Sesa Goa's growth plans face delays due to regulatory hurdles

Iron ore major Sesa Goa today said it was awaiting regulatory clearances to go ahead with its domestic growth plans aimed at doubling its annual production capacity to 50 million tonnes by 2011-12.

"Primarily, we are awaiting various clearances to raise capacity of our mines," Sesa Goa Managing Director P K Mukherjee told PTI in a telephonic interview after announcing a 131 per cent growth in its consolidated net profit for the second quarter of the current fiscal.

The London-listed Vedanta Group subsidiary has joined the chorus of global firms like ArcelorMittal and Posco that have decried delays in getting regulatory approvals for their mega- India projects.

The company had earlier announced to almost double its annual production capacity to 50 million tonnes by the end of 2011-12. Sesa Goa, the country's biggest iron ore exporter, has operations in Goa, Karnataka and Orissa.

The growth projections of 2012 envisage nearly doubling the production capacity of its Goa mines to 30 million tonnes and that of Karnataka to 10 million tonnes. It also includes augmenting the production capacity of Orissa mines to 10 million tonnes in next two years from the current 2 million tonnes.

"Any decision on Goa is on hold, pending the new Goa Mineral Policy. In Karnataka, our projects are in advanced stage of clearances. In Orissa, we have to renew contracts with local miners," Mukherjee said.

Global steel giants ArcelorMittal and Posco have failed to launch combined Rs 1.5 lakh crore worth steel projects in the states of Orissa and Jharkhand for the last five years, on account of regulatory hurdles and problems in land acquisition.

The company said it increased shipments from Goa to meet any shortfall in exports, arising due to Karnataka government's decision to ban movement of iron ore from some of its ports. Mukherjee said he was hopeful of a favourable decision by Karnataka High Court in this regard.

The company had last evening announced that its profit for the second quarter more than doubled at Rs 385 crore as compared to Rs 166.46 crore in the same period of last fiscal.

"The biggest driver was iron ore prices. Then it was the 25 per cent jump in volume. Also due to Karnataka ban, we did more from Goa, which has high margins," he added. The company on an average sold its iron ore at $72 a tonne as against $52 a tonne in the year-ago period.

Going forward, Mukherjee said the company expected prices of high grade iron ore to hover in the range of $140 a tonne.

"The demand as well as market sentiment is strong. In the last few days prices have gone up by $8-9 a tonne. There will be some blips here and there but by the end of the third quarter prices should range at $140 a tonne level for the 63.5 Fe content (high grade) iron ore," he added.