There is challenge to cut cost by raising efficiency bar: Sesa Goa CEO

15 May 2017

To prepare the Indian iron ore industry to meet the feedstock requirements of a 300-million tonne (mt) steel capacity projected for 2030, it is essential to speed up the process of auctioning new deposits, says Kishore Kumar, CEO of Sesa Goa.

India is targeting a steel capacity of 300 million tonnes (mt) by 2030. In order to use that capacity, steel producers will need 480 mt of iron ore against the estimated production of 180 mt in 2016-17. How will the iron ore industry prepare to meet this big future local demand and also export fines and low grade ores?

Our iron ore resource base had grown from 22.1 billion tonnes (bt) in 2020 to 31.3 bt in 2013. This is despite our exploration being historically restricted to shallow depths and high grades. Deeper drilling and lower cut-offs of mineable ore will give a further boost to the resource base. We have in the past, between 2007-08 and 2010-11, produced well over 200 mt of iron ore.

But to bring the industry to the level of supporting steel production at the level envisaged for 2030, it will be imperative to speed up the process of auctioning of new blocks of deposits. In our country, it takes anything between three and five years to open mines after going through the lengthy process of securing a large number of state- and central-level clearances. Land acquisition also remains a challenge.

Let there be a greater focus on exploration to make more and more deposits auction-ready. I shall very strongly recommend that at least six months ahead of iron ore mining leases that are to expire by March 2020, all preparations should be made for their further auctioning. That will ensure continuity in production. Once a mine is closed, it takes a long time to bring it back into production.

What is your reaction as a merchant miner to the steel ministry proposal to end the free pricing regime for iron ore so the feedstock is available to steel mills at “reasonable” prices?

Merchant producers of iron ore are at all times price-takers and not price-givers. For price determination, the best course of action is to leave it to global indexes run by agencies such as Platts and Metal Bulletin. Since the breakdown of annually negotiated world iron ore price in 2010, these indexes have become the primary physical market pricing reference for seaborne trade in the commodity.

Boom and bust will be there in every commodity. Since February, ore has swung between $94.86 and shades below $60 a tonne. Resource groups take big risks when they open new mines. Leave prices to be decided by market forces. That is for the good of all stakeholders.

Your group has a major presence in Goa and Karnataka. Shouldn’t there now beupward revision of the Supreme Court-ordered caps on iron ore production?

The expert committee set up by the court has recommended production cap for Goa now at 20 mt should first be revised to 30 mt and then to 37 mt once the mining corridor for transfer of ore from mines to the port without causing disturbances to environment and inconveniences to local communities is ready. As for Karnataka, the recommendation is to allow production to be raised first to 40 mt and then to 50 mt. Both the states have the capacity to do sustainable and environment-friendly mining at much higher levels than now.

Steelmakers in Japan, South Korea and in the West consider it wise to procure iron ore from merchant miners instead of owning mines. In contrast, Indian steelproducers are too very keen to have captive mines. Where do you stand on this?

Steelmaking is a highly capital-intensive pursuit. Then there is the constant challenge of cost reduction by raising the efficiency bar. Steel now also has to fend off competition from other metals and composites. It will, therefore, be wise for Indian groups to buy iron ore from merchant miners like their peers abroad and concentrate all their energies and resources on steelmaking. That way they will also be spared the criticism of only extracting high-quality ore from captive mines leaving the middlings unextracted. Mind you, all natural resources are community owned and their harnessing must be wastage-proof.

Irregularities such as mining impacting the environment, poaching into areas adjacent to licensed fields and slaughter mining are not uncommon here. How to end these?

The government introducing the mining surveillance system using space technology and remote sensing imagery makes it difficult, if not impossible, to do any irregular mining. I think much in terms of fairness and sustainability in operation will be achieved if all extractive industries, including iron ore are asked to submit tax transparency, report yearly.

Source-business-standard

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