Pellet manufacturers across Odisha have sought the state government's go-ahead to participate in auctions of iron ore blocks.
Most pellet makers in the state are running their units without captive iron ore resources and depend on merchant supplies. Odisha has a nameplate capacity of 29 million tonnes per annum (mtpa), or 34 per cent of the country's total pellet making capacity. In FY19, the total pellet output in Odisha was 20.76 million tonnes (mt), growing 13 per cent year-on-year. Essar Steel and Jindal Steel & Power Ltd (JSPL) run the biggest pellet complexes in the state.
Iron ore pellets are intermediate products in the process of steel making. In the domestic market, pellets are losing market share to iron ore lumps, which steel makers prefer to buy because of their price competitiveness. But pellets are made from enriched iron ore fines which are available copiously unlike the scarce lumpy ore. However, 26 per cent of the country's pellet making capacity is idling as the fines are unavailable at optimal prices. Fines are getting stacked up at mines heads, posing serious environmental hazards. Unless the stockpile is depleted, the baleful impact on the environment is inevitable, industry observers feel.
Apart from getting fines at sustainable prices, access to captive supplies will help the pellet players gain competitiveness in the market.
“Pellet plants in the state do not have captive mines and are largely dependent on merchant miners for raw material supply. Moreover, 16 merchant mines of around 79 mpta (million tonne per annum) capacity are going to lapse on March 31, 2020 which would add up to the shortage further and more pellet plants may close down”, Pellet Manufacturers Association of India (PMAI) wrote to the Odisha government's steel & mines department.
Odisha has so far put up three of its virgin iron ore blocks for online auctions. All three have been awarded to steel makers- Essar Steel, Bhushan Steel Ltd (now Tata Steel BSL) and Bhushan Steel & Power Ltd as only integrated steel plant was listed as end use for the blocks.
Mineral Auction Rules, 2015 empower state governments to reserve iron ore blocks for end use plants. The choice of end use project is in the eminent discretion of the respective state that auctions the mineral blocks. The blocks put up for electronic auctions can be set aside for steel plants, pellet units as well as sponge iron plants.
Citing Karnataka's example, PMAI pointed out that the pellet manufacturers were permitted to bid for iron ore blocks. Odisha, however, presented a contrarian trend where iron ore blocks offered so far were exclusively for integrated steel plants.
Initially, Schedule II of Mineral Auction Rules 2015 prescribed the indicative list of specified end use of mineral blocks auctioned. For iron ore, only one indicative use- 'integrated steel plants' was specified. Later, the Union ministry of mines clarified in October 2015 that the list in Schedule II is only indicative in nature and not restrictive to only integrated steel plants and states have the leeway to reserve iron ore blocks for sponge iron and pellet plants.
PMAI has suggested iron ore blocks with 75 per cent fines in their repository may be kept aside for pellet makers while the lumps from such deposits can be sold in the open market.