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Iron ore export ban costs Karnataka Rs 29,000 crore in 10 years; miners seek relief

Ever since the iron ore mining scam broke out nearly a decade ago, the export ban from Karnataka is not just hurting miners with lack of capacity absorption, but also realisation of the full value of the ore

Rukmini Rao | August 24, 2020 | Updated 12:16 IST
Iron ore export ban costs Karnataka Rs 29,000 crore in 10 years; miners seek relief
While there is no export ban of iron ore from other states in India, the restriction placed on Karnataka mines has not just resulted in piling of surplus stock but also low price realisation

Once a booming industry, which later spiralled downwards, iron ore mining in Karnataka has been plagued by scams, restrictions and export ban for over a decade. According to industry estimates, over the last decade Karnataka has lost over Rs 29,000 crore in revenues due to the export ban.

With phased re-opening of category A & B mines amid various compliances such as resettlement and rehabilitation (R&R), limited quantity extraction and dumping, the Central Empowered Committee (CEC) in its report has noted substantial improvement in the environmental parameters in the three large mining districts - Chitradurga, Bellary and Tumkur - in Karnataka.

In a report filed to the Supreme Court on June 29, CEC sides with allowing exports of iron ore fines and pellets. The southern chapter of the  apex body of the mining industry, the Federation of Indian Mineral Industries (FIMI), has also urged Karnataka's Mines and Geology department to appraise the Supreme Court on of the current situation and permit export from the state.

Also read: Coal India seeks extension of freight concession for coal

With the SC keen to hear the 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. Also over the last several months, miners and industry body representatives  have had several rounds of  meetings with the state government  to push for export ban lift.

While there is no export ban of iron ore from other states in India, the restriction placed on Karnataka mines has not just resulted in piling of surplus stock but also low price realisation. Currently, a third of the mined iron ore is sold to the single largest steel company JSW steel in Torangal in Bellary, which miners believe has tilted the market price unduly in favour of buyers.

With the iron ore sale now streamlined through online bidding, HM Khayum Ali, FIMI southern chapter and also a former additional director of the mines and geology department, Karnataka, explains that 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 says.

Also read: NMDC raises iron ore rates by Rs 300 to Rs 2,950 per tonne with immediate effect

According to FIMI, the value of captively consumed iron ore which is fixed by the Indian Bureau of Mines (IBM), has forced lessees to resort to distress sale. According to FIMI in 2018-19, approximately 6.67 MMT of iron ore was imported into the state as a substitute for locally produced iron ore,  which resulted 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,"  added Khayum.

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 is 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.

Also read: Hindalco to supply 1.2 million tonnes of bauxite residue to UltraTech Cement

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