BHUBANESWAR: Despite a strong demand for iron ore, Karnataka is facing a glut at mine sites as more and more producers were opting to procure ore from outside the state. Stalled e-auctions and unsold inventories have choked the industry so hard that the state government has sought intervention of the Central government in securing the sector by raising basic customs duty on the mineral.
Karnataka Chief Minister H D Kumaraswamy has written to Prime Minister Narendra Modi highlighting the “unique” status of iron ore in the state post the Supreme Court capping its annual production and restricting the sale among end-users only through e-auction. Due to such restrictions, the industry is facing a situation where the quantities offered for sale remain unsold while domestic steel companies are resorting to imports at a time when the country is facing a large trade deficit.
Noting that the state is the third-largest producer of iron ore — a key raw material used in steel making — Kumaraswamy said that the “very low” import duty of 2.5 per cent encourages steel players to go for import rather than utilising the local ore.
“This has led to a situation where a huge quantity put up for sale on e-auction platforms remains unsold. The unsold stock may lead to closure of mine operations,” the letter stated.
According to Kumaraswamy, the excessive import of iron ore is not only having a negative impact on the current account deficit, but is also hitting the domestic iron ore production, and “also defeating the purpose of the Make-in-India programme.” So far, the state has lost more than `600 crore due to high imports by local steel manufacturers.
Earlier, the apex mineral body Federation of Indian Mineral Industries had urged the government to impose 30 per cent import duty on iron ore and iron ore pellets to protect the domestic miners. It had also written to the ministries of steel, mines and commerce, and also NITI Aayog, seeking incentives to boost exports for reducing the current account deficit. “Some large steel companies in the state prefer to buy from Odisha or even import it at a higher price, rather than buying through auctions conducted in the state,” said a FIMI official.
However, officials from steel firms in Karnataka have said that higher pricing and lower quality are forcing them to import from outside the state.