Facing acute shortage of iron ore, steel and sponge iron producers of Karnataka have demanded that state-run NMDC, the only miner allowed to operate in the state, should take steps to increase its production and lower prices.

The industry that constitutes nearly a fourth of all steel produced in India is grappling with high operating costs that has seen 37 units shut shop this year. The average rate of utilisation inside the mills is just 50%.  

"There are 37 units which are closed. Some of the units that have not closed down are operating at less than 25% capacity," said Seshagiri Rao, joint managing director, JSW Steel. "Even integrated steel plants like ours are facing shortages. Our plant is operating at just 68% capacity."

The industry has been facing shortages for well over a year after a Supreme Court ruling banned all iron ore mining activity in view of rampant illegal mining and disregard for environmental concerns. Only NMDC was allowed to operate at 12 million tonnes per annum.

"NMDC is not producing at the permitted levels of 12 million tonne per annum. In fact, it is operating at less than half the threshold," said Suketu Shah, joint MD, Mukand Steel. "It has also ignored international market rates and charging higher prices, making things difficult for us."

NMDC's recent two e-auctions of iron ore got less than 7% offtake as industry has stayed away due to high prices.

"In the last few auctions, the offtake has been less than 7%," said RK Goyal, MD, Kalyani Steels. "It shows that the price is too high even for the industry that is starved of iron ore."