In a further setback to the domestic steel industry, iron ore production is expected to fall by 40 per cent to 100 million tonnes this year compared with 167 million tonnes last year.
Last year's production also represents a steep decline as compared to 208 million tonnes (mt) produced in 2010-11.
"According to the Indian Bureau of Mines (IBM) statistics, iron ore production during April-September this year was to the tune of 72 million tonnes. According to the Federation of Indian Mineral Industries (FIMI), the production will not cross 100 million tonnes," said R K Goyal, managing director, Kalyani Steels Limited on Thursday.
After a crackdown on illegal mining, there was a drop between 2010-11 and 2011-12 in iron ore production of 65 per cent in Karnataka, of 12 per cent in Odisha and 6.2 per cent in Goa.
The clampdown on iron ore mining in Karnataka and Goa and the difficulty in developing new mining assets in the country have led the steel industry and the economy into a disadvantageous position, according to representatives of the mining and steel industries.
The decision to sell iron ore through e-auctions and limiting the mined quantity in Karnataka had led to price speculation. This, in turn, led to closure or lower capacity utilisation of steel units there, Goyal said.
He said the present cap of 30 mt in total production from the state was less than the current requirement of the industry, of 33 mt in Karnataka. The procedure laid down by the Supreme Court for necessary clearances and approvals to open the mines would take at least two years from now. So, there is no respite in sight for the industry.
Iron ore export had come down to 57 mt last year from 102 mt the previous year and could further decline to 30-35 mt this year. The 100 mt of lost export and a potential import of 15 mt of high-quality ore would cost at least $13 billion, he said.
The situation was in complete contrast to what the country was aiming for in the next five to seven years, according to G Srinivas, former joint secretary of the mines ministry. India will be requiring 200-220 mt of ore to feed the domestic steel industry by 2020 and the mining industry and the government have to find ways to accelerate the development of new mines, he said.
N K Nanda, director (technical) of NMDC, the central government-owned mining company, said it had been focusing on possible tie-ups with various state governments on exploration for new ore reserves. Mining companies also need to focus on beneficiation of low-grade ore, beside looking for production-grade reserves in new areas to meet the domestic demand, he said.
Jindal Steel & Power's senior vice-president, G S Mittal, said his company would require 34 mt of ore when it achieved the target of 20 mt steel production capacity by 2020; it currently operates three mt of capapcity and is adding another three mt soon. He said efforts to secure new mining leases faced difficulties.
To facilitate additional capacities in the steel sector, the government should develop a model wherein three to five mt capacity plants with the required land and mineral resources are offered to companies through e-auction, according to Goyal.