The Karnataka's steel industry, hit hard by shortage of iron ore, has welcomed the Supreme Court's direction to release 1.5 million tonne of the raw material every month through e-auction.This will increase the total supply to the industry to 2.5 million tonne per month as the state-run NMDC has been allowed to do mining of up to one million tonne a month.
The apex court had earlier banned mining in Karnataka's Bellary, Tumkur and Chitradurga districts due to large scale environmental degradation of the areas.
On Friday, however, it had accepted the recommendations of the Central Empowered Committee (CEC), which had said that 1.5 MT iron ore per month can be released for the industry through e-auction route from the stock of 25.88 million tonne, lying at the mines in the state.
"It's a great relief. Now, we can run our plants at 80% capacity as the iron ore supplies will be somewhere about 2.5 million tonne per month for the industry [in Karnataka]," said MVS Seshagiri Rao, Joint Managing Director of JSW Steel, which runs a 10 million tonne per annum (MTPA) plant in the state.
Expressing similar sentiments, a senior official of an affected company said, "Taken together, the production of NMDC at 1 MT per month, the supplies will be about 2.5 MT in a month against a demand of 2.9 MT. So, against nothing, we will at least get something to run our units."
However, small and medium size companies are not that optimistic as they feel that the e-auction route will increase the prices of iron ore significantly and the input costs of the companies will increase manifold.
"Only big producers would benefit [from the e-auction] as they can bid for any amount to secure supplies.
"The bidding route will increase our production costs by many times and ultimately, our plants may get into the danger zone of becoming unviable," said an official of another company, which runs a blast furnace of one million tonne capacity in the region.
Adding that quality of the raw material is also a concern as the stock is a mix of iron ore lumps and fines, the official further said that smaller companies did not have the capability of running their units on fines (lower grade iron ore).
Both the officials, however, refused to be identified as the matter was subjudice.
Besides releasing the stocks, the CEC had also recommended that iron ore from Karnataka's mines will not be exported, and lease-wise and grade-wise reserve price for iron ore for bidding will be fixed after considering the sale price obtained by National Mineral Development Corporation (NMDC).
NMDC is the only company allowed by the apex court to do mining in the state, while MSTC-- a mini-ratna PSU specialised in e-commerce -- has been given the responsibility of doing the auctions for iron ore stocks.
Due to ban on mining, the iron and steel industry in Karnataka has been witnessing severe shortages of iron ore.
According to the Bangalore Chamber of Industry and Commerce (BSIC), daily supplies were about 41,000-42,000 tonne of iron ore till last week for the iron and steel units against a daily demand of 1,04,000 tonne.
22 of 60 sponge iron plants in the state have shut their operations for want of the raw material, while many other firms like JSW Steel, MSPL, BMM Ispat, Sathavahana Ispat among others have resorted to operating at reduced capacities due to paucity of the raw material, industry sources said.
Karnataka produces 16 million tonne iron and steel in a year, which is a little less than 25% of the country's total production.
The state also produces more than a fifth of India's total iron ore production, which is around 220 million tonne annually. Of this, about 80% comes from Bellary-Hospet region at about 40 million tonne per annum, Tumkur and Chitradurga districts meet rest of the requirements.