Industry body Assocham has asked the government to review e-auctioning of iron ore and provide long-term ore linkages to protect the interest of domestic iron and steel industry.
Electronic auction of iron ore, instead of providing any relief to India's iron and steel industry will adversely affect it, more so as lack of raw material has been a major cause for "tardy progress" of both green-field and brown-field steel capacity expansion projects, Assocham has said in letter to Mines Secretary R H Khwaja.
"There is a need to adopt holistic development approach for ensuring smooth supply of iron ore thereby harnessing the growth of iron and steel industry," said Secretary General, Assocham D S Rawat.
Iron ore production in FY 2013 was 136 million tonnes (MT), out of which 42 MT was captive production while 18.4 MT had been exported, leaving about 76 MT for for non-captive steel producers, it said.
If e-auction is allowed for an important raw material like iron ore, it will create "complete chaos" for the iron and steel industry and such a huge quantity of Iron ore for non-captive users cannot be fulfilled through e-auction process, Assocham said.
In case of e-auctioning, the quality of raw material cannot be assured and it will always remain fluctuating as each time it would come from multiple sources. This would create problems in the operations of blast furnace and steel melting furnaces thereby leading to high coal and energy consumption, it added.
"The existing plants will eventually close down due to uncertainty and high raw material prices as had happened in case of Karnataka where 28 out of 53 sponge iron manufacturers had shut their operations," the letter said.
Besides, Assocham also shared its concerns about inflow of new investments in the domestic steel sector as setting up of integrated steel plants involves huge funding.
"It is almost impossible to commit large financial resources without having security of iron ore supply which is a critical raw material for operating steel plants," it said adding, "even banks do not provide financial closure to projects without secure source of raw materials.
