Date : 3rd April, 2012 Dear Arunabha Pal, Financial year 2011-12 has come to an end and the

new financial year has begun. This is the right time to evaluate our performance vis--vis our goals. While our performance has not been as encouraging as I would have liked it to be in terms of targeted production levels and sales in the year as a whole, however, I have observed a remarkable improvement in the month of March2012 which leads me to believe that there is a great potential for higher levels of performance from you. A look at the production figures for the year does not reflect a very happy picture: Product Hot Metal Crude Steel Saleable Steel 2011-12 APP 2011-12 Actual 15.9 MT 15.3 MT 14.2 MT 14.12 MT 13.35 MT 12.40 MT Percentage Fulfilment 88% 87% 87% % growth over CPLY -5% -3% -4%

Financial data too reflects a similar trend. In spite of SAIL crossing the Rs.50,000 crore turnover milestone for the first time since inception, profitability has taken a significant hit and is likely to be much lower than the previous year. Although, unprecedented foreign exchange fluctuations and increased cost of inputs have played a role in adversely impacting the financial performance, but we must appreciate that we have not been able to reap the benefits of higher net sales realisation during 2011-12 on account of our lower production. The growing competition is driving us to the wall. The time has come to give in our best to maintain our image as a market leader and our Maharatna status.

True test of leaders lies in emerging as winners in adversities. There are signs of successful efforts in many areas. What we need to do now is to pick up on the momentum gained in last few weeks and sustain it throughout the year. It is not difficult, with the kind of talent, skills, knowledge, resources, processes, experiences and expertise that we have in each one of you. Our performance is good in patches but is not consistent over time and across locations. Let every day be a challenge, let every success be a launching pad for the next higher level of achievement. Let us be proactive and not reactive. Year 2012-13 is full of even greater challenges and it is very crucial to focus on our priorities right from the beginning of the year. Let me share with you some of the thrust areas: Targets for the financial year 2012-13 have been worked out in consultation with a large cross-section of senior officials. Any shortfall with respect to targets that we have set for ourselves should not be accepted from the very first month of the financial year. Adhering to the planned maintenance schedules to maintain equipment health and achieving techno-economic parameters as per norm is also equally important. Projects will remain the biggest thrust area for the year with two 4060 cu. m. blast furnaces & allied facilities scheduled to be brought on-stream in 2012-13. The integrated commissioning of 2.5 MTPA expansion plan at ISP has been planned by Nov12. At RSP, production from the new Blast Furnace is envisaged from Oct12, while other major facilities i.e. new slab caster, the third 150T BOF converter and the 1MTPA Plate Mill are to be commissioned progressively during 2012-13. These large scale projects require great organisational capability and technological discipline, for which systemic interventions need to be done by all of you. It is important that augmentation of this capacity comes without any further time and cost over-run. With increased level of productions, requirement of raw material would also go up substantially in the coming years. Preparedness of RMD to meet the growing requirements of iron ore is a very crucial factor for the company. For the same, projects implementation and development of new mines have to be expedited. It is of crucial significance that MDO for 7 MTPA mines at Chiria and 14 MTPA mines at Rowghat are identified/finalised during the year.

Production from our captive collieries has been sub-optimal, with target fulfilment being 40% only during 2011-12. Urgent interventions need to be made to enhance production from captive sources. In this respect, finalisation of MDO for developing 4MTPA colliery at Tasra has to be carried out without delay.

There is also a need to make concerted effort for cost reduction. Let me candidly share with you that competition in the Indian Steel Industry in 2012-13 is likely to intensify like never before, with several major capacities going to be added in the country. It will be the survival of the most cost-competitive in this scenario. Under these circumstances, SAIL has to strive to improve its cost competitiveness for achieving targeted profits.

Activating the R&D setup through the implementation of the recently prepared R&D Master Plan will provide a cutting edge to our organisation which can give us multiple benefits, viz. making product and process improvements, development of new & high value-added products, cost reduction, etc. As per the plan, we have to undertake at the Corporate level, Technology Missions(TM) and High Impact Projects(HIP) targeted at reducing raw material and energy consumptions coupled with initiatives for imparting greater flexibility for raw material usage, reducing emissions of CO2 and improved waste utilization. At the individual steel plant level, Centers of Excellence (COE) have been created which would primarily focus on various product development and improvements in collaboration with key customers and technology suppliers. plan. All of us need to play an active role towards this objective for sustained benefits from the R&D

Growth in construction, infrastructure, power, capital goods and auto sectors shall play important role in enhancing the steel demand. During the 12th 5-year plan period, GOI has a target of doubling of the investment in infrastructure to $ 1 trillion which should boost steel demand considerably. The market is therefore, getting ready to absorb higher output. But with the intensifying competition, to retain and increase our market share, we have to speed up our actions and rise to the expectations of our stakeholders. No complacency, no lapses, no delays.

Let the targets for 2012-13 be our driving force this year. Product Hot Metal Crude Steel Saleable Steel 2012-13 APP 15.1 MT 14.2 MT 13.4 MT

I urge you to build your teams, enhance competencies and lead your teams to create new records of performance. I am with you all the way.

(C S Verma)