Karnataka’s steel industry, which is reeling under an unprecedented iron ore crunch, has found deficiencies in the government’s recent attempts at restoring the supply of the mineral in the state , going by an affidavit filed before the Supreme Court on Monday.
Simultaneously, JSW Steel, the biggest steel-maker in the state, also said in a statement that the iron ore crunch has forced its Vijaynagar steel plant to cut its work to 30 per cent capacity.
A recent mining ban in three districts of Karnataka had led the court to allow state-owned miner NMDC Ltd to supply 1 million tonne (mt) iron ore every month to the steel plants in the region. It had also permitted liquidating 25 mt iron ore stocks lying unused in the state , by auctioning 1.5 mt every month.
The auctioning, JSW says, has caused prices to jump. “While all long-term customers across India are procuring iron ore directly from NMDC at a long-term price it has fixed, the sale of iron ore from NMDC mines in Karnataka through e-auction will put steel producers in the region at a disadvantage,” it adds.
The apex court, through a July order, had imposed a blanket ban on the mining of iron ore in Bellary district of Karnataka, reacting to reports of large-scale illegal mining and violations of environmental norms in the region. The ban was later extended to two other districts of Tumkur and Chitradurga.
NMDC has failed to meet the entire supply commitment and has been supplying only 60 per cent of the committed quantity, Karnataka Iron and Steel Manufacturers Association (KISMA) has stated in its affidavit. It has also called the reserve price at e-auction “unreasonably high” severely limiting the relief. “The reserve price for low-grade iron ore is higher by about Rs 1,000 per MT as compared to export linked market prices. In view of this, 31 lots of low-grade iron ore of 0.12 mt could not be sold as none had offered bids at reserve price or above,” the affidavit says.
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The industry body has also pointed out delays both in the conducting of auctioning process and despatch of sold ore as reasons for limited relief to companies.
Any closure of steel plants in the region would impact India’s gross domestic product by 0.5 per cent apart from loss of thousands of crores revenue to the exchequer and loss of lakhs of jobs in the local steel industry, according to KISMA, which comprises big corporates like JSW Steel, Kalyani Steels, BMM Ispat and Kirloskar Ferrous.
JSW Steel, part of the $10 Billion O P Jindal Group, has a 10-MTPA steel plant at Vijaynagar.
“The abrupt disruption of supplies to JSW Steel by NMDC cut the lifeline to run the furnaces in safe condition,” adds the company statement.
JSW Steel has a long-term supply contract with NMDC. In its September 23 order, the apex court said the e-auction would take place irrespective of long-term supply contracts, which NMDC might have with private parties. Following the order, the miner had cut even existing long-term supplies.
KISMA has appealed to the court to direct NMDC to restore long-term supplies until e-auction is being conducted with the condition that buyers will assure NMDC of paying the differential between the price paid and actual prices determined in auctioning. It has also asked for offsetting any lag in the supplies by increasing the amount of the mineral auctioned from stocks.