Reserving mines for OMC to hurt mineral development: Experts

OMC is unable to operate its own mines at full capacity; supply of iron ore to steel units will be impacted, they say

The state government's in-principle decision to reserve Khandadhar and Mankar Nacha iron ore mines for its PSU Odisha Mining Corporation (OMC) would hinder optimum exploitation of the deposits besides depriving end use industries of adequate ore supplies, experts said.

Industry observers have questioned the rationale behind the move to reserve the two key iron ore mines in favour of the PSU that is struggling to operate its existing mines at full capacity.

"Its very unfortunate. Reservation of key iron ore mines for OMC will not contribute to harvesting of mineral wealth when OMC is unable to operate its existing mines at full capacity. The reservation will also not ensure optimal supply of iron ore to steel and other end use industries", said Prabhakar Rout, mining expert and vice president of Utkal Chamber of Commerce & Industry (UCCI).

The state government has lined up 19 mineral blocks for auctions out of which a high level committee has recommended reservation of  Khandadhar and Mankar Nacha iron ore mines for OMC.



OMC currently has 14 iron ore mining leases with an approved production capacity of 19.28 million tonne per annum (mtpa). However, capacity utilisation by the state run miner is woeful as it has managed to operate only four mines — Daitari, Gandhamardhan, Kurmitar and Barapada Kasia. Though these mines have an approved EC (environment clearance) production limit of 15.02 mtpa, actual output from the four mines was only 3.20 million tonne in  2014-15.

“It is not fair to reserve new iron ore deposits in favour of OMC when it is struggling to operate its existing leases at their rated capacities. Offering such iron ore blocks for auctions would serve a better purpose in terms of revenue gains for the state and also optimum exploitation of ore”, said a mining industry source.

OMC's managing director Girish SN could not be reached for his comments.

Analysts feel reservation of iron ore mines for OMC is not unjustified if the PSU equips itself to scale up production.

“Effectiveness needs to be improved for PSUs like OMC to handle big iron ore mines. OMC needs to ramp up capacity preferably by hiring an efficient mine developer cum operator (MDO)”, said Giriraj Daga, portfolio manager at Mumbai-based SKS Capital & Research Pvt Ltd.

OMC has set an ambitious iron ore output target of 9.86 million tonne (mnt) in 2015-16, 14.85 mnt in 2016-17 and finally reaching 22.05 mnt by the end of 2017-18.

To boost production of iron ore from the Daitari mines by 2.5 mnt, OMC has decided to go for a new 1000 TPH (tonne per hour) ore handling plant along with 3200 TPH mechanised wagon loading system including related railway infrastructure. The project proposal has been approved by the state government. The Daitari mines had a target to produce 1.35 mnt iron ore in 2014-15. L&T has been engaged as the EPC (engineering, procurement & construction) contractor while Dastur & Company is the technical consultant for the project.

OMC has also decided to ramp up production from Gandhamardan mines to 9.12 mnt. Mecon Ltd has been roped in as the technical consultant for this project. An agreement has already been signed with Mecon for this purpose.