Iron ore production in FY16 estimated to grow 10% to 140 mn tonnes

As many as 199 mining concessions including 15 iron ore leases are expected to be auctioned

With the passage of the Mines and Minerals (Development and Regulation) Amendment Bill in Parliament, action will now shift to mineral-bearing states. Although the new Act is expected to pave the way for higher ore production, a lot depends on how quickly state governments set the ball rolling in terms of auction of mining leases.

According to the ministry of mines, 199 concessions, including 15 iron ore leases, are expected to be auctioned by various state governments in the next few months. Unless state governments act immediately, ore production in the coming year is unlikely to be better than the past few years. The Federation of Indian Mineral Industries (Fimi) estimates iron ore production in 2015-16 at 135 million tonnes (mt), a mere eight per cent growth over the current financial year.

In 2014-15, the production is estimated at 125 mt. Of this, Odisha will be the major contributor at 50 mt, followed by Chhattisgarh at 25 mt. Jharkhand and Karnataka stand at subsequent places with 19 mt and 17 mt, respectively.

“A minor growth in production could be seen in Karnataka next year. Goa will start production only towards the second half of the next financial year. If all goes well, Goa could produce around 10 mt, while Karnataka might add 5 mt more. Odisha will continue to be the largest producer next year as well,” Basant Poddar, senior vice-president, Fimi, told Business Standard.

According to Poddar, in addition to auction of mines, state governments should also support more explorations to identify new mining reserves and put them up for auction.

“There is a lot of uncertainty prevailing in the mining industry as state governments are not coming forward to take quick action. A lot depends on state governments and the Centre as to how fast do they start the process to auction mining leases,” said R K Sharma, secretary-general, Fimi. The  sector has been waiting for several years to get new  concessions in all states, he added. According to him, there are many impediments in the growth of iron ore production such as huge pile up of ore stock at mine heads. The quantity is estimated at 124 mt as of March 2014. Of this, 104 mt are iron ore fines and the rest are lumps. In Odisha alone, the 74 mt ore is piled up. “Unless these stocks are cleared, there can be no fresh mining. A drastic fall in the prices of iron ore in overseas markets and 30 per cent export duty has prevented miners from exports, resulting in piling up of stocks,” said Sharma.

Although the environment ministry has revoked suspension of environmental clearances to all mining leases in Goa, mining is unlikely to start before October this year. Even if the state governments speed up the process of handing over the EC and other clearances to miners, they will not start production before the monsoon season gets over.

According to analysts tracking the sector, the miners in Goa will not rush to resume production owing to a lack of demand for the state’s low-grade iron ore in the domestic market. They are also not in a position to export with the current duty structure and low prices prevailing in the international markets.

“A rise in global slowdown and low international prices are the major factors of worry for Goan miners. Fresh mining is affected due to unsold stocks in all states. We expect the production to be around 140 mt in the next financial year,” said Monica Bachchan, director, Metalogic Projects Management Services, a Delhi-based metals and mining consultancy firm.