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Higher ceiling for iron ore production in Karnataka a right step, but not adequate, say experts

Experts also say the ruling may not have a major impact on volumes and softening prices would adversely affect merchant miners

August 26, 2022 / 08:27 PM IST

The Supreme Court's ruling raising the annual ceiling for iron ore production in three districts of Karnataka is a step in the right direction, even though it may not have a significant impact in boosting volumes to help reduce the dependence of the southern states on Odisha for iron ore, experts said.

The Supreme Court has raised the iron ore production ceiling in Karnataka from the current 35 million tonnes (mt) to 50 million tonnes (mt) from the A and B category mines in the state, which is the second-largest iron ore producing state in India.

According to Jayanta Roy, Senior Vice President, ICRA, “The increase in Karnataka’s iron ore mining capacity to 50 million tonnes is a welcome move, which will help improve the ore availability for steel mills in the southern state. This will not only help reduce the partial dependence on ore supplies from Odisha, but also help secure iron ore for the state's upcoming capacity expansions, including the six million tonnes per annum (mtpa) expansion at JSW Steel's Vijayanagar plant.”

Though this move is expected to be beneficial to non-integrated players like JSW Steel, it may not benefit NMDC. According to Roy, post the increase in ore availability in the state, there may be some softening of prices in Karnataka, which would be an adverse development for merchant miners.

Too little, too late?

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According to the former commercial director of NMDC, TRK Rao, “This is too little and also too late. It doesn't help in meeting the massive demand of the steel industry when JSW is ramping up its steel production capacity. Also, these mines have more capacity to produce, which could be well consumed due to soaring demand."

According to the Supreme Court’s document, the ceiling limits were imposed because of the earlier Centrally Empowered Committee’s (CEC) recommendation and the report of the Lokayukta, which suggested that the rate of mining of iron ore in Karnataka was unsustainable and would result in exhaustion of iron ore deposits in the state within 30 years.

Back in July and August 2011, various courts had imposed a ban on mining in the districts of Bellary, Chitradurga, and Tumkur.
Nickey Mirchandani Assistant Editor at Moneycontrol covering Materials and Industrials space which includes Metals, Cement and Infrastructure sector. She’s a presenter and a stock market enthusiast with over 12 years of experience who loves reading between the lines and scanning through numbers. Before joining Moneycontrol, she was an Associate Research Head at Bloomberg Quint/ BQ Prime, where she wrote analytical pieces, anchored multiple interviews and a show called “ Market Wrap”.
first published: Aug 26, 2022 08:27 pm
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