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Sponge iron makers have requested the government to amend India’s mining policy to ease the severe shortage of iron ore and sponge iron in the country. Orissa Sponge Iron Manufacturers Association (OSIMA), which represents 85 sponge iron makers in Odisha, is calling for regulation of pellet exports, resumption of mining at the newly leased mines and government directives asking state-owned and private mines to operate at full capacity.


Sponge iron plants in Sundargarh and other downstream industries are struggling due to improper mining policy, said OSIMA’s Chairman Yogesh Dalmia in a conversation with Davis Index. The closure of 21 mines due to the lapse of leases and delay in resuming mining at the newly auctioned blocks has resulted in a severe shortage of iron ore in Odisha. Induction furnace and re-rolling mills manufacturing billets and long products are facing heavy losses due to unavailability and domestic iron ore. 


What has happened?

The auction of mining leases in early 2020 attracted high premiums from the bidders but due to the COVID-19 crisis, most of these mines are yet to resume operation. On the other hand, pellet manufacturers had to opt for exports amid a slump in domestic demand as steelmakers cut production. Exporters could export upto 12-15mn mt of pellets per annum to overseas market in absence of demand. This situation has resulted in a tight supply of ore in the domestic market and pushed up prices of iron ore, sponge iron to a record high. 


Some merchant miners who retained their old mines, following the auctions, are also delaying the restart of mining citing rains and other excuses. The association alleged that these miners are also indulging in hoard ore to create an artificial shortage in the market.


What can be done?

OSIMA has demand the state and central government to regularize to supply of iron ore and sponge iron in India and put forth some recommendation including:

* New lessees along with their connected entities should be debarred from purchasing iron ore from other mines

* Plants having pellet manufacturing capacity should be debarred from purchasing Calibrated Lump Ore (CLO) and the same should be supplied to the local industry

* New lessees be directed to start mining and sales, otherwise they must be asked to pay the Government of Odisha premium as per auction conditions.

* State PSU like OMC and IDCOL be advised to open their closed mines and operate at full capacity

* Operating private mines be directed to mine and sell at full EC approved quantity

* The existing captive mines may be permitted to sell 25pc of their production in lump form till the supply situation normalizes

* Reserve 70pc CLO production for state-based sponge iron industry

* Leases of companies who have acquired mines and fail to restart operations from Oct 1 should be cancelled

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