Not only hurting miners with lack of capacity absorption, but the export ban of iron ore from Karnataka ever since the mining scam broke out nearly a decade ago has also hurt the realization of full value of the core
Iron ore mining in Karnataka, which was once a booming industry but later spiraled downwards, has been plagued by scams, restrictions and export ban for over a decade, with an industry estimate accounting for over ₹29,000 crore in revenues lost due to the export ban over the last decade in Karnataka. The Central Empowered Committee (CEC) in its report has noted substantial improvement in the environmental parameters in the three large mining districts namely Chitradurga, Bellary and Tumkur, in Karnataka, due to phased re-opening of category A & B mines amid various compliances such as resettlement and rehabilitation (R&R), limited quantity extraction and dumping.
CEC has, in a report filed to the Supreme Court on June 29, sided with allowing exports of iron ore fines and pellets, along with the southern chapter of the apex body of the mining industry, the Federation of Indian Mineral Industries (FIMI) also urging Karnataka’s Mines and Geology department to appraise the Supreme Court on of the current situation and permit export from the state. With the SC also keen to hear views of the state government on the export ban issue, FIMI has made several representations to the state urging it to file its views on the matter. And over the last several months, miners and industry body representatives have also had several rounds of meetings with the state government to push for export ban lift. The restriction placed on Karnataka mines has not just resulted in piling of surplus stock but also low price realization, as interestingly, there has been no export ban of iron ore from other states in India. A third of the mined iron ore is currently sold to the single largest steel company JSW steel in Toranagallu in Bellary, which, the miners believe, has tilted the market price unduly in favor of the buyers.
HM Khayum Ali, FIMI southern chapter and former additional director of the mines and geology department, Karnataka, explains that with the iron ore sale now streamlined through online bidding, the price discovery is far from being fair.
“Nearly 85% of the iron ore is getting sold at low base prices that buyers would quote, else it doesn’t get sold”, he said.
The value of consumed iron ore which is fixed by the Indian Bureau of Mines (IBM), according to FIMI, has forced lessees to resort to distress sale, with approximately 6.67 MMT of iron ore imported into the state as a substitute for locally produced iron ore in 2018-19, resulting in pile up of 8 MMT of old stocks.
“The IBM index price for Karnataka for the period of Jan 2018 – May 2019, iron ore prices have gone down in Karnataka by -18.7%, while for Odisha and Chhattisgarh, it has only reduced by -2.7% and -7.7% respectively”, Khayum added.
The CEC report to SC also states the present maximum permissible annual production limit of iron ore mines from 37 mines in Chitradurga, Bellary and Tumkur to be approximately 32 million metric tonne (MMT). With 5 new leases becoming operational, the annual production of iron ore from 2012-22 is expected to be over 35.72 MMT.
