Karnataka: Mining ban leads to NPAs

BANGALORE: Small sponge iron manufacturers in Bellary district are facing shortage of raw materials due to prohibitive cost of procurement of iron ore and increasing debt, leading to a rise in

Published: 08th March 2012 01:55 AM  |   Last Updated: 16th May 2012 06:31 PM   |  A+A-

BANGALORE: Small sponge iron manufacturers in Bellary district are facing shortage of raw materials due to prohibitive cost of procurement of iron ore and increasing debt, leading to a rise in Non-Performing Assets (NPAs) of banks and other financial institutions.

Following the Supreme Court ban on iron ore mining in Bellary and other districts in the state since August 2011, the sponge iron manufacturers in Bellary, who are dependant on local market for raw material, are facing liquidity crunch. As a result, the Sponge Iron Ore Association has requested financial institutions and banks to lower interest rates.

According to official sources, by the end of  December 2011, the total quantum of NPA at all Bellary banks stood at Rs 135 crore.The small sponge iron manufacturers also lost to big players in procurement of iron ore through e-auction.

According to official sources, the total bank expense was Rs 1,056 crore, including Rs  635 crore term loans, and the remaining amount was the working capital in December 2011. The problems in procuring iron ore created issues in overhead costs. Caught in this situation, the Association has requested the state government for a bail-out. However, it did not yield any results as the issue is in the SC. Also, the manufacturers are not sure when they will receive raw materials after buying it through e-auction, owing to inordinate delays in delivery.

The cost of iron ore in Karnataka at e-auctions was `3,200 per tonne after deducting taxes and transportation cost.The SC allowed e-auction of 2.5 million tonnes of iron ore per month from Karnataka mines including the NMDC.

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