Apex industry body Assocham has urged the government to review e-auctioning of iron ore and provide long-term iron ore linkages to protect the interest of domestic iron and steel industry.
“The e-auction of iron ore, instead of providing any relief to India’s iron and steel industry will adversely affect it, more so as lack of raw material has been a major cause for tardy progress of both green-field and brown-field steel capacity expansion projects,” highlighted The Associated Chambers of Commerce and Industry of India (Assocham) in a communication addressed to R.H. Khwaja, secretary, Ministry of Mines.
“There is a need to adopt holistic development approach for ensuring smooth supply of iron ore thereby harnessing the growth of iron and steel industry,” said D.S. Rawat, Secretary General of Assocham.
Iron ore production in FY 2013 was 136 million tonnes (mt), out of which 42 mt was captive production while 18.4 mt of iron ore had been exported and about 76 mt of total iron ore was available for the relevant market for non-captive steel producers.
“If e-Auction is allowed for an important raw material like iron ore, it will create complete chaos for the iron and steel industry and such a huge quantity of Iron ore for non-captive users cannot be fulfilled through e-Auction process,” noted Assocham while highlighting certain grave consequences of selling iron ore through e-auction on iron and steel industry.
In case of e-auctioning the quality of raw material cannot be assured and it will always remain fluctuating as each time it would come from multiple sources and create problems in the operations of blast furnace and steel melting furnaces thereby leading to high coal and energy consumption, it added. “The existing plant will eventually close down due to uncertainty and high raw material prices as had happened in case of Karnataka where 28 out of 53 sponge iron manufacturers had shut their operations.”
Besides, Assocham also shared its concerns about inflow of new investments in the domestic steel sector as setting up of integrated steel plants involves huge finances.
“It is almost impossible to commit large financial resources without having security of iron ore supply which is a critical raw material for operating steel plants,” highlighted Assocham. “Besides, in India even banks do not provide financial closure to projects without secure source of raw materials.”
Merchant mining companies will be the sole beneficiary of e-auction of iron ore, further noted Assocham. “Merchant miners will charge higher prices to derive maximum benefits thereby taking significant advantage of demand-supply gap more so as there are no captive mines to operate iron and steel industry.”