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Iron ore export to hit all-time low in FY13

India’s iron ore exports are set to fall to a new low this financial year, owing to multiple problems, such as shortages in Karnataka, Odisha and Goa, high export duty and differential railway freight.

Compared to 2011-12, which witnessed a year-on-year decline of 38.5 per cent in exports at about 60 million tonnes, the current year (2012-13) may see an all-time low of 45-50 mt, a drop of 16-25 per cent over last year.

“We are not in a position to make any estimation for exports during the current year. But, going by the prolonged ban on mining in Karnataka, restriction on mining in Odisha and Goa, along with a high railway freight rate and 30 per cent export duty, export of iron ore is no longer a viable proposition,” said R K Sharma, secretary general, Federation of Indian Mineral Industries (Fimi).

Iron ore export from Karnataka has been stopped since July 28, 2010. The state government had imposed a ban following large-scale illegal export. While there is no possibility of export resuming from Karnataka this year, the governments of Odisha and Goa have restricted the movement of the ore. The government of Goa is not giving clearance to lift dumps containing 48-52 per cent iron-grade ore.

Odisha, which accounts for a nearly a third of the country’s iron ore output, is likely to see a slump in production and export this year, following a crackdown on illegal mining that has resulted in suspension of activity at several mines, mainly in the Joda and Koira regions.

Currently, the railways charge Rs 2,430 a tonne on iron ore meant for export, to be transported from Barbil in Orissa to the port, while the domestic freight is Rs 700 a tonne. The government had raised the export duty on iron ore to 30 per cent in December last year from 20 per cent.

In addition to these domestic problems, the price of iron ore in the international markets saw a year-on-year decline of 22 per cent to $138 a tonne in April this year. The price of iron ore at e-auctions in Karnataka is fixed at Rs 2,551 to Rs 3,500 a tonne, depending on the grade.

Steel mills face a huge shortage of iron ore in the southern states. Stocks in Karnataka have depleted to seven mt. Of 25 mt reserved for electronic auctions by the Supreme Court, its monitoring committee has so far auctioned 18 mt. With a majority of the remaining seven mt being low-grade ore, steel mills find it unfit. Even JSW Steel, which has technology and machinery to enrich the low-grade ore, is facing low productivity at its blast furnaces.

Steel mills in and around the state, which depend on Karnataka ore , require about 100,000 tonnes per day. With the balance seven mt sufficient for about two months, they are again facing the threat of closure, as regular mining is unlikely to resume in the next three months. Government-owned NMDC, the only company allowed by the apex court to extract ore in Karnataka, has not been able to meet its monthly target of a million tonnes. It is producing 600,000-700,000 tonnes per month.

Resumption of mining in Karnataka is expected within the next three to four months, as the companies are yet to prepare reclamation and rehabilitation (R&R) plans, which then have to be approved by the Central Empowered Committee. Fimi has prepared an R&R plan for about 10 mines and sent these to the Indian Council of Forestry Research and Education, its sources added.