Low iron ore dispatches in Odisha hits supply

14 November 2016

Lacklustre dispatch of iron ore in Odisha as against the approved limits under environment clearance (EC) has cast a shadow on the government’s mining revenue collection.

Total dispatch of iron ore till the end of September stands at 44 million tonne (mt) but this is only 25% of the approved EC limit. Low despatch in the first half of this fiscal has already posed a challenge to meet the state government’s ambitious revenue realisation target of Rs 6,700 crore from mining operations.

One industry estimate pegs the revenue loss at the end of September at 40%. And, if the current tempo of despatch continues in the remainder of this fiscal, the government’s shortfall could well touch Rs 2,000 crore. This fiscal, the state government was eyeing 120 mt of iron ore output, a record production figure.

Odisha has 143 iron ore mining leases. However, only 46 of them are operational with a combined approved EC limit of 156.63 mt. In 2015-16, the iron ore despatch was 72 mt which was only 45.96% of the prescribed EC limit. The state government had mopped up Rs 5,047 crore by way of royalty from iron ore, coal and other minerals in last fiscal.

Iron ore despatches are falling mainly because of the prevailing curb on night movement by road.

“The government can consider lifting embargo on iron ore movement and allow it 24×7. This will ensure smooth movement of iron ore and boost royalty collection”, said a steel industry official.

Low dispatch of iron ore was evident from the operations of state-controlled miner Odisha Mining Corporation (OMC). In 2015-16, OMC had set a target for dispatch of 8.47 mt but could despatch only 4.6 mt, thus missing 54% of its target. This year also, the state PSU is unlikely to achieve its target of dispatching 10 mt of iron ore, though it has the EC limit of 15.4 mt.

Some big merchant miners were allegedly resorting to production curbs and this coupled with tepid despatch had distorted market dynamics, creating an imbalance in demand and supply of iron ore. The fall out of this imbalance was reflected in iron ore prices. Price of lumps had shot up from Rs 1,700 to Rs 2,450 per tonne. Iron ore fines prices, too, has gone up from Rs 1,200 to Rs 1,250 a tonne, in a span of two months.

Hike in raw material prices had teared into the profitability of steel companies and other end use plants. Most of the end use industries feel the solution lies in the state government enforcing strict implementation of the EC limits to production of iron ore. If operating mines conform to the EC limits, it will not only ensure iron ore availability at competitive price, but also shore up the government’s royalty collection.

Source – BS