With the Karnataka cabinet approving a proposal to allow the export of iron pellets from Karnataka, all eyes are now on the Supreme Court. The Apex Court is likely to pronounce its verdict anytime on the application of mining companies for lifting the ban on the export of pellets from the state.
The state cabinet decision comes after the Apex Court-appointed Central Empowered Committee recommended the withdrawal of ban on the export of pellets. Even the ministry of steel has also recommended lifting the ban. Several mining companies including Vedanta, MEL and Federation of Indian Mineral Industries (FIMI) have filed an application in the Supreme Court seeking withdrawal of ban on the export of pellets.
Once the ban is lifted, Karnataka is expected to export an estimated 6 million tonnes of iron pellets worth over Rs 4,500 crore.
Going by the current prices prevailing in the international market, the miners in the state are likely to earn up to Rs 7,400 per tonne ($105 per tonne) of 63/64 Fe grade pellets in the global market.
The Karnataka government led by B S Yediyurappa had banned the export of iron ore and pellets from Karnataka in July 2010, which was later upheld by the Supreme Court in 2011. For the last nine years, there have been no exports from the state. However, the public sector mining giant KIOCL Ltd exports pellets for which it secures iron ore from Chhattisgarh.
“Currently, domestic prices of pellets are much higher than in the export markets. We have lost the opportunity of earning higher foreign exchange as the prices were higher in the international market six months ago. The prices have come down from $150 per tonne to around $100 per tonne as of now,” said Basant Poddar, Managing Director, Mineral Enterprises Ltd.
However, he said, it makes sense to lift the ban on exports as it will benefit all the stakeholders in the trade such as miners, logistics operators and Indian Railways. The Railways alone can earn up to Rs 300 crore per annum as freight revenue by carrying pellets to the port from the hinterland.
If the Supreme Court allows the export of pellets, KIOCL will be the biggest beneficiary as it is the largest producer of pellets in India. It currently operates a 3.5 million tonne per annum pellet plant at Mangaluru. The state government-owned Karnataka State Mineral Corporation Limited (KSMCL), formerly Mysore Minerals Limited is also planning to diversify into pellet production. It currently operates two mining leases in the state with a capacity of 1.34 million tonnes per annum.
The installed capacity of pellet plants in Karnataka is about 7 million tonnes per annum. Other makers include NMDC Limited (1.2 MTPA) and MSPL and Mineral Steel among others. The state has an unused stock of 14 million tonnes of low-grade iron ore fines that can be converted into pellets. Going forward, the state can produce an average 4 million tonnes of pellets annually. The steel industry does not use low-grade iron ore fines and the mining industry hopes to make use of the same for conversion into pellets.
