Iron ore utilisation policy in the works

The government is formulating an iron ore utilisation policy on the lines of a similar policy currently operating in the domestic gas sector. The move, fuelled by concerns over improper exploitation and wastage, coupled with huge exports of the major mineral out of the country, is likely to include prioritising consuming sectors. “The basic idea is to check the current huge exports of fines out of the country and ensure conservation of the mineral by cutting wastage, especially of low-grade ore, in the absence of enough value-addition capacity,” a senior official close to the development told Business Standard.

The overall blueprint of the policy is being prepared as part of the New National Steel Policy, currently being drafted by the steel ministry.

A committee under Steel Secretary P K Mishra is working out the modalities of the new steel policy. A separate 17-member task force under the committee, chaired by former National Mineral Development Corporation (NMDC) Chairman P C Gupta, is preparing the fine print of the iron ore utilisation policy.

India, the world’s fourth-largest producer, mines over 220 million tonne (mt) iron ore annually. Around 120 mt of this is consumed domestically to produce 62 mt steel every year, while the remaining 100 mt — worth around Rs 30,000 crore — is exported. Fines, the small-sized and generally high-grade form of the ore obtained after crushing, account for over 80 per cent of these exports.

These fines, when made into pellets, push up blast furnace productivity significantly and reduce coking coal consumption during steel making.

However, India has to ship bulk of its fines overseas, mostly to China, due to limited pelletisation capacity in the country.

With a pelletisation capacity of less than 20 mt at present, India is ranked seventh among the ten pellet-producing countries in the world. The US, Brazil and China are the leading producers. More than 35 mt of pelletisation capacity is being executed at present by companies like SAIL, Tata Steel and Jindal Steel and Power Ltd (JSPL), among others.

“Another concern is the decreasing production of large-sized lumps of iron ore in India. This has also intensified the government’s focus on fines. This issue will also be addressed by the iron ore utilisation policy. The task force has already met two-three times,” another senior official said.

He also added that under the new policy, integrated steel plants were likely to be given priority for iron ore usage, followed by sponge iron plants and other ancillary units that consume the alloy. The official refused to share details, saying the discussions were at initial stages.

A similar prioritisation of consumers was done by the government in the natural gas sector through the gas utilisation policy announced in 2008. That policy had prioritised gas allocation to existing gas-based fertiliser plants, LPG fractioners units, existing gas-based power plants and city gas projects — in that order.

The gas utilisation policy was formulated to address the demand-supply gap in availability. While no such shortage currently exists in iron ore, India’s pace of exploitation of the mineral is a concern.

The government is aiming at doubling steel production to 110 mt over the next decade. That would require mining 400 mt iron ore every year.

At this pace, the country’s 25 billion tonne proven iron ore reserves would be exhausted in 35 years.