India: State-based industries seek fifty percent reservation policy for iron ore

Iron ore-producing states of Odisha and Chhattisgarh are under pressure from pellet and sponge iron manufactures in their respective states to implement pre-emption provisions.

Writing to the Odisha government since May, the Pellet Manufacturers Association of India has asked it to enforce its 2015 policy reserving 50 percent of the state's production for industries within Odisha.

This move had been challenged by the Federation of Indian Mineral Industries but the SC had upheld the state's right to reserve minerals for use within the state. SteelMint has learnt that while the notification is yet to be withdrawn it is not being implemented.

PMAI claims that despite the 118 mnt pa capacity of merchant mines in Odisha the unprecedented shortage of ore neutralises the competitive advantage of end-use industries located closer to the mines in Odisha's hinterlands and away from the market of finished products.

Chhattisgarh

Meanwhile, on behalf of Chhattisgarh-based iron ore-dependent industries, the Federation of Indian Chambers of Commerce (FICCI) has urged the state government to implement a pre-emption policy. Any such move could affect NMDC, 84 percent of whose production ends up being consumed outside the state - as FICCI's letter to the Chhattisgarh CM points out.

Echoing PMAI's argument of "competitive disadvantage", FICCI wants raw material to be made available at fair prices for Chhattisgarh's installed sponge iron capacity of 11.8mtpa. Deducting captive supply, the state-based units need 27mtpa of iron ore. Both industry associations complained that Odisha's iron ore prices had rocketed beyond their reach.

Odisha

The state of Odisha, India's largest iron ore producer, is home to one-third of the country's total pellet and sponge iron capacities and a fourth of the country's steel capacity. The combined iron ore requirement of these is 81 mnt pa. However, of the 111 million tonnes produced in FY 2021, 56 million tonnes were dispatched outside the state. In PMAI's estimate, the non-availability of affordable iron ore was costing the state a loss of INR 16,245 crore every year.

Responding to these letters, Odisha's Steel and Mines department on 16 June 2021, has sought procurement, grade-wise consumption and the sale of pellets in the domestic and export market from the lobby group. Coincidentally at least two petitions in the SC seek a check on exports of pellets, which they argue are just a form of iron ore evading the duty high-grade ore attracts.

Both FICCI and PMAI refer to the practice in Karnataka where under SC's orders iron ore is to be sold only to state-based plants and cannot be exported. Important to remind readers that Karnataka has recently announced it would be seeking a lifting of these restrictions which it believes is undermining its earning potential from iron ore.