Government Curbs Iron Ore Trade From Captive Mines

The restriction on mining of ore in Goa and other decisions over a mining ban in other regions has impacted iron ore supply in the country. The mining of the ore has been restricted to curb illegal mining, prevent environmental degradation and saving the limited resource. This has resulted into supply constraints which have led to a rise in the iron ore prices over the past few months. Recently NMDC raised the iron ore prices by 8 to 13 per cent citing the supply shortage scenario. Given this situation and the need to meet the domestic iron ore requirement, the government is taking measures such as increasing the freight rates, removal of mining ban in some of the ‘A’ category mines, etc.

The situation for iron ore has still not improved as mining in ‘A’ category mines will take two to three months to begin operations given the various legal procedures that need to be completed. As if this wasn’t enough, the government has now restricted trade in iron ore, barring steel companies from selling ore from mines which have been allocated for their exclusive use. The order has also come against the backdrop of the recent coal scam which has forced the government to take serious steps to curb illegal mining.

According to a media report, the ministry of mines has said that the ore produced by iron and steel companies should be used for captive operations and can’t be sold domestically or overseas. The ministry has asked Odisha and other states to ensure that iron ore extracted from mines is leased out for captive use only. 

The Goa government recently banned all types of mining activities to ensure that no illegal mining takes place. In a similar move last year, the Supreme Court had banned mining in three iron ore-rich districts of Karnataka, which has now been partially lifted. India is one of the major iron ore exporters to China but this has now fallen by more than 45 per cent in the April-June quarter. This is mainly on the back of two main reasons. The first is the slowdown of the economy along with the falling global prices and the other one is the hike in export duty from 20 to 30 per cent imposed by the government which has led to a further drop in overseas’ sales.