Ban on mining in Bellary to hit iron and steel output

With no iron and steel manufacturer in Bellary region having captive iron ore mining facilities, the Supreme Court order is likely to cripple several companies in the neighbouring States, said Bangalore Chamber of Industry and Commence (BCIC).

In its reaction to Supreme Court order of banning mining in Bellary district, BCIC in a release said the order would make Karnataka-based iron and steel companies in addition to the ones located in the southern States to close their activities in the next 2-3 days.

Many companies both in the State and in neighbouring States heavily depend on Bellary for their iron ore requirements and the region offers a capacity of 20 million tonnes an annum.

The total iron and steel produced in Karnataka is to the tune of 16 million tonnes an annum (MTPA), constituting about 24 per cent of the country's total production, which is 66 MTPA. Other companies located in other States, are dependent on Bellary ore, have a manufacturing capacity of four MTPA.

“Since steel making is a continuous process and cannot be switched on and off abruptly. The abrupt or long-term stoppage of blast furnace and coke ovens could be disastrous. Apart from a huge financial impact, the recovery may take 8-12 months. There are also safety concerns to be addressed if the steel production has to be halted quickly,” said BCIC.

The Supreme Court has directed Central government ministries such as Department of Mines, Environment, Steel and Commerce and Industry to submit an interim report inter-alia indicating the domestic iron ore requirement.

“The affected iron and steel manufacturers feel that the time is fast running out, even after curtailment of production these companies have very low levels of inventory which may not last more than 2-3 days of production,” said BCIC.

A suspension on iron ore mining in India will have an impact of 2 per cent on the national GDP given its 6.2 per cent weightage in the Index of Industrial Production. With 25 per cent of steel production being forced to shut down in Karnataka, the GDP will be negatively impacted by 0.5 per cent which amounts to $8.5 billion (at factor cost).

Iron and steel shortage would lead to a cascading effect on the price of automobiles, consumer durables; construction, infrastructure and so on will also push up the associated costs. It will also delay implementation of ongoing projects as well as addition of new capacities/projects.

“BCIC fully supports and welcomes the steps initiated by the Supreme Court order for curbing illegal mining and conservation of the environment. However, suspension of iron ore mining and transportation in Karnataka would result in grave implications to the iron and steel industry in particular and the Indian economy in general. This will lead to, amongst others, high inflation, manpower layoff, idling of huge investment, socio-economic unrest in the region and loss of revenues to the Central & State Government,” explained BCIC.

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