Karnataka's iron ore curb hits steel mills' supply by 40%

The Karnataka government’s recent restriction on issue of mineral dispatch permits to mining companies has affected the supply of raw material to steel mills in the southern and western parts of the country. According to some estimates, the supply of iron ore to sponge iron makers has come down by 40-50 per cent in the last few days.

With no possibility of early withdrawal of the restriction by the state government, mining companies in Karnataka fear the supply situation may worsen in the days to come. The situation, if not improved in the next few days, is likely to impact prices of steel products, the industry sources said.

Sponge iron makers, particularly in the states of Tamil Nadu, Gujarat and Maharashtra are the most affected with the restriction on inter-state movement of iron ore from Karnataka mines.

Companies like Sunvik Steels in Karnataka, Shradha Ispat of Goa, Sesa Goa’s pig iron plant in Goa, Jindal Steel and many units in Gujarat, Maharashtra and Tamil Nadu are facing shortage of raw material. Supply of iron ore to Jindal Steel, which operates steel plants in Toranagallu in Bellary district and Salem in Tamil Nadu, has come down by close to 30 per cent. Sesa Goa, the largest private sector exporter of iron ore is unable to supply iron ore for its own pig iron plant in Goa apart from exports.

Officials in Jindal Steel said the company requires around one million tonnes of iron ore every month and in the last 45 days since the restriction was imposed by the state government, the supply of iron ore has come down by close to 30 per cent for the steel major.

Out of one million tonnes procured every month, Jindal procures 200,000 tonnes from its JV with Mysore Minerals and 50,000 tonnes from NMDC, while the majority of 750,000 tonnes is sourced from private mine operators in Bellary-Hospet-Sandur region. Of this, the supply has been affected to the extent of 15 per cent for the company, a company official said. Jindal’s steel plant in Salem, Tamil Nadu is also facing difficulty in procuring iron ore from Karnataka. This unit produces one million tonnes of long products per annum.

“We are unable to meet the supply deadlines to steel mills outside Karnataka due to additional documentation and centralised procedure for issue of mineral dispatch permit and forest transit pass in Bangalore. We are forced to spend more than a week in Bangalore to get these permits despite filing an affidavit stating that the ore was not meant for exports,” a top official of a leading mining company told Business Standard.

The government has also made it mandatory for mining companies to seek permission from the director of mines and geology in Bangalore before transporting their ore. This has resulted into delay of one week to get the permits. “Most of the time, when we go to Bangalore the director of mines will not be there due to his preoccupation and we are forced to spend lot of time in getting the permits,” a miner said.

Prior to Karnataka government’s ban on export of iron ore and restriction on inter-state movement, the mining companies from the state were transporting one million tonnes outside the state every month and supplied around 1.5 million tonnes to steel mills within the state apart from exporting two million tonnes.