Bengaluru: Karnataka Iron Ore Industry continues to suffer due to hard hitting impact of trade restrictions which confines the true potential of the sector in fostering employment, revenue generation, and infrastructure development in the state.
The decade old regulatory system in Karnataka has created a skewed market situation for the Iron Ore industry in the state. Karnataka is the only state in the country where the Iron Ore producers have no freedom to sell the material in open market, whereas despite an adequate supply of Karnataka Iron ore in the state, Steel industries have complete freedom to source the Iron ore from other states or import from overseas.
Due to non-level playing field in terms of trade restriction and existing unfair situation wherein, Iron Ore miners can only sell the material domestically, without any alternative, the prices of Karnataka Iron ore are highly suppressed to the tune of almost 53 per cent lower compared to International Iron Ore market (Imported Iron Ore). Imported Iron Ore prices are close to Rs 7625/WMT compared to the Karnataka Iron ore prices which is close to Rs 3613/WMT.
This massive pricing difference is leading to huge losses to Karnataka exchequers to the tune of Rs 8,000 crore per annum in terms of royalty, payments to SPV, District Mineral Foundation and NMET, while the total loss considering all these years will come to around Rs 30,000 crore.
In addition to revenue loss, it has also restricted the growth opportunities for Karnataka’s mining industry and associated socio-economic benefits thereof, including direct and indirect employment.
Karnataka has already lost around $4.05 billion Dollars till now due to prevailing restrictive Iron Ore trade practices.
In FY22 till date, steel industry in Karnataka has imported approximate 2.5 MT Iron Ore from outside Karnataka while 4.25 MT stocks of Iron Ore remains unsold. This market scenario is due to a conditional restriction imposed by the Supreme Court on the state’s iron ore sector almost decade back, as per the directives of the Supreme Court it was to be reviewed after two years, but till now the state continues to remain hostage to the old guidelines, with no plan in place for the revival of the state’s iron Ore industry.
Iron Ore Mining requires huge manpower and further growth of industry can lead to creation of massive employment opportunities in the state however on the other hand such restrictive trade practices deteriorates the industrial growth resulting in unemployment and underdevelopment of communities.
The state of Karnataka annually produces approximately 42 MT of iron ore and annual domestic demand of the state is 37 MT, which is already in surplus to the state demand.
E-auction mechanism for Iron Ore Producers and on the other hand complete freedom of Material sourcing for steel makers resulting in stockpiles of unsold Iron ore despite the state having good quality Ore produced within the state. Its high time the state government should take corrective action by making policy reforms to attract new investments in the mining sector and for ease of doing business in the state.