Differences abound over iron ore e-auctions in Karnataka

Steel makers, who support the proposal, face opposition from miners

It is expected e-auctions for selling iron ore in Karnataka, in place for two years, will be extended. However, there are differences over the issue.

The Supreme Court is yet to order continuation of the e-auction system. The term of the monitoring committee, appointed by the apex court to supervise the process, ends on Wednesday. Steel companies, which had alleged cartelisation by miners a few days ago, have expressed support for the continuation of e-auctions until normalcy in production is restored.

“We want the CEC (centrally empowered committee)’s support and the e-auction process to continue for some more time, at least until iron ore production of 30 million tonnes (mt) a year is achieved. As of today, production is hardly 20 mt, against the requirement of 36 mt by the steel industry. We have verbally requested the CEC to continue the e-auction system,” said Vinod Nowal, deputy managing director, JSW Steel Ltd.

However, iron ore mining companies have strongly opposed any move to extend the e-auction process, saying it was meant only for two years. As ore production is set to rise, the mining sector is keen to sell in the open market because this will help improve margins. They can also enter into long-term supply contracts with buyers. Currently, only two auctions are held in a month and companies were unable to store their material for long, said one.

The Karnataka government has filed an affidavit before the apex court, expressing its willingness to take over the management of conducting e-auctions. It had shown interest to set up a separate monitoring committee on the lines of the existing CEC, to supervise the auction process, official sources said. In its order dated April 13, 2012, the Supreme Court had said the e-auction system should be in place for two years, until normalcy was restored in the mining sector. The court is set to hear the matter on April 21.

“The Supreme Court ordered for an e-auction system two years ago because it was an extraordinary situation and it was required at that time. It should be left to the open market system. Now, all systems are in place and there is no need to continue with this system. The Federation of Indian Mineral Industries will be filing a counter affidavit in the court against the continuation of e-auction,” said Rahul Baldota, executive director, MSPL Limited.

Continuation of e-auctions will ensure buoyancy in the collection of revenue for the state government. The system has brought in transparency in the collection and done away with under-invoicing by miners.

In its September 2, 2011, order, the Supreme Court had appointed a centrally empowered committee to oversee the e-auction of iron ore from Karnataka. The committee had, in turn, formed a monitoring committee to carry out the orders of the apex court.

The e-auctions resulted from large-scale illegal mining, which caused immense environmental degradation of adjoining areas. The apex court, while banning mining, had permitted to auction 1.5 mt of iron ore a month from the stock of 25.88 mt at mines in the state, through e-auctions.

According to data compiled by Delhi-based iron ore research firm OreTeam Research, between September 2011 and March 2014, the e-auction system has seen the sale of 74.05 mt of iron ore produced and stocked in Karnataka.

“If the auctions continue, production might not increase much this year; if these discontinue, there could be good production. But on the contrary, if the auctions are being removed, the miners could even start asking for exports. So, it is a tough call for the government,” said Prakash Duvvuri, head of research at OreTeam.

The e-auctions will continue until the authorities concerned issued further notification, said state government officials.

TERM COMING TO AN END

* In September 2011, SC appointed a centrally empowered committee to oversee e-auction of iron ore in Karnataka

* The court allowed the auction of 1.5 mt a month through e-auctions

* The e-auctions started in September 2011 have so far led to the sale of 74.05 mt of iron ore in Karnataka

* The term of the e-auctions was till April 12, 2014

* A major portion of the material sold through e-auctions was bought by JSW Steel