Delay in transporting ore: Steel production remains hit in state

There seems to be no end in sight to the problems of the now ore-starved iron and steel companies in Karnataka. The industry, in the throes of a severe shortage of iron ore for the past few months, is struggling to resume normal production despite the auction of ore from the stockpile of 25 million tonnes in the state.

While the Supreme Court-appointed Monitoring Committee and MSTC have been conducting e-auctions as directed by the Supreme Court since September 14, the industry has been facing considerable delays in getting the ore bought at the auctions due to the procedural delays and logistical constraints.

The steel companies like JSW Steel, Kalyani Steel and pig iron makers like MSPL among others are facing severe difficulties in transporting iron ore from the mines to their respective plants due to the delays in issuing mineral dispatch permits and forest clearance from the state government.

More than the big companies, it is the small and medium sized steel mills in Karnataka that are affected the most. They are already reeling from heavy losses due to the unavailability of iron ore for nearly six months.

JSW Steel has been facing for the past few months a severe shortage of iron ore due to the ban on iron-ore mining in Karnataka.

“This problem of acute shortage of Iron-ore was further accentuated in September 2011 when there was a delay in implementing the Supreme Court’s directive to make available iron ore to the steel companies from stock piles and NMDC production through an e-auction,” the company said in a statement.

This led to a steep drop of 28 per cent in crude steel production in September 2011 as compared to August 2011, as the company cut down its production at Vijayanagar Works to 30 per cent in the last week of September, JSW Steel said.

In the last four auctions, JSW Steel has secured 1.924 million tonnes for Vijayanagar plant and 0.156 million tonnes for Salem Works. However, iron ore received at site is only around 18 per cent of total material procured by Vijayanagar Works in e-auctions. The company is yet to improve capacity utilisation significantly from existing levels as the receipt of e-auction material is taking considerably longer time due to procedural delays and logistical constraints, the company added.

R K Goyal, managing director, Kalyani Steel said the company has so far received around 25,000 metric tonnes of iron ore out of about 200,000 metric tonnes purchased at the e-auctions.

“The transportation of ore from the mines to our factory is a big issue for us. The department of mines and geology has permitted the transportation of ore only from 6 am to 6 pm. The department is not well equipped to issue mineral dispatch permits faster and is also faced with the problems of connectivity at its offices and the delay is hampering the movement of ore to our factory,” he said.

The company has been able to run its plant at less than 50 per cent of its installed capacity due to the shortage of ore. The company runs a 700,000 tonne plant at Hospet in Bellary district. As against the daily requirement of 3,500 tonnes per day, the company is managing to get about 1,600 tonnes a day.

“We are not in a position to shut down the factory at this stage as around 3,000 workers are dependent on us. If the plant is closed, the overheads will be higher and it would be difficult to recover the losses,” Goyal added.