Nearly 80 per cent of the 65 sponge iron mills in Karnataka have either been shut down or are on the verge of closure, said Mr T. Srinivas Rao, president, Karnataka Sponge Iron Manufacturers Association (KSIMA).
Speaking on ‘The state of DRI (sponge iron) in Karnataka and pellets as an alternative raw material’ at the Ore Team’s second annual meet, Mr Rao said, “Ever since the Supreme Court imposed ban on iron ore mining and introduced e-auctions, sponge iron mills have been facing severe hardship.”
The sponge iron units use hard iron ore lumps or pellets as raw material. Ever since the ban, these units have no access to lumps.
Mr Rao said, “Lumps are sold in the e-auctions and are being cornered by big companies or large steel mills. We cannot match their pricing to buy ore.”
The sponge iron mills cannot use soft lumps or iron ore fines and, hence, many of the units had to shut shop.
According to him, the sponge iron mills lost Rs 1,000 crore and two lakh jobs in the last two years.
Production
The sponge iron industry produces around 12,000 tonnes daily. On annual basis, production is around six million tonnes after consuming around 12 million tonnes of iron ore.
The sponge iron mills need one-and-a-half tonnes of ore to produce one tonne of pellets. Cost of pellet production is around Rs 22,000 per tonne. But the market price is hovering at Rs 20,000 per tonne.
Pricing
“Sponge iron mills earlier bought ore at around Rs 2,000 per tonne, which included all charges. Now with the e-auctions in place, we are forced to buy at around Rs 4,000 per tonne along with 27 per cent component involving forest development tax (FDT) and royalty. This is unaffordable for us,” Mr Rao said.
“The pricing is not so high in Odisha and Chhattisgarh. We have approached the Supreme Court for some relief,” he added.
Captive mines
Karnataka’s mining policy does not have provision for allocation of captive mines for sponge iron mills. “This is hindering us. Now both the State and the Centre should bring in suitable amendments to change or replace the first-come-first-served policy,” said Mr Rao.
He suggested that the State government should at least consider setting up sponge iron clusters and allotting captive mining lease.