Secondary steel players and pellet makers most of which are running their units at depleted capacities have stoutly opposed a proposal by the Odisha government to the Centre for relaxing the ceiling on mining lease area.
Under Section 6 (1) (b) of Mines and Minerals- Development & Regulation (MMDR) Act, any leaseholder with 10 square kilometres (km) or more area in its control is debarred from acquiring any more mining lease in a state.
To overcome this restraining clause, the state government had shot off a missive to the Union mines ministry, to revise the area limit to 58 sq km for iron ore and associated minerals. The state government’s argument is premised on the fact that Steel Authority of India Ltd (SAIL), a central sector PSU, possesses approximately 55.01 sq km of mine lease area in Odisha. Besides, 2.77 sq km area has been reserved by the central government for exploration and exploitation through SAIL. It may be noted that mining lease area limits have been expanded to 75 sq km in Jharkhand and 50 sq km in Chhattisgarh.
The Union mines ministry which had previously spurned the state’s request is now vetting the proposal afresh. Also, the ministry has instructed the state government to hold on the auctions process till a decision is worked out.
The tussle between the central mines ministry and the state government has taken a toll on Odisha’s mineral block auctions. No block could be put to online auctions in FY19 as the matter relating to mine lease area cap was enmeshed in litigation. In this fiscal too, the state government despite having readied many blocks, is unable to auction them, pending a decision from the Centre.
Irked by the plan to relax the cap on mining lease area limits, both the secondary steel makers and pellet producers have knocked the doors of the Prime Minister’s Office (PMO) and the Ministries of mines and steel.
Sponge iron manufacturers in Chhattisgarh feel the idea of relaxation of area limits is disastrous for the country as there will be a huge monopolization of resource.
“If relaxation is done under Rule 6 (1) (b) then two or three very large monopolies will be created and the small and mid-sized steel plants as well as mid-sized companies will have no fair opportunity to have a mine. Even the consortium of small steel producers will not be able to compete”, Vijay Jhanwar, president, Chhattisgarh Sponge Iron Manufacturers Association said in a letter to the PMO.
Echoing similar views, Amit Gupta, executive director, Atha Group said, “The government should not relax the mining lease area limits as this move will promote two or three big players while secondary steel makers who contribute 50 per cent to Odisha’s output will suffer”. Kolkata-based Atha Group has interests in mining and steel billets & sponge iron production.
To buttress their claims, the pellet makers say that any easing of mine lease area limits will lead to iniquitous concentration of iron ore in a fewer hands, creating monopoly by select licensees.
“Whereas SAIL has 55.01 sq km iron ore lease in Odisha apart from its leases in Jharkhand & Chattisgarh, Tata Steel has 49.61 sq km lease for iron ore & associated minerals in Odisha in addition to their leases in Jharkhand. They have been allocated these leases without any payment of premium and as such have an edge over other competitors”, said Manish Kharbanda, president at Pellet Manufacturers Association of India (PMAI).
With 16 large merchant mines in Odisha having permits to produce 80 mt iron ore per year lapsing by March 2020, such dependent steel producers may end up paying more for ore in view of the anticipated demand-supply imbalances.
“Today, most of the smaller players are buying from the merchant miners and NMDC. We expect that prices may go up (after March 2020) but we see that production is also increasing. But if the increase (in iron ore prices) is substantial then we will have no choice but pass it on to the customers. Today, most of the steel plants, especially those making alloy steel have no captive iron ore”, said Sridhar Krishnamoorthy, managing director of Andhra Pradesh based Arjas Steel.
On the contrary, steel players already having up to 10 sq km of captive iron ore resource have enough deposits to meet their plant requirement for 30 years, PMAI felt.
“If any player wishes to have additional resources he should show financial closure of the enhanced capacity and give a sizable performance guarantee”, reasoned PMAI’s Kharbanda.