Low-grade iron ore producers hit hard by state's export ban

The recent ban on the export of iron ore by Karnataka government has thrown life out of gear in Tumkur and Chitradurga districts where only low-grade iron ore is available. The ban has severely affected the livelihoods of people depending on the mining industry and close to 10,000 persons are rendered jobless since the ban was imposed.

The iron ore mining companies engaged in the extraction and export of low-grade iron ore in these two districts are in deep trouble as their losses are running into several crores on account of possible penalty from the buyers abroad, but also due to the heavy investment in infrastructure.

As many as 25 of the 90 operational mining companies in the state export over 10 million tonnes of low-grade iron ore from these two districts for which there is no market in the country. These companies have collectively invested over Rs 200 crore in the last couple of years on setting up support infrastructure like cranes, sheds for storing ore, railway sidings and port equipment for exports. In addition to this, companies like Sesa Goa, MSPL, Bharat Mines and S K Modi have also invested Rs 100 crore to buy railway rakes to transport ore to the ports.

“Ever since the ban was imposed, the entire infrastructure has been lying idle and we are forced to store large quantity of lose ore in our mines which is leading to environmental hazard. In Chitradurga and Tumkur area only low-grade iron ore is available and it would be useless if not exported. There is no market for this low-grade ore in the Indian market. It’s a total waste of national wealth,” said Basant Poddar, managing director, Mineral Enterprises Limited, one of the miners hit by the ban.

Low-grade iron ore accounts for 50 per cent of the total exports from Karnataka at 15 million tonnes per annum and a majority of this comes from mines in Chitradurga and Tumkur. Presently, 25 companies operate mines on over 1,000 hectares of revenue land in these districts.

“It’s not only a loss for us, but also for the country as it gains foreign exchange apart from royalty revenue to the state government. Over Rs 6,000 crore investment is needed to set up 1 tonne per annum steel mill and also import high-grade coke to use the low-grade iron ore. So far, there is no proper technology available in the country to make use of low-grade iron ore,” Poddar said.

The only market for low-grade ore is China. Over the last 50 years nobody has tried to make use of this ore as already high-grade ore is available in other places for steel making, he said. There has been no investment in the steel sector in Chitradurga which is starved of water. In fact, the only steel mill present nearby is at Bhadravati of public sector Visvesvaraya Iron and Steel Ltd, which is also not consuming low-grade iron ore. Instead, it is exporting 20 per cent of the ore it buys from the NMDC after using the cream of it, Poddar added.

The Federation of Indian Mineral Industries (FIMI) fear that if the ban stays these mines may have to be closed permanently causing job loss to more than 10,000 persons. Already, 2,500 trucks are off the roads due to the ban.

Shantesh Gureddi, chairman, FIMI-southern region, said, “Investments made not only in private railway sidings, but also in infrastructure projects like Hassan-Mangalore Rail Development Corporation, a special purpose vehicle between Government of India, the Government of Karnataka and a private company, will be rendered infructuous. Besides, iron ore of less than 62 per cent grade iron content are not consumed by domestic industry.

“However, India is only a swing supplier filling the gap but if we lose this market, Australia and Brazil will fill as they have ample surplus capacity and India will lose this market forever,” he said.