Commodities

Expiring mine leases may hit steel sector hardest

Suresh P Iyengar Mumbai | Updated on November 07, 2019 Published on November 07, 2019

Stabilisation of waste dump in process at SMIORE's Iron Ore mines in Sandur, Karnataka

329 mines are to be auctioned, but are not seen fetching good prices, given the prevailing low raw material prices

The leases of 329 mines of private mining companies, including 48 operative and 281 non-operative mines spread across ten States, will expire in the next four months, leading to supply disruptions of key raw materials to various manufacturers.

These mines are slated to be put on auction but may not fetch a good price given the global uncertainties and the prevailing low raw material prices. Also, debt-laden metal companies may not bid aggressively.

Moreover, metal prices, which are in a down-cycle, are not expected to revive any time soon with the US-China trade war persisting despite the talk of imminent resolution. While the mining leases of private commercial miners are being cancelled, the government recently renewed, up to 2030, the leases of captive mines allotted to top corporates.

RK Sharma, Secretary-General, Federation of Indian Mineral Industries (FIMI), said one does not understand the logic behind such discrimination. “Nowhere in the world two sets of people from the same industry are treated differently and discriminated under a common law,” he said. The bottlenecks are a hindrance to growth and need to be removed, he added.

Odisha worst affected

Half of the 48 operative mines whose leases will expire in March are in Odisha, six each in Jharkhand and Karnataka, five in Gujarat, three in Andhra Pradesh, two in Rajasthan, and one each in Himachal Pradesh and Madhya Pradesh.

Among the non-operative mining leases that are expiring, 184 are in Goa, 42 in Karnataka, 12 each in Jharkhand and Madhya Pradesh, nine in Maharashtra, seven in Odisha, six each in Andhra Pradesh and Gujarat, two in Rajasthan, and one in Himachal Pradesh.

Iron ore supply to the steel industry would be the worst hit since, of the 329 mines, 232 are of iron ore. Of these, 24 are operative. The majority of non-operative iron ore mines are in Goa, where there is a blanket mining ban.

Besides iron ore, the mining leases of 21 manganese mines, 14 of bauxite, 23 of limestone, four of chromite, two of graphite, one of garnet and 32 of other minerals will expire in March.

Working mines, mostly in Odisha and Jharkhand, handle 45 per cent of the iron and manganese requirements of steel plants in the eastern sector.

Material removal

FIMI’s Sharma said the situation is alarming because in case a lessee is not able to retain the mine, he gets seven months to remove all material from the site. “How he removes and where he keeps that material is another issue,” he said.

Further, the raw material supplies to steel manufacturers will also be disrupted at a time when India is looking to produce about 300 mt of steel in the next five years and become the second-largest producer in the world, he added.

Published on November 07, 2019
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