Karnataka's small, medium miners plan to float pellets and steel company

Small and medium miners in Karnataka are planning to form a consortium and float a company to manufacture pellets and steel.  The development comes at a time when the steel industry is importing iron ore, instead of sourcing it from Karnataka, due to cost variation and alleged quality issues.

While welcoming the miners’ decision, the Federation of Indian Mineral Industries (FIMI) South said that this value addition will be good for the industry.

Basant Poddar, managing director, Mineral Enterprises Limited (MEL) and Member of FIMI South, said, “Such ventures are the need of the day as it will augment resources and result in significant value addition.”

His company will be one of the members of the consortium, which will have three-four companies.  Poddar declined to reveal names of the other three players, saying that talks are in the final stage and in the next six months things will materialise. The new company will be setting up a one million tonne pellet plant at a cost of around Rs 5 billion and it will be funded through debt and equity, which will be brought in by the consortium partners.

“Eventually, we may look at setting up a steel plant also,” said Poddar. The development comes on the backdrop of increasing inventory pile up across the mines in Karnataka.  While local miners alleged that it is because the customers, mainly steel makers, reduced sourcing from the state. The industry blamed low quality and high prices as reasons for reducing sourcing.

According to FIMI’s data, between April and June, total quantity that came into auction (both lumps and fines) was 24.63 million tonnes, while sales was only 6.88 million tonnes. Miners from the state are not allowed to sell outside Karnataka due to Supreme Court’s restriction.

The apex court had said in the illegal mining matter that iron ore produced in Karnataka should be consumed locally.

This requires independent pellet and beneficiation plants (that improve quality of the ore) to cater only to the domestic iron and steel industry.