Market and product

The country is likely to face a major iron ore crisis due to the lapse of key operating mines by March 31, 2020. The deficit in domestic iron ore supplies after March 2020 is seen at around 80 million tonne. This, in turn, is bound to put brakes on building India's steel-making capacity as it targets an ambitious 300 million tonne (mt) output by 2030.

Supplies in iron ore would be more pronounced in Odisha, the largest producing state where 17 mines are set to run out of operations. The combined annual capacity of these mines is estimated at 66 mt. The shortfall from Odisha would especially hurt the domestic steel companies as the state's iron ore is predominantly used in within the country as opposed to the export-oriented ore in Goa and Karnataka.

"We had earlier requested the government to extend the validity of such mines. There will be chaos if the mines are thrown out of operations. Steel plants without captive iron ore sources will suffer the most, they will have to fall back on imports”, said R K Sharma, Secretary General, Federation of Indian Mineral Industries (Fimi).

Data by the Indian Bureau of Mines (IBM) suggests that 250 such mines are going to expire by March 2020. Of this, barely 50 are currently in operations. The Union ministry has been issuing reminders to states asking them to work on a roadmap to enable auctioning of such mines. No roadmap is, however, ready yet.

By 2020, the demand for domestic iron ore is pegged at 234 mt which is further projected to escalate to 447 mt by 2030.

A spokesperson at Essar Steel said, “The government has already initiated the process of auctioning iron ore mines and to get them operational. Also, many of the steel companies have captive mines to meet their requirements either fully or partially. Further, in addition to the 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.”

As per the provisions of the amended Mines and Minerals (Development & Regulation) Act, the validity of existing non-merchant mines has been extended till March, 2020 while those of captive leases have been extended till 2030. Major mining leases that will lapse by 2020 include Rungta Mines, KJS Ahluwalia, Serajuddin & Co, Kaypee Enterprises, Kalinga Mining Corporation, Mid East Integrated Steel Ltd, KN Ram, RB Das, Tarini Prasad Mohanty, KC Pradhan and Lal Traders.

Iron ore blocks going for auctions need to be explored at least up to G2 level as per the policy of the Government of India. Most of the mining leases expiring in 2020 have not been explored to that level. There is an exploratory obligation on the holder of the mining lease as per the conditions laid down in the approved mining plan under the Mineral Concession Development Rules (MCDR), 1988. Further, Rule 22 of Mineral Auction Rules 2015 stipulates license holders to complete detailed exploration at G1 level and prepare a detailed feasibility study report, over the entire area under the mining lease, within a period of five years from the date of commencement of such mining lease. - Business Standard -