Reeling under raw material shortages and the extension of a mining ban, the multi-billion dollar Karnataka steel industry is in the doldrums due to continuing uncertainty over iron ore supply to their plants.
The jittery industry was not even optimistic over the release of 25 million tonne (MT) of iron ore, lying at various mines in the southern state, as the modalities are yet to be worked out.
"Most of the iron ore is lying at the privately owned mines. Suppose the mine owner refuses to share his stock, then what will you do? 25.88 million tonne availability, which is being talked about, is an ideal scenario only," said a senior official of one of the affected companies in the region.
Echoing similar sentiments, officials of Kirloskar Ferrous, which runs a 50,000-tonne unit for grey iron castings, said, "Quality of the stock is also a big concern. About 11 MT of the said 25 MT of iron ore is lower grade, having below 60 Fe content, and that can not be used by most of the companies in Karnataka."
Officials of JSW Steel, which operates a 20 MT iron ore beneficiation plant in the region together with its 10 MT steel plant, also expressed similar concerns over the quality of iron ore stocks lying at mines in the state.
"Quality of the iron ore (stocks at the mines) is not yet established. We can do some beneficiation of ore, but if the Fe content is below 55, then there is a problem," the JSW officials said.
Citing the matter as subjudice, all the officials refused to be identified.
On Friday, the apex court had said it would allow the release of raw material lying at various mines in the state for the iron and steel industry, even as it extended its ban on mining activities to the Chitradurga and Tumkur districts, after Bellary.
The court had also asked the Amicus Curiae and Attorney General to provide details on the quantity of iron ore that could be released from the existing stock of 25 million tonne, subject to reclamation and rehabilitation plan(s) being submitted before the next hearing on September 2.
"The only silver lining is that the court is willing to release some quantity (of the iron ore stock). But we don't know how much and when. Even if 15 MT is made available, we can run our units at about 80 per cent capacity," JSW officials said.
However, other companies were not as optimistic as JSW Steel. According to them, extension of the ban to the Tumkur and Chitradurga districts would add to their woes, as most of the units do not have stocks of iron ore.
"It's just like asking a patient sitting on the death bed to wait one more week to get treated," officials of Kirloskar Ferrous said, adding, "We are trying to run at least one blast furnace so that we could continue producings castings. We don't know how long we can continue."
Kirloskar, which supplies iron castings to about 15 automobile and tractor-makers, is currently running at half of its installed capacity and has shut down one of its two blast furnaces.
Echoing similar sentiments, officials of Kalyani Steel, which has shut down its 1.1 MTPA plant said, "Our costs would increase by about Rs 2,000 to 2,500 per tonne, as we now have to bring iron ore from other states like Orissa and Jharkhand. We are clueless on how to run our operations."
The companies also said that NMDC -- the only company allowed by the Supreme Court to carry out mining activities in state -- has failed to raise its production levels to the desired levels.
According to the Bangalore Chamber of Industry and Commerce, till last week, NMDC was producing around 21,000 tonne to 22,000 tonne of iron ore a day, while the company is required to produce 33,000 tonne daily to achieve the desired level of one million tonne per month stipulated by the apex court.
The chamber has also estimated the daily demand of the iron and steel industry in the state at 1,04,000 tonne, of which the Tumkur and Chitradurga districts together contributed about 20,000 tonne a day before imposition of the ban by the apex court.
"Supply position is very-very tight. NMDC has not been able to raise its production, while now we can not source iron ore even from Tumkur and Chitradurga. We don't know what to do," a senior Mukand Steel official said, adding, "We are mobilising some stocks from our units in other state."
According to industry sources, 22 out of 60 sponge iron plants in the state have shut down their operations for want of raw material, while many other companies like JSW Steel, BMM Ispat and Sathavahana Ispat, among others, have resorted to operating at reduced capacities.
Karnataka produces 16 million tonne iron and steel in a year, which is a little less than 25% of the country's total production.
The state contributes more than a fifth of India's total iron ore production, which is around 220 million tonne annually.
Out of the total production in the state, about 80% comes from the Bellary-Hospet region, at about 40 million tonne per annum, while the Tumkur and Chitradurga districts contribute the remaining output.