The withdrawal of iron ore mining ban in Karnataka by the Supreme Court yesterday is unlikely to bring immediate relief to the ore-starved steel industry. Mills might have to wait for up to six months to get higher supplies of ore for their blast furnaces.
According to a report by the Central Empowered Committee (CEC) of the apex court, only 12 of the 18 mining leases in Category A can resume mining in phases over the next six months. These leases together are authorised to produce 4.5 million tonnes (mt) of iron ore per annum. One company — Allum Prashanth — is unwilling to obtain all statutory approvals, while five others cannot start mining even if they obtain all approvals, as there are other legal cases pending against them.
The Supreme Court allowed 18 Category A mines to resume mining, subject to certain conditions, about 13 months after the ban was imposed.
Presently, only one company, Mineral Enterprises Limited (MEL), has obtained all statutory approvals and is likely to resume mining tomorrow. It can produce about 380,000 tonnes per annum of ore, according to the revised mining plan. “We have to submit some more affidavits to the Supreme Court, giving an undertaking that we will abide by all the conditions stipulated by the CEC. Only after the court accepts our undertaking can we start the mining,” said Basant Poddar, managing director, MEL.
However, MEL’s mining lease expires on October 6 and before that it plans to produce a maximum of 200,000 tonnes. “We can apply for a temporary work permit valid for six months, provided the state government forwards our lease renewal application to the ministry of environment and forests (MoEF). Otherwise, we may have to again shut down production after one month,” he said.
Another two mines with combined capacity of 940,000 tonnes are expected to obtain pending approvals within one month. Another five companies would secure all approvals within the next two months and have a combined capacity of 2.31 mt.
JSW Steel and Kalyani Steel are currently operating at 80 per cent and 40 per cent capacity, respectively. It would take at least three to six months for the companies to bring ore to the e-auction platform in the state.
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“It is not a healthy situation for us. We are operating at 40 per cent of our capacity (700,000 tonnes per annum plant), with a raw material inventory sufficient for another three weeks. By the current indications, we cannot expect normalisation of production in the next six months to one year depending on how mines restart their operations,” said R K Goyal, managing director, Kalyani Steel.
JSW Steel, which operates an 11-million tonne per annum steel plant at Toranagallu in Bellary district, is presently working at 80 per cent capacity. It has ore stock for a couple of more months and is largely banking on the opening up of mining in the state. JSW has been the biggest buyer in electronic auctions. So far, it has bought 14 mt of 24 mt auctioned in the state.
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“We have enough stock reserve but the ore quality is pathetic. E-auctions are happening regularly but below our expectations. NMDC’s production has also not improved beyond 700,000 tonnes per month. With the opening of mining, we hope at least four to five mt would be available in the next few months,” JSW sources said.
The installed capacity of steel in Karnataka is around 17 mt per annum and the industry requires about 30 mt of iron ore per annum. Presently, it is operating with auctioned ore. JSW has even brought ore from Chhattisgarh and Jharkhand. With about 700,000 tonnes of ore produced by state-owned NMDC and the auctioned material, JSW hopes to keep its furnaces working at up to 70 per cent capacity till December.
With the resumption of mining, ore supply is likely to improve to about 14 mt (NMDC plus 12 mines adding 4.5 mt) over the next one year. If the Category B mines are opened up in the next few months, the situation is likely to improve further, JSW sources said.