Steel and mining companies still bearing the brunt of ban in Karnataka, Goa

Steel and mining companies operating in the mineral-rich states of Karnataka and Goa continue to bear the brunt of the iron ore mining ban, which brought the two industries to their knees between 2011 to 2014.

“Till today, we regret the expansion opportunity we lost due to the ban in Karnataka. As per our business plan, JSW Steel was to have 16 million tonne capacity at Vijaynagar alone by 2012. We are still at 12 million tonnes here,” deputy managing director of the company Dr Vinod Nowal told Business Standard.

Sajjan Jindal-led JSW Steel, one of the top primary steel producers in the country, at present has a total installed capacity of 18.1 million tonnes. With no captive iron ore source for its plants, the company currently relies entirely on e-auctioned and imported iron ore to meet its raw material requirement.

“The ban in Karnataka ended in 2013 but till date, there isn't adequate iron ore supply. Some of the B-category mines are still not approved and due to the shortage, prices of ore remain elevated,” informed R K Goyal, managing director at Kalyani Steel.

The company has a 700,000-tonne plant in Karnataka, which had to be shut down completely for some time during the Karnataka iron ore ban period which lasted for 21 months, from July 2011 to April 2013.

The Supreme Court's cancellation of 88 iron ore mining leases in Goa on Wednesday has brought back painful memories to domestic steel players who suffered severely due to a shortage of the key raw material during the ban.

“It was a nightmare to run a business during the mining ban. The ban stopped ore supply abruptly with no alternatives for us. Moreover, we decided to not lay-off any of our 2,500 employees. With virtually no income in hand, expenses were never ending for us in this period,” said Goyal.

The apex court banned mining of iron ore in Karnataka following allegations of illegal activity that had resulted in damage to the environment.

The state has A- and B-category high-grade iron ore mines, which find wide application in the domestic market, along with low-grade C-category mines.

According to industry officials, the total potential for iron ore mining is 50-60 million tonnes a year of which A- and B-categories form the majority of up to 50 million tonnes.

“We had to curtail exports since our volumes dropped and also had to take a re-look at our client list and supply only to those which were important. Till date, we are bringing ore from Odisha, which obviously works out to be costlier for us,” informed Nowal of JSW Steel.

Recently, the court lifted mining ceiling in Karnataka to 35 million tonnes from 30 million earlier for the A and B categories that it had placed on the total production in the state. Having burnt its fingers, JSW Steel has engaged itself strengthening the backward integration. The company has won five C-category mines is likely to have two of them operational in coming months.

With regard to Goa mining lease cancellation, the apex court had questioned the hastening of clearances and said the allocation of mines was made with only revenue considerations in mind. Aniruddha Joshi, a former vice-president at Anil Agarwal-led Vedanta Ltd, however, said, “According to the Supreme Court's earlier judgement, the second renewal has to be taken for granted while the third will need technical permission necessary for the conservation of minerals. These miners were at second renewal stage so the whole plea that renewals have been done hurriedly is incorrect."

Meanwhile, in a notification to the exchanges, Vedanta informed that its mines in Goa are impacted consequent to the Supreme Court order and that the company is currently assessing financial and operational impact of the judgement. In Goa, Vedanta has large mines in Codli and Sonshi regions along with pig iron facility with a captive power plant.

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