Iron ore shortage set to continue in Karnataka

The shortfall in ore supply is imminent as the production of iron ore by state-owned NMDC will be restricted to 7 million tonnes per annum

Shortage of iron ore for steel mills in Karnataka is set to continue or even become worse. The production capacity of NMDC, the largest producer of ore in the country, is likely to be restricted to seven million tonnes per annum (mtpa) from the present 12 mtpa.  

The management of NMDC recently stated its capacity could be restricted in line with the recommendation of the Central Empowered Committee (CEC) of the Supreme Court. For the current financial year, it is estimated to produce nine mt of ore.

“According to the CEC’s recommendation, the total capacity of all approved mines would be restricted to 20 years’ mine life, which implies NMDC’s capacity would get restricted to seven mt against the 12 mt limit fixed by the Supreme Court. To mitigate the crisis, NMDC is undertaking a drilling plan at Donimalai mines to increase its reserves by 60-70 mt,” SBICAP Securities said in a report.

For the quarter ended June, NMDC produced 2.16 mt of iron ore at its Donimalai complex in Bellary district, a rise of two per cent over the same quarter last year. Currently, there is a supply of 13.73 mt of iron ore in Karnataka, which includes nine mt from NMDC, 4.73 mt from eight Category-A mines and one Category-B mine. This leaves a shortfall of 16.27 mtpa. The total requirement for Karnataka steel mills is estimated at 30 mtpa.

  As a short-term measure, the steel industry has urgently requested the regulatory authorities for sale of six-eight mt of sub-grade ore stock, which can help the industry for another three months. So far, the monitoring committee, constituted by the Supreme Court to oversee the e-auction process in Karnataka, has sold 1.5 mt in these auctions.

In the medium term, the steel industry has urged the state government to prepare an auction scheme and get it approved from the Supreme Court. “The state government should appoint agencies to prepare an auction mechanism for Category-C mines,” a senior official of JSW Steel said.

The shortfall in ore could be brought down to around six mtpa after opening the remaining mines in Category-A and B and auction of Category-C mines. This shortfall can be bridged by allocating new leases, as ordered by the apex court in its order dated April 18.  The government should allocate leases like Ramanadurga and Haddinpade to steel producers, which have set up facilities in the state, the company official said.