The liquidation of 25 million tonnes (mt) of iron ore stocks in Karnataka, as directed by the Supreme Court last month, is set to begin on Wednesday. The state government plans to begin the process of auctioning the ore in small tranches of 1.5 every month. The move will come as a major relief for the state’s raw material-starved steel and sponge-iron industry.
A senior Karnataka government official said the auctioning would begin from September 14. The Supreme Court-appointed monitoring committee will oversee the entire sale process, he told Business Standard. “While 40,000 tonnes of iron ore stock can be auctioned every day, we expect the sales to remain over 25,000 tonne initially,” he added.
The apex court had imposed a blanket ban in July on all mining activities in Bellary, the principal iron ore-producing district in upstate Karnataka, following reports of large-scale illegal mining and violation of environmental norms. The ban was extended to the other two iron ore-producing districts of Tumkur and Chitradurga last month.
Karnataka alone accounts for around a fourth of India’s domestic iron-ore production of 225 mt. The ban on mining had jeopardised annual steel production exceeding 14 mt by more than half-a-dozen corporates, including JSW Steel, part of the $10-billion O P Jindal Group and Kalyani Steels, an arm of the $2.1-billion Kalyani Group.
Steel companies in the Bellary-Hospet region, which account for over 30 per cent of India’s domestic steel production of 63 mt, had been forced to import iron ore from other states jacking up production costs.
JSW Steel, which runs the 10-MTPA steel plant in Vijaynagar in Bellary, has a daily iron ore requirement of around 45,000 tonnes. The plant has been running at less than 80 per cent capacity as the company started sourcing from the neighbouring states of Chhattisgarh, Jharkhand and Orissa. JSW Steel has been banking upon the auctioning of 25-mt stocks to ramp up production, according to Chief Executive Officer (CEO) Vinod Nowal.
MSTC Ltd, a PSU under the steel ministry, will conduct the entire auctioning process through its portal mstcecommerce.com and maintain an account of the sale proceeds, the government official informed. The three-member panel appointed by the apex court will monitor the overall process. The interested buyers will have to register themselves with MSTC to take part in auctioning.
While value addition plants – involved in pelletisation and benefication of the ore – will be allowed to source raw material from the auctioning in addition to steel manufacturers, no exports of the auctioned ore will be allowed in line with the Supreme Court’s directive. Reserve price of the ore will be fixed based n the latest sale price offered by state-owned miner NMDC Ltd, and the state government will charge royalty at 10 per cent of the market value of the ore. Also, there will be provisions for strict penalty for violators of the auction guidelines.
Companies are hopeful of benefiting from the ore auctioning as supplies pick up. “Currently,” said R V Gumaste, Managing Director of Kirloskar Ferrous Industries Ltd, “we are consuming 1,000 tonnes daily and managing with only one blast furnace. With the auctioning process beginning, we hope to run both of our furnaces with a requirement of 2,000 tonnes,” he told Business Standard.
He, however, pointed out that the price at which the ore becomes available would decide whether it makes business sense. “Our input costs are already facing tremendous pressure. We hope the ore becomes available at reasonable prices with good margins. This will be clear only after the first round of auctioning is over,” he added.
