for the increase in Project cost by Rs 2.53 crs
28