Ore mine allocation raw deal for many

Jan 12 2014, 01:02 IST
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JSW Steel has a total installed capacity of 14.3 mtpa across India (Reutes) JSW Steel has a total installed capacity of 14.3 mtpa across India (Reutes)
SummarySeveral cos with existing capacities await mines even as new players sit on them

The lack of a proper policy on allocation of mines for producing iron ore, manganese ore and bauxite has led to a gross disparity while several new players have bagged such allocations in the past several years, the more serious ones with existing capacities for end-use products are on the waiting list.

Take for instance JSW Steel and Essar Steel. The companies, which require iron ore for producing steel, still do not have a captive mine allocation.

Indias biggest steel company in terms of domestic installed capacity, JSW Steels Vijayanagar steel plant with a rated capacity of 10 million tonnes per annum (mtpa) in Karnataka currently has zero backward integration and has to buy iron ore through e-auction, forcing it to operate at 80% utilisation due to paucity of ore. JSW Steel has a total installed capacity of 14.3 mtpa across India.

Similary, Essar Steels plant in Hazira, Gujarat, too is currently operating at 50% utilisation against a capacity of 10 mtpa.

In contrast, in the past years, especially during 2004-09, various state governments allocated mines to new players that just showed their intent at end-use, but so far have failed to either develop any mine or show actual end-use. In some cases, allottees even sold off mines allocated to them or engaged in excess mining.

A case in point is Dhariwal Infrastructure. As per data available with the ministry of mines, the joint venture company of the Kolkata-based Manikchand Group (makers of the Manikchand gutkha and mouth freshener brand) and tea-manufacturer Prithvi Group were given a prospecting licence (PL) in 2009 for a 353-hectare iron ore mine in Gadchiroli district of Maharashtra. Dhariwal Infrastructure was a company formed to produce power, which requires coal mine and not iron ore. Barely a year after bagging the mine, Dhariwal Infrastructure was sold off to CESC, the flagship company of the RP-Sanjiv Goenka Group, for a valuation of R300 crore.

Asked about the delays in developing the mines, some companies said they are still waiting for environmental clearances. However, most have not mentioned a mining plan or the current status of the mines in their annual reports or their websites.

FE sent mails to 15 such companies, but even after a month, only one replied. Ind Energy of Nagpur, which was given an iron ore mine in Chhattisgarh around 2005, said it has still not got approval to start mining and had plans to

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