Increase in iron ore cap to benefit steel mills in Karnataka

Posted on 19 December 2017

Source: Business Standard

The increase in their iron ore output cap would help small steel mills in Karnataka that were shutting down due to unfair pricing of the raw material by local mining agencies, Sajjan Jindal, chairman and managing director, JSW group, said in a Twitter post on Monday.

 Imposed in 2011 at 30 million tonnes, the Supreme Court had on December 14 raised the iron ore output cap to 35 million tonnes. The ruling is likely to help steel mills across Karnataka to receive more raw material and raise operating capacity.

Welcoming the order, Jindal said, “A much-welcome order by the Supreme Court for increasing the iron ore mining cap in Karnataka from 30 million tonnes to 35 million tonnes. More than anything else, it is great for the environment as it will avoid  cross-country movement of iron ore.”

Industry sources said that many sponge iron ore units in Karnataka were facing a raw material shortage, forcing them to cut their operating capacity. JSW Steel had to procure iron ore from Odisha and Chhattisgarh to feed its 18 million tonne steel mills in Karnataka. The cost of production was higher for JSW Steel than other steel mills in the state.

 “We must leave it to the government to ensure that the steel industry in Karnataka does not suffer again on account of arbitrary and unfair pricing by miners, who were taking advantage of the shortage created by the Supreme Court order,” Jindal added.

 The Federation of Indian Mineral Industries (FIMI) had urged the apex court to increase the iron ore cap to enable steel mills to source adequate raw material for processing. JSW Steel is likely to be the biggest beneficiary of the increase.

 “We are not going to see any impact on our steel production capacity as we source iron ore from local mines. We wish government-owned miner NMDC cuts iron ore prices for the benefit of steel mills in the state,” said RK Goyal, managing director, Kalyani Steels.

 The enhancement in production capacity is likely to boost industries in the region. It will also ensure smooth supply of raw material to the steel industry.

 Thirteen mining lease-holders in Karnataka had filed a petition before the Supreme Court in May 2016, seeking an enhancement of the permissible annual iron ore production limit. Based on instructions issued by a court-appointed body, the state government in August 2017 asked its department of mines and geology to evaluate the proposals.

 According to industry sources, the total potential for iron ore mining in Karnataka is 50-60 million tonnes a year. 

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