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Detection of illegal iron-ore mining in Karnataka has led to developments that impinge on the sustained supply of the critical input to the steel-making industry.
Industry sources in the Bellary-Hospet region told Business Line here that Karnataka supplies iron ore to several large-scale steel plants in the State and in Maharashtra, Gujarat, Andhra Pradesh and Tamil Nadu for production of roughly 15 million tonnes, signifying 25 per cent of steel production of the country.
Before the large-scale illegal mining and its clandestine exports were detected in Karnataka, the State produced around 42 million tonnes (mt) of iron ore in 2009-10 out of which 28 mt were exported. In 2010-11, Karnataka produced 33.6 mt of ore, out of which 7.4 mt only were exported as the decline in production last fiscal stemmed from an export ban and stoppage of iron ore mining in several mines.
Last year, the sources said, Karnataka and neighbouring States have added huge capacities for manufacturing pellets, iron and steel. Besides steel production capacities of 16 mt, the State also supplies iron ore for production of approximately 5.6 mt of sponge iron and pig iron, which have a variety of other uses such as in foundry.
The sources noted that if all the pellets are utilised for sponge iron, pig iron and steel making, 41 million tonnes of iron ore would be required to feed the high installed capacities in the steel industry. Even at 80 per cent capacity utilisation, these plants require around 33 mt of iron ore annually.
A leading steel maker in the private industry said on conditions of anonymity that though the Supreme Court has permitted public sector National Mineral Development Corporation (NMDC) to mine in two leases to cater to the domestic market, the local steel industry's need for ore is too huge to be satisfied.
Industry sources said they were getting the requisite ore from NMDC's mines in the Eastern belt. But the procurement will jack up input costs inordinately, the sources said, besides making them do with insufficient infrastructure in the form of patchy availability of rail rakes to run their plants at operational capacities.
Sources also argue that with steel capacity in the country at 78 mt and likely to touch 120 mt by 2012-13, investments in downstream industries for steel plants using iron ore would be hard to come by if supply of ore is stopped or rendered dear. Illegal mining should not be used as an excuse to deny downstream industries from procuring the ore for value-addition, they said.
The sources said all major mine leaseholders and steel manufacturers in the Bellary-Hospet region have contributed to the socio-economic development of the region, besides doing their bit to address environmental issues.
They said illegal mining is rife in iron ore-rich States such as Orissa, Jharkhand, Goa and Andhra Pradesh too. The apex court-appointed Central Empowered Committee has detected that 215 out of 341 working mines or more than 60 per cent in Orissa are operating without Centre's clearance.
It is time the authorities got their act together to ensure that domestic steel-makers do not get unduly penalised for want of iron ore supply at a time when India needs to ramp up its outlays on infrastructure projects. It is better to fix the illegal mining problem before it assumes menacing proportions and undermine India's quest for value-added manufacturing to ensure high growth and generate gainful jobs, policy analysts warn.
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