Iron ore scarcity may affect BSP's profit in next 3 yrs

Bhilai Steel Plant (BSP) — the highest profit making entity of the Steel Authority of India Limited (SAIL) — is likely to have its profit affected in the next three years, due to iron ore scarcity.

For, the existing captive iron ore mine of the BSP in Dallirajhara is on the verge of exhaust and the one allotted to it in Rowghat will take to develop following strong protest from the Naxalites. The plant is also on the expansion mode and will require more ore from next year.

“Since the production will increase and there will be scarcity of iron ore, the expenses of arranging raw material from different sources will add to the production and will eat our profit,” assistant general manager (Public Relations) of BSP Subir Daripa told Business Standard.

The BSP had been running under profit every year consecutively for the last two decades. It shares major proportion in the profit of the steel major. The unit is recognised as the flagship entity of the SAIL.

According to the BSP officials, the unit is producing about 7.8 million tonnes of iron ore from Dallirajhara mines (as per the report of 2011-12). The annual requirement of the raw material is somewhere between 9.5 MT and 10 MT. The company is transporting about 1.2 MT of iron ore fines from SAIL’s Raw Material Division (RMD).

The real problem for the BSP will start when the expansion plan from 5 MT to 7 MT will complete by the end of current fiscal 2012-13. If things go on the right track, the units will be commissioned by July or August 2013.

“After expansion, the iron ore requirement of the BSP will enhance to 14 MT and by the time, production in the Dallirajhara mines will come down,” Daripa said. Managing one or two million tonnes can be considered, but transporting 14 MT tonnes that too iron ore lumps is next to impossible, he added.

Firstly, Chhattisgarh does not have additional reserves with good quality of iron ore. The BSP has to manage ore from either Jharkhand or Orissa.

“But it is not so easy to get ore from both the states as it will stress for value addition and setting up plant in the respectively state,” explained an official in the RMD. Even if the ore is arranged, the transportation cost will be so high that it will be impossible for the BSP to sustain its position of sharing a major portion of SAIL’s profit, the official added.

The BSP has been allotted Deposit F in the Rowghat mines that has an estimated reserve of about 500 MT. But the red army has cast its shadow on the mine as the Naxalites have dared to take up any work in the area where they have considerable sway. Even if the government agencies throw open security blanket in the area spread over 2,050 hectares and start the work, BSP can mine ore from Rowghat only after two-three years. But not 14 MT right from the first year that it will require after the expansion plan is completed.