Access to int'l markets restores price parity: Mining firms

Mining companies in Karnataka, which have long complained that the ban in ore export was forcing them to sell their product at throwaway prices, heaved a sigh of relief on Friday.

More than 70% of the iron ore produced in Karnataka was exported to China, Japan, West Asia and other countries. Industrial players said the ban not only led to unsold stockpile of up to 10 million tonnes but also led to a price fall.

Basant Poddar, former chairman of Federation of Indian Mining Industries (FIMI) who saw the sector from the close quarters before and after the mining scam, said the miners in Karnataka will once again access the level playing field.

"The ban on export was imposed to only three districts in Karnataka while miners across the country had no such restriction. This led to a situation where we were exploited by the steel industries. For example, JSW bought ores from South Africa or Odisha but we were gagged. But we were limited. This put an artificial drag on the prices instead of allowing the market forces decide," he said.

A market observer told DH that miners in Karnataka were left at the mercy of the steel manufacturers. "Industries like JSW dictated the prices in the market which no mining company was in a position to oppose. This restrictive pricing has also led to huge losses to the government exchequer in terms of cess and tax payments," he said.

He explained that the companies which mined iron ore of grades lower than FE 58 suffered the most due to the export ban.

"These companies had no buyer within the country. China has lot of industries which have the technology to process low-grade iron ore. However, the companies were not allowed to export it. As a result, many came to the point of shutting shop," he explained.

The ban threatened the very survival of companies like the KIOCL, which depended on export. The KIOCL hauled ores from mines as far away as Chattisgarh to their plants in Karnataka, converted them into pellets and sold them to the market.

"This was done to retain their buyers in the international market. It's a wonder that KIOCL managed to stay afloat and thrive for so many years. The Supreme Court's order will directly benefit KIOCL more than anyone else," the observer said.

H M Khyum Ali of the FIMI said it will take time for the miners to reestablish their connections in the international market. "Odisha is the best example to show the demand for the iron ore in Indian Market. They are processing 130 million tonnes ore of which 100 million tonnes is exported. Karnataka is producing about 43 million tonnes per annum now. We will definitely see good prices as exports increase," he said.