Centre wants Odisha iron ore output ramped up 20% to match green limits

Closure of seven working mines in state has triggered sharp price hikes by both, lessees and NMDC

The Union mines ministry has exhorted Odisha's iron ore mine leaseholders to expand production to match the approved limits under environmental clearance (EC).

The closure of seven working mines in Odisha  has triggered sharp price hikes by lessees as well as the country's top producer NMDC Ltd. The operational mines held by Serajuddin & Company, Mesco Steel, state-run Industrial Corporation of Odisha Ltd (Idcol) and others were closed on January 1 this year after they failed to pay out the Supreme Court-mandated compensation in a case of overproduction between 2000-01 and 2010-11. The deadline for paying penalties was December 31, 2017. The shutdown of these mines is estimated to knock off 20 million tonnes of iron ore capacity each year.

"We have asked the iron ore miners in Odisha to ramp up their production to EC limits. There is headroom to increase production by 20 per cent. Miners must produce up to the limits under EC and other statutory approvals to ensure there is no artificial shortage of ore”, said a senior ministry official.

With a production of 102 million tonnes in last fiscal, Odisha was the country's largest producer, contributing more than 50 per cent to the pan-India output of 190 million tonnes. In the ongoing fiscal, miners in the state have approved EC to produce 180 million tonnes.

There are barely 40 operational iron ore mines in Odisha. Major merchant producers are meeting the EC run rate in iron ore production. But, the mines producing lower grade ore (58 to 62 per cent Fe) are finding it tough to liquidate their stock because of lack of demand. 

"There is lack of demand for lower grade iron ore in the domestic market. Such ore cannot be exported due to the prevailing 30 per cent export duty. This has led to accumulation in inventory at the mine heads”, said a mining industry source.

The domestic demand for iron ore is quite subdued due to slowdown in the Indian steel industry. The country produced 191 million tonnes of iron ore in last fiscal and against this, only 107 million tonnes was consumed domestically. Nearly 25 million tonnes were exported, mostly from Goa and smaller quantities from Odisha, the biggest producer.

With the production-demand imbalance in the domestic market, iron ore stockpile at mine heads has gone up to 149 million tonnes (as on March 31, 2017). 

Out of the total stockpile, 122.83 million tonnes or 85 per cent are in Odisha and Jharkhand.  Odisha also accounts for 58 per cent of the total stockpile in the country.  It is observed that of the total stockpile, 70 per cent are below 62 per cent Fe (both lumps and fines).  Fines constitute 93 per cent of the all-India stockpile of below 62 per cent Fe in these two states. 

The increasing stockpile year after year is squeezing the available space in mines for continuing iron ore production.  Unless the stockpile is liquidated, increase in production of iron ore would be affected.

Since there is no domestic demand for iron ore up to 62 per cent Fe, mining lobby body Federation of Indian Mineral Industries (Fimi) feels that the only alternative is to export.  The iron ore from Odisha and Jharkhand can be exported only from Haldia, Paradip, Visakhapatnam and Dhamra ports.