India: SC Raises Iron Ore Mining Cap in Karnataka to 35 MnT

In a big relief to the southern India based steel mills, the Honorable Supreme Court has today increased cap for category A and B mines to 35 MnT.

The Supreme Court banned mining of iron ore in Karnataka in Jul’11 following allegations of illegal mining. In 2013, the Supreme Court allowed mining in the state but announced iron ore production cap at 30 MnT.

Southern India based steel makers have been requesting the Apex Court for enhancement of iron ore production cap in the state so as to raise their steel capacity utilization rates.

The decision on increasing cap to 35 MnT will help southern India based steel mills like JSW Steel which were planning to utilize its full capacity, but not able to do so because of less supply of iron ore.

The news has come as a big relief and now the cap on individual mines also needs to be lifted as well, so they can mine and produce 35 MnT.

Also few reports suggest that the Court has imposed no cap on ‘C’ category iron ore mine blocks. Out of ‘7’ C category iron ore mine blocks won so far, JSW Steel bagged 5 mines and MSPL won 2 blocks. The recent update will help JSW Steel to begin production at its own mine blocks.

In its conference call held in Nov’17, JSW Steel officials had announced that NMDC prices in Karnataka are fetching a premium of INR 600 over NMDC Chhattisgarh. After JSW Steel starts captive iron ore production from its mines, they will have to pay premium on the IBM average price which may further reduce their cost of production.

Karnataka is India’s 3^rd largest iron ore producing state after Odisha and Chhattisgarh witnessed an yearly increase in iron ore production by 4% in FY’17. In FY’17, Karnataka’s iron ore production increased to around 26 MnT as against 25 MnT in FY’16.