FIMI said restrictions on sale and expor of iron ore had led to ‘artificial oversupply’ of iron ore in Karnataka(Aniruddha Chowdhury/Mint (File))
FIMI said restrictions on sale and expor of iron ore had led to ‘artificial oversupply’ of iron ore in Karnataka(Aniruddha Chowdhury/Mint (File))

Industry captains seek ease of Karnataka curbs on iron ore export and sale

  • FIMI said the restrictions had resulted in artificial oversupply of iron ore, leaving large quantities unsold and huge stockpiles in the mines.
By Sharan Poovanna
PUBLISHED ON MAR 04, 2021 10:15 AM IST

The southern chapter of the Federation of Indian Minerals Industries (FIMI) on Wednesday made a representation to the Karnataka government expressing the distress on the sector due to restrictions on sale and exports of iron ore.

“There is a peculiar disparity in the state of Karnataka owing to the restrictions, where the steel industry is free to import from other states and countries while the miners are restricted to sell through e-auction only to the end users around the state,” according to the letter addressed to the government.

FIMI said this has added the ‘artificial oversupply’ of iron ore in the state leading to depressing prices and leaving large quantities unsold and huge stockpiles in the mines.

FIMI said the restrictions have led to an estimated revenue loss of 3,000 crore per annum to the state.

The legal entanglement for auctions of existing stockpiles and export restrictions from the state by the Supreme Court (SC) almost a decade ago (2011) among other authorities has forced Karnataka to pursue a cautious approach, adding to delays, unrealised potential and loss of revenues, industry leaders and officials said.

“(The) Government should look into expediting e-auctions and whatever reserves are there, they should explore and auction it. They (the government) will get a huge amount of revenue out of that,” Vinod Nowal, Deputy Managing Director, JSW Steel Ltd, said.

He added that the e-auction process exists, but fresh areas need to be explored and all clearances should be expedited.

In October last year, FIMI had estimated that the state endured 29,000 crore losses due to the ban on iron ore exports.

Iron ore mining in Karnataka is a political hot potato after the issue led to the collapse of the first Bharatiya Janata Party (BJP)-led government in the south. B.S.Yediyurappa, then (and incumbent) chief minister of Karnataka, had to relinquish power after the political face-off against his own cabinet colleague, Gali Janardhana Reddy from the mineral-rich district of Ballari, about 320 km from Bengaluru. A report by then Lokayukta, Justice N. Santosh Hegde, had detailed the extent of illegal mining, losses to the state exchequer and large-scale and irreversible degradation of the environment in areas by mining lords, including the infamous ‘Reddy brothers’.

“The mining industry in Karnataka has not lived up to its potential. It is a big travesty that when you have ore in Karnataka, you are bringing it from Odisha. It makes absolutely no sense,” Basant Poddar, former chairman and current member of the FIMI, said.

Poddar estimates that Karnataka has barely auctioned 15% of its capability that has left the industry at the mercy of piling costs, shortage of iron ore and without any imminent reprieve.

Despite the huge iron ore reserves in Karnataka, large corporations like JSW have depended on Odisha to make up for shortfalls.

“Iron ore for steel industry is in short supply in Karnataka and we are bringing it from Odisha which has a logistical problem,” Nowal said, adding that the company brings in about 3-4 million tonnes of ore from Odisha to make up for at least 15% shortage in the state.

He said that logistics cost in India is about 2.5 times more than global costs, adding to piling up operational expenses.

The state government has reached out to the Centre to expedite clearance requests for at least four pending proposals of the Karnataka State Minerals Corporation Ltd.

“Exploration activities are underway in about 24 blocks in the state. But all of this depends on clearances from the forest department and the Centre,” said a senior official at the state mines and geology department, requesting anonymity.

Several petitions have been filed by the industry in the SC for some relief, FIMI added.

There are about 25 major mineral licensees operating in Karnataka, according to government data. Industry leaders also point out the deputation of inexperienced and incompetent officials to the mines and geology department, leaving the sector at the mercy of a complex bureaucratic process.

Poddar said the impact of restrictions is being felt largely by the micro, small and medium enterprises, which do not have deep pockets to compete against big corporations.

He said Goa is now importing iron ore from South Africa. He added that ore was being sold at $50 per tonne in Karnataka whereas the price is around $150 per tonne in exports.

Meanwhile, environmentalists believe that unscrupulous mining is leading to widespread destruction of fragile ecosystems in the state. “Mining licences are given without any thought or consideration for the environment. This is a revenue-oriented approach with mindless growth and reckless development,” AN Yellappa Reddy, a noted environmentalist, said.

Environmentalists have also raised the issue of the large-scale and irreversible damage done to the ecology in areas like Ballari, Chitradurga and other places. Thousands of crores from district mining funds, rehabilitation and other purposes remain unused in the 10 years since the SC judgement on Karnataka, experts said.

While iron ore mining is strictly monitored, other forms of mining like stone and sand are being carried almost unregulated in the state, according to officials and industry leaders.

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