SC order a death blow to steel sector in Karnataka

The Supreme Court directive to suspend iron ore mining activities with immediate effect in Karnataka’s Chitradurga and Tumkur districts will be the last nail in the coffin for iron and steel manufacturers in the state. The two southeastern districts account for about 20 per cent of the state’s annual iron ore production of about 45 million tonnes.

Mining operations have already ceased in upstate Bellary district, which contributes 80 per cent of Karnataka’s iron ore production. The ore produced in Chitradurga and Tumkur are of low grade, and mainly exported to China.

The state’s pig iron, sponge iron and steel manufacturers, who were working on a thin supply of iron ore from these two districts, will have to shut down their blast furnaces within a week as the SC has ordered the complete halt to mining, industry sources said. The apex court order is likely to adversely affect JSW Steel. The Sajjan Jindal-led company, after a recent SC ban on mining in Bellary, was depending on supplies from Chitradurga and Tumkur — to the extent of 50 per cent of its requirements. The 1982-founded firm operates a 10-million-tonne-per-annum steel plant at Toranagallu in Bellary.

A JSW Steel official said the company had been operating at less than half of its installed capacity after the supplies dried up from Bellary last month. “With the suspension of mining in Tumkur and Chitradurga, we cannot continue with the production any more. Our iron ore stocks will last another four to five days. We may have to shut down our blast furnaces,” he added. On the back of the SC order allowing NMDC to produce iron ore from its Bellary iron ore mines, JSW Steel said the company expects to run its plant at 80 per cent capacity. The ban in Chitradurga and Tumkur will now force the company to further cut production.

“Our blast furnaces are not designed to operate at a lower feed of ore,” the official said on condition of anonymity. “They have to be run at 80 per cent capacity or shut down. With the ore supplies drying up, we will be left with no option but to shut down gradually.” Among the major mining companies that will be affected severely by the SC order are Sesa Goa and Mineral Enterprises Ltd, which operate in Chitradurga. About 25 per cent of Sesa Goa’s iron ore production comes from its mine in Chitradurga. Edelweiss, in an August 22 note, said the SC order on mining ban in the region could possibly shut Sesa Goa’s 6-million-tonne-per-year Chitradurga mine.

“Sesa Goa’s mine in Chitradurga had recently ramped up to 6 MTPA and was accounting for 25 per cent of its annualised volume,” said Prasad Baji and Faisal Memon of the leading financial services company.

Presently, in Karnataka alone, as many as 16 steel mills including JSW Steel, Kalyani Steels Ltd, Mukand Steels Ltd, Kirloskar Ferrous, VISL Bhadravathi, MSPL Ltd, BMM Ispat Ltd and Sathavahana Ispat among others source iron ore from Karnataka. Many other sponge iron manufacturers in Tamil Nadu and Goa also source iron ore from Karnataka. “It will be a big blow to the steel sector as there is no other option than closing down the plants completely. The companies will have to either reduce the production significantly or close down due to non-availability of iron ore. It may take long time for NMDC to reach the assured supply of 33,000 tonnes per day. The current supplies are only in the range of 22,000 tonnes as against the industry requirement of 104,000 tonnes per day,” T S Sampath Kumar, secretary general, Bangalore Chamber of Industry and Commerce said.

The Friday’s order of Supreme Court will also affect about 60 sponge iron manufacturers in the state, most of them have already shut down.

“It’s a very sad thing for the industry. The SC order has come as a severe blow to miners. Actually, only 11 per cent of the forest area is under mining in Bellary district. We have taken all possible precautionary measures to protect the environment,” a spokesperson of MSPL, a mining and pellet producer from Bellary said.

There will be a loss of revenue to the exchequer and the overall economic development will be severely affected in the three districts of Bellary, Chitradurga and Tumkur. The impact is so severe that more than 80,000 people working in the sector will be rendered jobless and the livelihoods of over 100,000 people associated directly or indirectly gets affected, Sampath Kumar added.