Karnataka loses 500 cr as local ore shunned

The Karnataka government is losing heavily in royalty revenues and other taxes as steel mills in the state are importing iron ore despite the availability of abundant quantity of iron ore within the state.

The state government has lost royalty revenue close to Rs 500 crore, about 50% of its annual royalty revenue from major minerals, during the first half of the current fiscal.

According to a memorandum submitted by the Federation of Indian Mineral Industries (FIMI) to the Ministry of Finance, Ministry of Commerce and Industry, Ministry of Mines and NITI Aayog recently, five million tonnes of iron ore is lying unsold in the state as of August this year.

On an all-India basis, about 151 million tonnes of iron ore is left unsold at mine heads. Till July 2018, according to the Ministry of Commerce and Industry data, India has imported iron ore worth Rs 2,225 crore.

Out of the 7.1 million tonnes of iron ore produced in Karnataka and put out for sale at e-auctions, the steel mills have purchased only 2.21 million tonnes during the first five months of this year. Instead, steel mills have imported over four million tonnes during the first half of this year. JSW Steel, which operates a 12-million tonnes per annum steel plant in Ballari, is the largest importer of iron ore. The public sector mining giant KIOCL Ltd is another importer of iron ore.

“Ironically, Karnataka is the only state which cannot export iron due to a Supreme Court order. When steel mills are not using the locally available iron ore, then the mining industry should be allowed to export. We have requested the apex court to allow us to export so that we can earn foreign exchange while utilising the local material,” Basant Poddar, a senior official of FIMI-South told DH.

He said the government should also impose import duty on iron ore so that the domestic industry can be protected. Since 2011, the export of iron ore from Karnataka is prohibited by the SC.

Every tonne of iron ore procured from outside Karnataka would cause loss to the exchequer of the 15% of sale value as royalty, additional 4.5% of sale value (30% of royalty) towards District Mineral Fund. Added to this is the direct loss contribution to the Special Purpose Vehicle (10% of base value) for implementation of restoration scheme.

Karnataka’s royalty revenues from major minerals, which includes iron ore, stood at Rs 611 cr during 2017-18 (till Nov 2017) and Rs 1,042 cr in 2016-17.

“Consumption of non-Karnataka origin iron ore when abundant iron ore is available at mine head in the state is directly defeating the objectives of the directions given by the court from time to time,” FIMI said in its affidavit.