Iron ore mining ban in Odisha likely to hit captive miners

If the M B Shah Commission's proposal for a complete ban on iron ore mining in Odisha is implemented, it may result in a fall of 11 million tonnes (mt) in the combined captive iron ore output of Steel Authority of India Limited (SAIL) and Tata Steel.

Earlier, iron ore mining was banned in Goa, after it was found norms related to the environment had been violated.

The commission is finalising its recommendations on irregularities in iron ore mining in Odisha. If the commission suggests a blanket ban on mining, SAIL would lose four mt of captive iron ore output, while Tata Steel would lose seven mt of iron ore a year.

An industry official, however, said he didn't think iron ore mining would be banned in the state.

A report on iron ore mining by EmKay Global Financial Services showed for Tata Steel's current production capacity of 9.7 million tonnes per annum (mtpa), the company needed about 17 mtpa of iron ore. Currently, its iron ore requirements are partly met by supplies from Noamundi and Joda (East) mines in Jharkhand and Odisha, respectively.

In its report, EmKay said if captive mining was suspended indefinitely, Tata Steel would see an iron ore shortage of about seven mt, and this might force the company to operate only at about 60 per cent utilisation. Also, as iron ore for the company's six-mtpa steel plant being set up Odisha is likely to be supplied from the Khandband mine (Odisha), a ban might delay the project.

If captive miners are forced to discontinue mining, operations at SAIL's steel mill in Rourkela would be hit. Though the company has mines in adjoining Jharkhand, it would have to pay high costs to transport iron ore from there.

The impact on the industry would be severe, owing to a likely investigation, intervention by the Indian Council of Research & Education, preparation and implementation of a rehabilitation and resettlement study, among others. It is likely it would take at least a year for the issue to be resolved.

This would result in a 45-mtpa shortage of iron ore for 20-25 mt steel and pellet plants in the eastern region. While Chhattisgarh-based units would have a choice to source iron ore from NMDC, units in West Bengal and Odisha would find it difficult to continue operations.