Miners warn of 80-mt iron ore deficit on lease extension delay

The iron ore mining sector faces a challenge a little down the line, as licences of 250 mines are to lapse in three years from now. Only 50 of these are in operation, producing 80 million tonnes (mt) annually, a little over 80 per cent of these in Odisha. This 80 mt supply could be in danger, as no formalities have begun to extend the lease or validity.

With steel companies in expansion mode, supply concerns could emerge. The deficit in domestic ore supply after March 2020 is seen at around 80 mt and this could put the brake on expansion in steel making; the government targets an ambitious 300 mt annual output by 2030.

In Odisha, the largest ore producing state, 17 mines are set to run out of operations. Their combined annual capacity is 66 mt. The state’s iron ore is predominantly used in value addition within the country, as opposed to the export-oriented ore in Goa and Karnataka.

No road map is ready yet to auction the mine leases going to lapse. “We had earlier requested the Government of India to extend the validity of such mines. There will be chaos if these thrown out of operation. Steel plants without captive ore sources will suffer the most; they will have to fall back on import,” said R K Sharma, secretary-general, Federation of Indian Mineral Industries. By 2020, the domestic iron ore requirement is pegged at 234 mt, projected to escalate to 447 mt by 2030, when the aim is to reach steel production of 300 mt.

A spokesperson at Essar Steel was far more optimistic, “The government is fully seized of the matter and has already initiated the process to auction iron ore mines and also get these operational. Also, many of the steel companies have captive mines to meet their requirements either fully or partially. Further, in addition to state-owned companies, private miners also meet the requirement of steel companies. In any case the import option is always available if the prices are favourable.”

Under the amended Mines and Minerals (Development & Regulation) Act, the validity of existing non-merchant mines have been extended till end-March 2020 and of captive leases till 2030. Blocks going for auction need to, under the rules, be explored at least up to the G2 level; most of the leases expiring in 2020 have not been. Rule 22 of the Mineral Auction Rules, 2015, stipulate completion of detailed exploration at the G1 level and to prepare a detailed feasibility report over the entire area under the mining lease.

Source – www.business-standard.com