Karnataka may earn up to Rs 1,500 crore revenues from Donimalai mine

The additional iron ore production will lead to additional steel production to the extent of 1.5 million tonnes

The reopening of iron ore mines at Donimalai in Ballari district after two years by public sector mining giant NMDC Ltd will be a shot in the arm for both the steel industry and the Karnataka government.

The state government is set to earn an additional revenue up to Rs 1,500 crore annually in the form of royalty, contribution to DMF, SPV Funds and SGST from the production of 7 million tonnes of iron ore. The steel industry is assured of an adequate supply of key raw material. The availability of raw material to the steel industry will go up to 32 million tonnes during the current year. Last year, the state’s production of iron ore stood at 29 million tonnes, industry sources said.

According to industry estimates, the state government is currently losing the royalty, DMF (District Mineral Fund), NMET (National Mineral Exploration Trust) and payment towards special purpose vehicle (SPV) due to suspension of production at Donimalai mines since November 2018. The total of all these levies works out to be 40% of the iron ore price (Royalty - 15%, NMET - 2%, DMF - 30% of Royalty, SPV - 20%). So, if Donimalai produces 7 million tonnes at the current price of Rs 3,500 per tonne of iron ore, revenue loss comes out to be close to Rs 980 crore.

Moreover, this additional iron ore production will lead to additional steel production to the extent of 1.5 million tonnes. The state government will get the SGST at 9% of Rs 40,000 per tonne of steel. So, for production of additional 1.5 million tonnes of steel, the total SGST works out to around Rs 540 crore. In totality, once NMDC starts operating the Donimalai mine, the state government would stand to gain an estimated Rs 1,520 crore additional revenues per annum, an industry expert told DH.

Meanwhile, the steel industry has welcomed the state government's move to allow reopening of Donimalai mines by NMDC. "It is a very good move by the state government to allow the reopening of the Donimalai mines. This will result in an increase in the availability of raw material to the steel industry. It will also help us to save on the logistics cost for bringing iron ore from Odisha," Vinod Nowal, Deputy Managing Director, JSW Steel said.

The move to reopen Donimalai mines will be a boon for JSW Steel, which is in the process of expanding its steel capacity to 18 million tonnes per annum. It will be assured of additional supply of iron ore to its steel plant in Ballari district. The company is currently in the process of expanding its steel capacity to 18 million tonnes per annum.