Supreme Court allows export of iron ore from key mines in Karnataka

Order allows direct sales as opposed to e-auctions only; three-judge bench asks mining firms to comply with Centre's rules on the matter

The Supreme Court on Friday lifted the ban imposed on iron ore export from mines of Ballari, Chitradurga, and Tumakuru districts in Karnataka and allowed miners to sell ore through direct sale.

A bench of Chief Justice of India NV Ramana, Justice Krishna Murari, and Justice Hima Kohli, gave the order on a batch of applications by mining firms and asked them to comply with the Government of India’s rules on iron ore exports.

“It is submitted that consecutive e-auctions have been receiving poor response. Looking at the overall change, restrictions on sale of ore and restrictions on prices need to be removed. We grant appellants permission to sell already excavated iron ore stock etc in three Karnataka districts. Permission is granted to appellants to allocate iron ore by entering into direct contracts without resorting to e- auction. Iron ore produced in Karnataka can be exported but in terms of Government of India policies,” the bench said.

The apex court had put a ban on iron ore mining in Karnataka in 2011 citing environmental degradation and to save the mineral resource for future generations. It had also banned exports.

But Friday’s order lifted the curbs on exports and allowed iron ore operators to sell excavated ore through direct sale as against through e-auctions only, what could be a win-win for merchant miners and steel companies.

“By lifting the ban on exports of iron ore, the Supreme Court has opened an avenue for sale of surplus ore. This is what the industry has been pleading for,” said R K Sharma, secretary general, Federation of Indian Mineral Industries (FIMI).

“An auction gives the feeling of scarcity. When there’s no scarcity, why should there be any auction?” asked Sharma.

The Indian Steel Association (ISA) said it needs to wait for the final order but pointed out that availability of iron ore could increase.

"By permitting to sell already excavated iron ore mined by entering into direct contracts without resorting to e-auction will increase the availability in the system and also help to bridge demand availability gap. However, it is still unclear if production curbs have also been lifted,” the association said.

“On the export front, the export duty of 30 per cent on iron ore having Fe content above 58 per cent is already in place. In order to increase domestic availability this duty should cover all grades of iron ore," it added.

According to Crisil Research, the Supreme Court ruling in 2011, saw production in Karnataka dwindle from a peak of 43 million tonnes in 2010 to 12 million tonnes in 2013.

Production picked up gradually over the years, aided by relaxation of production cap which was revised upwards to 35 million tonnes from 30 million tonnes, pointed out Hetal Gandhi, director, CRISIL Research.

The ruling by the Supreme Court today (May 20) will be welcomed by steel mills across the country as a ramp up in production in the state will bring iron ore prices down, Gandhi said.

Global iron ore prices have increased by over 50 per cent since November 2021 as of April-end. Prices corrected marginally in May 2022.

However, Gandhi pointed out that unless the ruling regarding the production cap is revised, a shift in dynamics in the state is unlikely. Karnataka produced around 33-34 million tonnes in fiscal 2021 against a production cap of 35 million tonnes.