Major producers of sponge iron like Welspun Maxsteel and Tata Sponge Iron are facing closure due to reduced offtake by the steel industry, which is struggling with a sluggish demand and restricted availability of vital inputs like iron ore, thermal coal and natural gas.
Environment-related issues are adding to the woes of the Rs 4,000-crore industry.
Sponge iron is an important material used for steel making by smaller mills eliminating the need to use expensive and scarce thermal coal and gas.
?We have requested the government to provide iron ore at concessional rates and try and allocate mines. Most smaller capacity plants are performing badly with frequent break down leading to increase in maintenance cost with capital repairs of equipments. Most of these plant are running at a capacity of only 50%,? said V R Sharma, chairman, Sponge Iron Manufacturers Association (SIMA).
India is the largest sponge iron producer in the world for last 11 consecutive years. At present, India contributes 33% of global sponge iron production.
The non-availability of iron ore and coking coal has hit domestic sponge iron manufacturers hard. Karnataka and Odisha, which account for about 37% of the total installed capacity of sponge iron in India, have been affected by ban on iron ore mining and other restrictions imposed on them. As a result, sponge iron production in these states has declined considerably.
The induction furnaces uses sponge iron to make steel. Sponge iron makers are having to pay exorbitant electricity charges due to the practice of discoms cross subsidising agriculture sector electricity consumers with support from industrial and commercial consumers.
One important step that could help the sponge iron industry is lowering electricity tariffs. At present, states such as Maharashtra, Punjab and Tamil Nadu charge around Rs7/unit, while Odisha and Chhattisgarh charge around Rs5/unit.
?Prime Minister’s vision for achieving 300 million tonnes of steel capacity cannot be achieved if sponge iron units are not encouraged to create capacities to support the steel plants. Rise in power & fuel expenses and transportation costs further pushed up the manufacturing cost of sponge iron companies,? Essar steel spokesperson said.
Tata Sponge Iron with a production capacity of 4 lakh tonnes per annum reported a 39% drop in their standalone net profit at Rs18.04 crore for the quarter ended June 30 on the back of lower revenues.
