Steel companies hit by delay in illegal mining verdict

Suresh P. Iyengar Mumbai | Updated on November 14, 2017

Mr Seshagiri Rao

The postponement of the Supreme Court verdict on illegal mining in Karnataka has put steel producers in a quandary.

Most of the steel companies in the State have already cut production because only low-grade iron ore is available from the e-auctions of the Metal Scrap Trading Company. The Supreme Court on Wednesday said that the three judges hearing the case will not be available for hearing on March 16. Last month, the apex court had adjourned the hearing on the case by two weeks to enable the Central Empowered Committee to hear the responses of the affected companies and the State Government.

The committee, which was mandated by the Supreme Court to probe illegal mining in Karnataka, has submitted a report that recommends cancellation of 49 mining licences in the State. It also suggests capping of the State's annual iron ore production at about 30 million tonnes.

Ore stockpile

Mr Seshagiri Rao, Joint Managing Director, JSW Steel, said the company has to cut down its capacity utilisation to 70 per cent in February against 90 per cent in January due to poor quality of iron ore being supplied by Metal Scrap.

“We have about three to four million tonnes of iron ore stockpile left with us. The question now is whether we should be using it. Use of low-grade iron ore is taking a heavy toll on our furnace,” he added.

Karnataka produces 16 million tonnes annually of iron and steel, constituting about 24 per cent of the country's production of 66 million tonnes annually. Karnataka also supplies iron ore to companies located outside the State.

This unexpected delay at the court will lead to manpower layoff, idling of huge investments and socio-economic unrest in Karnataka, besides loss to the exchequer, said a senior executive of another Karnataka-based steel company.

“Unlike coal, iron ore cannot be imported as it will be unaffordable. The costs will increase substantially even if we have to source it from other states. Even if the Court allows opening up new mines in the state, it will take at least two to three months to start mining,” he added.

Steel companies recently hiked long-product prices by Rs 1,000 a tonne due to rising costs. The hike was largely due to increase in freight rates which had gone up by 20 to 33 per cent.


Published on March 14, 2012

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