Decision taken after the govt banned ore exports from the state.
The country’s largest iron ore exporter, Sesa Goa, has cut mining output in Karnataka by 70 per cent since the state government banned any outgo of the steel-making raw material a month before.
A part of the Vedanta group, it has six million tonnes (mt) of iron ore mining capacity in Karnataka. The company produced 3.5 mt of high grade ore in the state in the last financial year, a capacity utilisation of 58 per cent. This year, the company had planned to raise output to five mt, due to high export potential to China, the world’s largest steel producer.
“Not only Sesa Goa, all 75-80 miners in the state have cut output heavily due to high stockpiling. Since, the government banned exports of iron ore from the state, all 30-35 specifically licensed export-oriented units (EOUs), contributing over 60 per cent to the state’s output, have reduced their output by 60-70 per cent,” said
D V Pichamuthu, director of Fimi South, a division of the mining trade body, the Federation of Mineral Industries (Fimi).
In contrast, public sector NMDC Ltd has not cut any mining output at its Donimalai mine in the state, which is operating smoothly despite the state government’s action. Analysts attribute it to the company’s focus on domestic supplies. The company, with 22.4 mt of iron ore reserves, has planned to expand output from four mt to seven mt.
Mining firms focusing on the local market will run smoothly, while EOUs will be hit badly, a steel analyst based in Mumbai said. NMDC’s share closed at Rs 257 on BSE, a drop of two per cent from the previous close.
Karnataka has 9.03 billion tonnes of proven iron ore reserves, equivalent to about 40 per cent of India’s estimated total of haematitic and magnetic iron ore resources. Sesa Goa and other mining firms have challenged the export ban in the Karnataka high court. The hearing is on August 20. Pichamuthu said if the ban was not lifted immediately, mining companies will have to halt activities in the state.
When quizzed about the possibility of more investment through setting up forward integration like pelletisation to fetch higher realisation, Haresh Melwani, CEO, H L Nathurmal & Co, a mining firm, said, “Only low grade iron ore is exported from India that is not used by domestic mills. Setting up pelletisation to process low grade ore domestically rests with steel mills.”
