There could be another scandal brewing in the dustbowls of iron ore-rich Ballari. After the government made e-auctioning of the ore mandatory, mining and steel lobbies accuse each other of forming cartels to earn windfall profits from e-auctions. But at the same time, around four million tonnes of unsold iron ore is said to be lying idle at the National Mineral Development Corporation’s Kumaraswamy Mine, with the Mysore Minerals Limited and a couple of other private miners in Sandur due to increasing imports by steel players, who reportedly find this more cost efficient in the long run. Shivakumar G. Malagi reports
The scam took the nation by storm and rich mining barons, used to flaunting their wealth and lording over the locals, found themselves either under the scanner or behind bars as the iron ore industry went through one of its worst upheavals in Ballari over the last decade. The district’s barren hills, stripped of all their greenery and mined mindlessly with scant regard for its ecology, spoke of the greed of the illegal miners, who robbed it of its natural wealth over the years, leaving it dusty and forlorn as they whizzed past in their fancy cars, bought from the unimaginable wealth they had amassed.
Nearly three dozen top bureaucrats and law makers too found themselves in the dock for abetting illegal ore mining and looking the other way as they went about their business. The judicial intervention also saw mines shutting down by the dozens in one of the darkest phases of the industry in recent memory.
Eventually, as the mining industry attempted to rise from the ashes, it came under a new regulatory system that insisted on e-auctioning of iron ore. But this has only set off a new battle with the steel manufacturers and mining companies arraigned against each other in Karnataka over the pricing of iron ore.
The steel companies claim there has been an unprecedented increase of 122 per cent in the base price of iron ore following the entry of private mining companies in e-auctions in April 2013 on the orders of the Supreme Court. They point out that while the public sector owned National Mineral Development Corporation (NMDC) increased the base price of iron ore with 61 per cent Fe content from Rs 2,035 to Rs 2,190 per tonne between April 2013 and January 2014, private mining firms hiked the price from Rs 2,250 to Rs 7,000 during the same period and there has been no fall since.
"Operators of seven category-B mines have been increasing the price in an unfair manner, causing hardship to the steel and sponge iron manufacturing units," laments a member of the Karnataka Iron and Steel Manufacturers Association (KISMA)
But on the other hand, mining bodies like the Federation of Indian Mineral Industries (FIMI) accuse the steel companies of cartelisation. In a letter to the secretary, mines, FIMI claimed three or four steel companies bought almost 75 per cent of the iron ore in e-auction in Karnataka and dictated its price in the process.
“It is the dominance of these few buyers, which decides the price of iron ore,” claims a member of the FIMI, maintaining that the government too loses revenue by way of royalty and other taxes due to this artificial reduction in price.
As mining and steel lobbies accuse each other of forming cartels to earn windfall profits from the e-auctions, around four million tonnes of unsold iron ore is said to be lying idle at the NMDC’s Kumaraswamy Mine, with the Mysore Minerals Limited and a couple of other private miners in Sandur owing to increasing imports by steel players, who reportedly find this more cost efficient in the long run.
According to a local miner, who supplies ore to JSW Steel, the higher cost of imports does not impact it in any way because it buys a higher grade of iron ore from abroad that allows it to cut down the cost on other processes like ore beneficiation, which is used to improve the grade of iron ore in the country.
In his view, iron ore is lying unsold in the state not because of lesser demand but because of the “unreasonable and unfair price” demanded for it by the miners.
As the face-off continues, steel plant owners say they are in a fix as they cannot shut their operations despite the rising iron ore price in the interest of the thousands they employ and nor can they increase the price of steel due to the intense competition in the industry. “We can't shut down our plants like miners owing to the thousands we employ. The state government must intervene to resolve this stand-off," pleads a steel company executive.
While Chief Minister H D Kumaraswamy has written to Prime Minister Narendra Modi, seeking his intervention in the matter, the fact that he has asked for curbs on iron ore import and an increase in the basic customs duty on it at the request of the miners, has not gone down well with the steel manufacturers.
In his letter, Mr Kumaraswamy called for raising the import duty on iron ore and pellets, arguing that the low duty of 2.5 per cent encouraged steel players to opt for imports rather than utilise the local ore.
Unamused , a steel company executive contends, "The Chief Minister has taken the miners’ side. He should have given the steel makers an opportunity too as we generate huge employment in the region."
Justifying the need to import iron ore, the Karnataka Iron and Steel Manufacturers Association (KISMA) says while the domestic steel manufacturing units in Karnataka need about 36 million tonnes of iron ore a year, the state’s current production stands at roughly 20 to 23 million tonnes.
“As it is, the integrated steel plants in the state are only able to utilise 60 to 70 per cent of their capacity and 28 of the 53 sponge iron plants in the state have shut down because of shortfall in supply of iron ore,” notes a member.
NMDC Donimalai mines halted
In a first of its kind move, the state government has reportedly warned the National Mineral Development Corporation (NMDC) to go by its norms or face the consequences, including cancellation of its iron ore mining lease in Ballari.
While the rebuke was given during renewal of NDMC’s license for its Donimalai mine, according to insiders, ore production has been halted at this mine as the government’s insistence on a lease rental equivalent to 80 per cent of its sale value has made its operations unviable. Although the NMDC has moved the court against the move, if the mine is forced to close, it could be a blow both to its growth plans and to the local steel industry. Warn industry insiders.
Calling for a reconsideration of the norms imposed, the company has in a letter to the state government said the NMDC could lose as much as Rs 1000 crore, or almost 10 per cent of its annual revenue if it did not reverse its decision. But the state government appears to be firm. "We can't differentiate between private and public sector mining firms as they both make profits from the state's natural resources" said an official. But official sources also admit that if the mine , which roughly produces six million tonnes of ore per annum, closes, the state government could suffer a loss of Rs 2000 crore....