Steel makers skeptic about govt step on iron ore supply

The govt also said, it will take steps to implement the state-level inter ministerial group report on providing raw material linkage to various industries within two months

Steel producers in Odisha, reeling under raw material supply problems, have welcomed the assurance of the state government to make available iron ore to them. But simultaneously they are wary of the implementation of this assurance citing legal hurdles.

Last week, while interacting with the Union steel secretary, state Chief Secretary had said that all miners would be asked to enter into iron ore supply agreements with the local steel producers.

The government also said, it will take steps to implement the state-level inter ministerial group report on providing raw material linkage to various industries within two months.

According to sources, Chief Secretary Jugal Kishore Mohapatra has asked the state steel secretary G Srinivas to study the report and finalise the guidelines to provide raw material linkage to industries.

"It is a positive step and we welcome it. But unless there is a legislation directing the miners to provide their material to local units, I doubt whether this assurance will have any real impact," said N D Rao, managing director of Brahmani River Pellets Ltd (BRPL), a subsidiary of UK-based trading major Stemcor .

The state government already has issued an executive direction that mandates miners to reserve at least half of their monthly output for local industries. Many miners have moved high court against the order and the next hearing on this matter will take place on March 7.

Steel producers said, a mere direction will have no impact as no mineral regulating law has provision for mandatory sale to local steel producers. They said, there is a possibility that miners will not obey the direction.

"There are layers of procedures to follow even if we sign a supply agreement. Besides, we are not sure whether miners will provide us the raw material at a regulated price, which is the main objective of such supply agreement," said an official of Bhushan Steel Ltd. Raw material supply is key to achieving the ambition of Odisha, which has country's one third iron ore reserve, to become the largest steel producing state in the country. The state has signed MoU for 45 projects in the steel sector.

Meanwhile, 20 MoU signed projects have started production at a fraction of their desired capacity due to raw material availability constraints. So far, the state-run Odisha Mining Corporation (OMC) has entered into five year supply contract with Adhunik Metaliks and Rexon Strips to supply iron ore from its Kurmitar mine. Among private miners, Sarada mines has supply commitment for Jindal Steel and Power Ltd (JSPL) and BRPL has signed agreements with Mesco Steel for using ore from the latter's mine.