Mining in Karnataka: More pain ahead for NMDC

Iron ore supplies in Karnataka have not picked up since the Supreme Court lifted the ban on mining 4 months ago. National Mineral Development Corporation (NMDC), one of the major miners in the state, may see production capacities cut by half, reports CNBC-TV18’s Vineetha Athrey.

Also read: Trade unions tell govt to stop further stake sale in CIL Stakeholders in the mining industry had its raised hopes when the apex court had lifted the ban on mining four months ago. “The judgement has removed the uncertainty of the last 1.5 years on mining in Karnataka”, said Vinod Nowal, director and CEO, JSW Steel. Basant Poddar, chairman (South) of the Federation of Indian Mineral Industries (FIMI) added, “We expect to mine 15 million tonne this year.” But these hopes have dimmed since. Iron ore production in the state is not on track to even hit 50 percent of the demand of 30 million tonne per year. The pain may now get worse. NMDC, which currently enjoys the largest mining capacity of 12 million tonne per annum, will have a 6 million tonnes per annum mining cap thrust upon it. The final order to this effect from the central empowered committee has not been issued yet. However, it will be a major setback for NMDC, considering it had set itself a production target of 28 million tonne of iron-ore this year. Karnataka was accounting for 9-10 million tonne. The mining major has already mined 3 million tonne so far this year and the lower cap will not leave much headroom. NMDC's loss is Sesa's gain For steel companies that rely on local iron-ore to keep costs in check, there may be some relief in the offing. Sources say one of the largest mines in the state, which belongs to Sesa Goa, has passed stage-1 of the review process. It will be back online before the year ends. Even with a lower mining cap, this should add 2.9 million tonnes of ore to the market. For Sesa Goa, the timing is godsend. Sesa Goa's mines will come online at a time when NMDC is forced to cut back on production. With the Supreme Court allowing miners to fix the base price for iron-ore auctions, Sesa Goa will have an opportunity to charge a premium for its ore.