Curb on illegal mining brought down iron ore production to half

Iron ore production was 208 mn tonnes which is expected to be hardly 100 mn tonnes this year

The government's bid to curb illegal mining has resulted in the steepest fall in iron ore production. Iron ore production was 208 million tonnes which is expected to be hardly 100 million tonnes this year.

Provisional figures from the Indian Bureau of Mines indicate that iron ore production during April-September of the current financial year was to the tune of 72 million tonnes. If the Federation of Indian Mineral Industries (FIMI) is to be believed then the figure for the full year will not cross 100 million tonnes.

“The figure 72 million tonnes includes a stockpile of 28 million tonnes from Karnataka that is being sold in the e-auction. The trend suggests that the figure for the financial year will not cross 100 million tonnes,” FIMI secretary general, RK Sharma, said.

Comparative production figures for 2010-2011, the year when the ban in Karnataka by the state government was first effected, was 208 million tonnes. Not surprisingly, the sharpest drop between 2010-11 and 2011-12 in production was in Karnataka at 65%, followed by 12% in Orissa and 6.2% in Goa against India’s 18.42%.

Exports have dwindled with the mineral-rich states clamping down on shipments. India, which happened to be the world’s third-largest iron ore exporter, shipped 14 million tonnes till August 2012. In 2010-11, exports were to the tune of 102 million tonnes, which came crashing in 2011-12 to 57 million tonnes.

User industries in India are now importing iron ore. Major steel producers that do not have captive iron ore mines are depending on imports. The difference in price between domestic iron ore and landed cost of import is about $30 a tonne. “If the landed cost of import is $130 a tonne then Indian ore costs $160 a tonne,” a steel producer said.

Sharma, however, explained that the higher prices were on account of a demand-supply mismatch. Lower availability was causing prices to increase, he said.

Availability for domestic users has been a problem since 2011 when mining operations were banned in Karnataka while Orissa and Goa also drastically reduced mining operations due to investigations by the Shah Commission.

But the genesis of the problem goes back further. In July 2010, the Karnataka government issued orders to ban movement of iron ore and permits. This prompted Orissa to review its export policy. Finally in 2011, the Supreme Court imposed an interim ban on mining in the Bellary district of Karnataka.

Subsequently, though, the Supreme Court has granted relief by allowing NMDC to mine one million tonnes a month, though the requirement of steel producers in Karnataka is 2.5 million tonnes a month.

In September, Goa too decided to halt mining activities on account of irregularities. In Goa mining activities had come to a standstill, Sharma said.

India has about 23.59 billion tonnes of iron ore. Of this 12.906 billion tonnes is hematite ore and 10.68 billion tonnes magnetite ore (low-grade). However, 75% of the magnetite ore reserves are in Karnataka and Goa.