Odisha-based iron and steel units are concerned that a substantial volume of the iron ore is going out of the state, which is leading to unutilised capacities. And, this, in turn, is leading to notional revenue loss for the government.
As per data from the Department of Steel and Mines, Odisha, the total installed steelmaking capacity is 33 million tonnes per annum (mntpa), for pellets, this is at 31.69 mntpa and for sponge iron, at 15 mntpa.
However, the production of value-added steel products in FY’21 was only at 20.5 mntpa, for pellets, at 22.76 mntpa and for sponge iron, at 7.82 mntpa. This indicates considerable unutilised capacity at 12.5 mntpa (38%) for steel, 8.93 mntpa (28%) for pellets and 7.18 mntpa (48%) for sponge iron.
As per an industry note available to SteelMint, the unutilised capacity in steel in Odisha was 9 mn t, with the plants’ capacity utilisation taken at 90%. The iron ore requirement at the rated capacity is 1.6 mn t for producing one tonne of steel. Therefore, for this unutilised 9 mn t, 14.4 mn t of ore would have been required.
As per the note, the potential revenue generation for the state from sale of value-added products in terms of current prices would be INR 8,382 crore for steel, INR 329 crore for pellets and INR 1,151 crore for sponge iron, which add up to a notional potential revenue loss of INR 9,862 crore for the state.
For FY’21, the notional revenue loss is estimated at INR 6,948 crore (INR 5,987 crore for steel, INR 193 crore for pellets and INR 767 crore for sponge iron).
The revenue loss is on account of the sales happening outside the state of Odisha in iron ore as well as in steel products (which is leading to GST loss @ 18% of the sale value).
Of Odisha’s total dispatches of iron ore so far in FY’22, a volume of 29 mn t went outside the state, and 22 mn t remained inside. In FY’21 the ratio was at 84:56 mn t.
Recommendations
The iron and steel industry within Odisha has certain proposals for plugging this potential revenue loss, the key point of which is invoking the pre-emption clause. The pre-emption policy aims to secure iron ore for the state-based units. If these units do not lift within that period or use the allotted quantity then the miner can sell outside the state.
- Ensure supply of iron ore through pre-emption at IBM prices to state-based installed capacities to leverage greater benefit to the community in the form of additional employment opportunities and higher revenues. State government has right to exercise the pre-emption policy for securing iron ore for the state-based units.
- Sustainable supply of ore to installed capacities will promote investment and industrialisation in Odisha.
“We recommend to the Odisha government that it should look into the pre-emption policy which allows the state-based units to get the ore first. That will help in GST collection and job generation,” an industry source observed to SteelMint.
Leave a Reply