The Odisha government has called out Jindal Steel and Power Ltd ‘s claim of iron ore shortage, asking the steelmaker to explain its actions.
The Department of steel and mines was responding to a letter from JSPL seeking allocation of iron ore through a 2012 policy prioritising state based plants. JSPL’s letter does not seem to have put the government, which has not been implementing this policy, on the defensive. Instead, it has questioned the steel and pellet maker’s right to make the claims. In an eight-page response with tables attached, the Additional Secretary, BN Acharya (has asked JSPL to explain its “contradictory actions”.
To the charge that prices of iron ore in Odisha have risen by 500% in the last 12 months, the government claims an analysis of average sale price published by IBM reflects a 170% – 300% increase. While + 60% Fe iron ore saw an average increase of INR 1453 per to tonne between February 2020 to April 2021, prices of HRC rose by INR 23,850 a tonne and CRC by INR 27,280 per tonne between May 2020 and April 2021, or 16 and 19 times the hike in iron ore prices.
JSPL claimed Odisha based plants were scrambling for reasonable priced ore. It needed 18 mn t pa itself. The letter points out JSPL Angul had an installed capacity of 6 mn t pa, at a conversion factor of 1:1.6 it only required 9.6 mt per year.
JSPL had claimed merchant mines were operating under their EC limits and there was a rampant interstate diversion of large quantities of iron ore. The letter pointed out that mines rarely operated at 100% of their EC limits, just like JSPL’s TRB mine in Koira which for the last four years has only produced 80% of its EC capacity. The government’s response noted that “98 % of JSPL’s dispatches through FY21 and the first quarter of FY22 had been to destinations outside the state (including exports), up from 64% in 2019-20.
In fact in June itself, when the company chose to petition for preemption, only 20,154.16 tonnes or 6.47% were consumed within Odisha, and 187,646.15 tonnes (of 55-58% Fe) were exported to China. JSPL with 2.24 mnt was after all the second largest exporter of pellets whose combined exports at 14.46 million tonnes in FY 21 had grown 14.59% year on year, said the letter. “Pellets are direct alternatives to CLO and can very easily meet the “alleged” shortage of iron ore,” said the letter seeking month-wise and grade-wise breakup of JSPL’s exports in FY 21 and Q1 of FY 22.
As a long term buyer JSPL’s offtake from state-owned OMC had only been 11.28% of the total allocation despite its alleged shortage of ore. Could JSPL explain why long term buyers only lifted 35.66% of the total allocation if the industry was indeed starved of ore? “Before your proposal is examined by the Government, these contradictory positions within JSPL need to be clarified,” says the letter dated 5 July 2021.
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