The year 2014 didn’t come out too well for Iron ore, as many mines across the nation are currently banned. There’s a possibility that steel output via DRI route might get affected owing to this shortage. We at Steel 360 interviewed Mr Vijay Jhanwar, General Secretary, CGSIMA where he went about surfacing the situation of Sponge units operating in Chhattisgarh (largest contributor of Steel in India via DRI route). An excerpt of the interview is following.
Q. What are the problems prevailing in Sponge iron industry in Chhattisgarh?
A. Most of the Chhattisgarh based Sponge iron units do not have a captive source of Iron ore. They are dependent on NMDC and some Odisha based private mines. In last 8-10 years, Iron ore prices have sky rocketed and increased 10 folds during these years. As a consequence, these plants have become incompetitive. Lately, mining operations in many lands have also diminished due to legislative & policy issues further worsening the situation. The steel industry of Chhattisgarh is going through its worst ever phase due to very high prices of Iron ore from NMDC.
Q. How is the mining scenario now?
A. The current mining scenario in Odisha has worsened due to halt in operations of many mines after the Supreme Court’s directives. There is no clarity on the time when these mines will restart operations. The new Government has to adopt quick measures to settle the events because a large community of manufacturers is in a grind owing to these issues.
Q. How are the manufacturing units getting affected by high Iron ore prices?
A. There is a huge disparity in Iron ore availability to steel companies with captive mines and without it. Today, there is a gap of almost INR 10,000/MT in raw material cost for units that do not have captive mines. I would like to elaborate this properly. A steel company with a captive mine gets Iron ore at a maximum of INR 500/MT plus royalty. On the other hand, steel plant without captive mine gets Iron ore at almost INR 5,000/MT plus royalty. In making one MT of finished steel almost 2.2 MT of Iron ore is used so this increases the cost of raw material to almost INR 10,000/MT in comparison to other steel plants with captive mine. How long can these steel manufacturers survive this huge disparity? This can exclusively be taken down by placing a price regulator on Iron ore and stopping the miners from making supernatural profits.
Q. What should be the pricing mechanism?
A. Iron ore is a natural resource and so its benefits should be spread equitably among the citizens of the country. Iron ore prices should be based on the cost of mining plus profit (to be decided by the government). This will help the industry increase its production and steel prices will also come down as a result. State governments should be granted power to decide Iron ore prices for manufacturing units within their state. The royalty should be established on a fixed basis, so that the state governments do not suffer any loss due to controlled Iron ore pricing.
Q. We’ve ascertained that the clearance process is one of the bottlenecks in our country. Please tell us exactly what steps delay the whole process?
A. Yes of course, the forest clearance norm needs a relook. Say for example, Barbil & Joda circle is a 50 km mineralized belt. Government can think of making a blanket clearance to the mining area; it can define targets for miners. The hard process of forest clearance takes 10-20 years and in Odisha it has exceeded even that; I believe the process can be redefined. I suggest this operation can go to the central government and it should be a single window system. Today, I’ve discovered that there are approved mining plans, consent to constitute, consent to operate, and then there’s Environment Clearance too, but no forest clearance.
The government can fix a policy and the policy can be linked to a cost that a miner can stand. In addition, a-forestation can be contracted to a third party expert of the subject. In return for this overhaul, the government can charge a fee to the miner. Mining as such, is not possessed by anyone. It is a property of the citizens and hence it is leased. Thus, the benefit should go to maximum individuals in the state.