Major players from the steel industry have approached the government to auction iron ore mining licences which are currently held by private miners. Licences for 334 mines, out of which 33 working iron ore mines with an annual production capacity of 55 million tonnes (MT), will expire in 2020 and may impact companies such as Rashtriya Ispat Nigam Ltd., Essar Steel and JSW Steel which have inadequate captive iron ore resources. In May 2019, the Federation of Indian Mineral Industries pitched for extension of leases of over 300 non-captive mines till March 2030. But instead of extending these mining leases, the steel industry is now demanding a transparent auction process that will enable a swift switch from old to new lessees.
The Indian Chamber of Commerce (ICC), Associated Chambers of Commerce and Industry of India (ASSOCHAM), Chhattisgarh Sponge Iron Manufacturers’ Association (CSIMA), and the Karnataka Iron and Steel Manufacturers’ Association have written to NITI Aayog and to the Union Ministry of Mines requesting for mine auctions. Welspun Steel, Tata Steel BSL (erstwhile Bhushan Steel), Jindal Saw, MESCO Steel, and Jindal Steel and Power (JSPL) are members of ASSOCHAM, while Tata Steel, JSPL and Shyam Steel are members of the ICC. Nilanjan Choudhury, Joint Director, ICC, told BE, “It was the steel industry’s demand that we had to pitch to the government.”
The World Steel Association had estimated steel demand in India to touch 103 MT till the end of this year against 96 MT which was registered in 2018. It would further grow to about 110.2 MT in 2020. According to industry insiders, it is the need of the hour to solve the iron ore license issue to maintain adequate demand of iron ore for the steel industry.
Iron ore production
Iron ore production in India is estimated to exceed 204 MT in FY 2019 as compared to FY 2018 when it was 201 MT. National Mineral Development Corporation (NMDC), India’s largest iron ore producer recorded 32.47 MT in FY19. SAIL and TATA jointly accounts for around 23% of the country’s total iron production from their own captive mines. The lack of domestic iron ore supply will necessitate an increase in the import of iron ore mix, which costs 50% more than domestic ore. Major Indian players prefer to import iron ore from countries like Brazil and Australia due to the cost benefit.
If the license is delayed
The iron and steel sector has a total banking credit of `2.85 trillion but most of the companies do not have assured iron ore accesses. The 2015 Amendment to the Mines and Minerals (Development and Regulation) Act, 1957, extended merchant miners’ licences to their mines by five years which will be in place till 2020. By this time, with new environmental and forest clearances, the mines were expected to be readied for auction. The 2015 Amendment also states that licences of expiring mines will not be renewed and the mines will be allotted on the basis of auction. Even the industry chambers stated that the government will lose about `79,500 crore in revenue if the leases of the iron ore mines are not auctioned soon.
Prevention mechanism of the loss
Getting iron ore mines through auctions will be a relief for the steel industry players who are forced to import costlier ore in the absence of captive mines. The fact that global iron ore prices went up to their highest in the last five years in 2019 is definitely a deterrent. Odisha has a booming mining industry and the state government has in place an auction policy. Odisha Steel and Mines Minister Prafulla Mallick informed recently, “We have already chalked out plans to auction 5 to 10 out of 36 mineral blocks in July so that ore production is not hampered.” He also said that 36 mining blocks are ready for auction out of which 12 are virgin.