Policy paralysis to cripple steel industry

The delay in the reallocation of expired iron ore mining leases by the Prime Minister Narendra Modi-led government may cause catastrophic dearth of basic raw material, at a time when the government is aiming at 10% annual growth to achieve 300 million tonnes of steel production per year over the next decade.

With just six months remaining for the expiry of 329 mining leases, the government is yet to initiate the process of e-auction to reallocate the leases. The long-drawn process usually takes more than a year to complete before the commencement of actual extraction of iron ore, according to Federation of Indian Mineral Industries (FIMI).

With this delay, the steel industry will have to bleed in excess of Rs 45,000 crore annually to import in order to sustain the current level of production.

With the expiry of these mining leases, the production of iron ore is estimated to decline by 80 million tonnes. Last year, India produced 210 million tonnes of iron ore and the current year’s production is likely to be in the same range. However, these mining leases will not be in the business beyond April. As per the rules under the MMDR (Amendment) Act, 2015, these mineral resources are required to be auctioned. However, the government has not yet started the process of e-auction. Normally, it takes up to two years to complete the process before the production of iron ore begins. The delay will cause huge shortage of the raw material,” Sunil Duggal, President of FIMI told DH.

Among the mining leases that are expiring in March next year, 48 leases are in Karnataka and six of them are working mines while the balance is non-working mines.

The consumption of steel is growing by 7% in the last five years, while steel production is increasing by 6.7% annually.

It is estimated that the steel industry will face a shortage of 80 million tonnes of iron ore annually with the expiry of existing mining leases across the country. Of this, 31 leases are in Karnataka. A majority of 184 leases are in Goa, where the mining operations are suspended.

The FIMI has sought an urgent intervention by Prime Minister Modi and fast-track reforms that could accelerate the growth in the mining sector and create massive jobs in the country. It is projected that the mining sector generates 10 indirect jobs for every direct job created in the industry.

“Already closure of mines in Karnataka and Goa has resulted in the loss of 1.2 million direct and indirect jobs since 2011-12 due to ineffective regulatory mechanism, lack of monitoring and oversight at ground level and the Supreme Court interventions,” Duggal added.