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Karnataka steel industry fears closure

Reports indicate that 7 months after the Supreme Court issued a detailed corrective plan for rampant illegal mining in Karnataka, the viability of the INR 45,000 crore steel industries in the southern state remains in question.

Contrary to the popular perception that enough iron ore would be available for steel mills within the state to sustain business until July, when operations are to resume, the industry says supply may run out as early as this month end, bringing 23% of the country's steel capacity to a closure.

The apex court had imposed a blanket ban on all mining activities in the state in August last year. In a temporary arrangement, aimed at helping the steel industry survive in the interim, the court had allowed daily auctions of iron ore from existing stocks, apart from directing state owned NMDC Ltd to operate two of its mines to supply a total of a million tonnes every month.

With the auctions remaining largely deficient in meeting demand, owing to cost and quality issues, and NMDC failing to supply even half of the committed 1 million tonne, the future of investments worth INR 56,000 crore, in addition to INR 25,000 crore debt exposures, is at stake. So is INR 7,000 crore of annual tax revenue and the livelihood of thousands of workers.

The steel industry in the state comprising a little over a dozen companies, including JSW Steel, Mukand, Sunflag Steel, TATA Metaliks, Kalyani Steels and Kirloskar Ferrous churns out 15 million tonnes steel annually, using this ore. None of these companies have captive mines linked to their projects and are, therefore, forced to procure their entire raw material requirement from merchant miners.

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