Iron ore mining industry is staring at an unsold stock of over 5 million tonnes in Karnataka, thanks to import of a record 6.1 million tonne of ore by steel mills during the current financial year.
The unused stock has also resulted in a loss of royalty and tax revenues in excess of Rs 500 crore to the state exchequer.
Despite the production of enough quantity of iron ore in the three mining districts of the state, the steel industry in Karnataka has imported around 6.1 million tonnes during 2018-19, which is little over 50% of the country’s total imports during this year.
The country witnessed import of 11.75 million tonnes this year, the second highest since imports started a decade ago, according to the Federation of Indian Mineral Industries (FIMI).
As a result of huge quantity of imports this year, Karnataka-based miners could not sell their commodity, which is a key raw material to produce steel. At the same time, the miners in Karnataka are not allowed to export their material due to a ban imposed by the Supreme Court.
“Iron ore is a bulk commodity which cannot be stored for long. Until the mined ore is transported, we cannot produce more quantity, and this will impact the production. Also, the miners are forced to reduce their prices in the e-auctions,” an official of a large private sector miner told DH.
The Supreme Court has fixed a cap on production of iron ore at 35 million tonnes per annum.
As against this, the miners have produced an estimated 28 million tonnes so far. The public sector mining giant NMDC, which has a capacity to produce 7 million tonnes at its Donimalai mines in Ballari district, has produced only 2 million tonnes this year.
It suspended mining operations after the state government imposed 80% premium on sales of its iron ore. The company has contested the matter in the high court.
In 2017-18, Karnataka-based steel mills including JSW Steel imported 2.3 million tonnes, while it went up to 6.1 million tonnes in the current fiscal, till the end of February.
As a result of unsold inventory, put out by the domestic mining companies, the state government has incurred a loss of Rs 500 crore revenues in terms of royalty, contribution to special purpose vehicle, district mineral fund and National Mineral Exploration Trust (NMET).
Currently, iron ore is sold at Rs 3,127 per tonne in Karnataka, while the imported ore costs an average of Rs 6,072 per tonne. Every tonne of ore imported, Karnataka government will lose about 29.8% of the value towards royalty and other taxes.