Steel: End-use plants hit by raw material shortage in Odisha

With mega industries, mainly steel units facing acute shortage of raw materials, the Odisha government has taken steps to tackle the problem by augmenting mineral production.

While steel plants have highlighted their inability to fully utilise their installed capacities due to severe raw material shortage, government's revenue earnings from mining sector has declined, Odisha's Steel and Mines Minister Prafulla Kumar Mallick said today.

"We are taking necessary steps to ensure availability of adequate raw materials for the industries and meet the target of Rs 6,500 crore revenue from mining set for the current fiscal which at present shows a shortfall of around Rs 1,200 crore," Mallick said.

Stating that he held a meeting earlier this week as part of efforts to solve the problem pertaining to raw material, the Minister said 33 steel companies with whom state government had signed MoUs had been called for discussion while representatives from 11 of them turned up.

"If necessary, another meeting can be held to sort out the problem. We also want to discuss the issue with those who failed to attend the recent review meeting," he said adding companies have been asked to present their case on iron ore requirement before the department secretary.

The minister said that the companies raised the issue of high cost of iron ore being purchased from Odisha Mining Corporation (OMC) through e-auction and mentioned about difficulties in transportation of minerals.

Representatives from mega industry players including Jindal Steel & Power Limited (JSPL), Essar Steel and Bhusan Steel who attended the meeting, sought early solution to the raw material problem, Mallick said.

JSPL requires about 325 million tonnes of iron ore for the next 25 years in order to run its Odisha operations, a company spokesperson said.

"The Angul unit of JSPL has a steel making capacity of 2.5 mtpa at present, but are facing acute shortage of iron ore," he said adding JSPL Chairman Naveen Jindal who recently met Chief Minister Naveen Patnaik, had been hinted to consider import of raw material due to acute shortage.

While JSPL's Angul plant is now running at 2.5 mtpa capacity, it would achieve 6 mtpa capacity soon. The company immediately requires 5 million tonnes of iron ore for its operation. In the long run, after completion of its 6 MTPA steel plant, the company will be requiring 12 to 14 MTPA of iron ore in a year for its operation, the spokesman said.

Similarly, Essar Steel is also seeking captive iron ore mines for its future plans, a company official said, adding the company which has commissioned a pellet manufacturing unit at Paradip has emphasised on the need for long term raw material linkage. Industry players have regretted that though Odisha has huge mineral reserves containing about 28 per cent of iron ore, 24 per cent of coal, 59 per cent of bauxite, 98 per cent of Chromite and large reserves of other major mineral resources, manufacturers are facing acute shortage. Pointing out that plants other than steel units were also hit hard due to raw material crunch, they said the Vedanta group's alumina refinery at Lanjigarh in Kalahandi district had to be shut down for several months about two years ago due to lack of bauxite.

Vedanta's alumina refinery and smelter are running with only 25 per cent of their capacities, a company official said adding bauxite for the refinery was sourced entirely from outside the state and abroad.

He recalled that Vedanta Resources Chairman Anil Agarwal, who met the chief minister recently, had stressed that their plants are now national assets and should be utilised to full capacity in order to generate maxium revenue as well as provide employment to the people in the state.

Though Vedanta was ready with the required capacities to manufacture 20 lakh metric tonne of aluminium per annum in Odisha, raw material has been posing a major problem, the spokesperson said. In order to promote value-addition industries, Odisha has signed MOUs with 93 industrial houses including 48 in steel, 28 in power, 3 in Cement, 3 in Aluminium, one in Oil refinery, 4 in ports and the rest in downstream parks in Steel and Aluminium Sector attracting about Rs 9 lakh crore of investment, official sources said.

But investors feel that contrary to their expectations the industries have been hit by shortage of raw material on account of near total halt of mining operation in the state.