The steel mills might have to wait for six months at least as 12 of the 18 mining leases still need to secure statutory nods

The removal of ban on iron ore mining in Karnataka as directed by the Supreme Court on Monday is unlikely to bring immediate relief to the ore-starved steel industry. The steel mills might have to wait for up to six months at least to normalise their operations as 12 of the 18 mining leases in Category A still need to secure several statutory approvals before starting their productions.

The Karnataka government has initiated several measures to curb illegal movement and the possibility of pilferage of iron ore in the state. The move comes after the direction of the Supreme Court and the Central Empowered Committee (CEC) in the recent past.

In an affidavit submitted to the Apex Court last week, chief secretary of the state S V Ranganath has said that the Mines and Geology Department has introduced the e-permit system to curb illegal transport of iron ore.

Initiates steps to resolve teething problems and procedural delays

The Karnataka government has initiated steps to resolve some of the teething problems and procedural delays coming in the way of smooth transportation of iron ore sold through e-auction by the monitoring committee. It has decided to issue round-the-clock transit permits to NMDC’s mines in Bellary district’s Donimalai. Besides, the government will continue to issue transit permits between 6 am and 10 pm for NMDC’s Kumaraswami mining lease in Bellary district.

Even as decks are being cleared for recommencement of iron ore mining in Karnataka, following the clearance from a Supreme Court panel, the Karnataka government has initiated the process of allotting fresh mining lease to Arcelor Mittal India.

Arcelor Mittal has proposed to set up a six million tonne per annum steel plant and a 750-Mw captive power plant at an investment of Rs 30,000 crore in Bellary district. It signed a memorandum of understanding with the state government during the Global Investors’ Meet in June 2010.

The Supreme Court-appointed Central Empowered Committee (CEC) has approved 16 iron ore mining lessees in Karnataka to resume operations, but has not permitted them to produce more than a third of their earlier annual sanctioned capacity.

These mines together have been allowed to produce 8.24 million tonnes (mt) per annum, as against their original sanctioned capacity of 26.48 mt.Sesa Goa, with sanctioned capacity of six mtpa, has been allowed to mine only 2.29 mtpa, about 38 per cent. It has a lease area of 163.5 hectares in Chitradurga district.

Firms like JSW Steel could face closure if mining does not resume soon

Steel and pig iron companies that depend on iron ore from Karnataka are facing closure due to a severe shortage of the mineral. The state’s steel industry, whose 21-million-tonne (mt) output accounts for 25 per cent of the national production, is operating with just a 45-day supply of iron ore. “If mining does not resume in the state immediately, it would be very difficult for us to keep the plant running,” said Vinod Nowal, director and chief executive officer, JSW Steel.

The recent decision of the Supreme Court capping iron ore production at 30 million tonnes per annum in Karnataka has not deterred iron and steel companies from expanding their capacities.

Companies such as BMM Ispat, Kalyani Steels, Kirloskar Ferrous and MSPL are working on 20 days to one-month inventories

Shortage of iron ore supply from Karnataka is posing a challenge to steel and pellet-making plants to maintain their production levels.Companies, such as BMM Ispat Ltd, Kalyani Steels, Kirloskar Ferrous Industries Ltd and pellet-making companies like MSPL Ltd, Sesa Goa and Dempo, facing acute ore shortage, hold raw material inventory for just 20-45 days.

Leases with SC panel-nod yet to get legal approvals from Indian Bureau of Mines operations unlikely to start before October

Steel mills in and around Karnataka that are dependent on iron ore from state mines might have to wait for some more time to get fresh supplies, as the resumption of mining is likely to be delayed. Though the Central Empowered Committee (CEC), appointed by the Supreme Court (SC), has approved 12 firms for resuming operations, following acceptance of their reclamation and rehabilitation (R&R) plans, actual mining might start only by October.

JSW Steel Limited, the country’s lowest-cost steel producer, plans to set up a 2.3 million tonne per annum (mtpa) cold rolling mill complex to manufacture high-grade automotive steel at Toranagallu in Bellary district. The project is being implemented in phases at an estimated cost of Rs 4,500 crore with Phase-I getting operational by March 2013 and Phase II by December 2013.

In addition to the CRM complex, JSW has also signed an MoU with the state government for setting up a 3.42 MTPA coke dry quenching (CDQ) plant to produce steel.