Sponge iron producers, which source their key input — iron ore — from the open market, have urged the mines ministry to advise states to allow them to bid for captive iron ore mines in the forthcoming auction of mineral leases.
Currently, under the Mineral (Auction) Rules, 2015, only integrated steelmakers are allowed to bid for captive ion ore mines. “Iron ore constitutes more than half of the cost of production of sponge iron. Having a captive source of iron ore would give us the opportunity of sustainable operations and growth,” said Deependra Kashiva, executive director, Sponge Iron Manufacturers’ Association (Sima).
India’s sponge iron industry is the world’s largest, with around 48 mt installed production capacity. These units, mostly located in the tribal districts of Odisha, Chhattisgarh, Karnataka and Jharkhand, buy iron ore from the open market. There are some 300 such units of varied size, ranging from 0.2 mtpa to 1 mtpa and they use mostly low-grade iron ore and domestically available coal. The units cater mostly to secondary steelmakers which contribute 56% of domestic steel production.
Sponge iron plants use both lumps and fines that also help sustainable development of mines. Around 30% of the total sponge iron produced in India was manufactured utilising iron ore fines.
At full capacity, the industry would need around 92 mt of iron ore a year, Kashiva said, adding that utilisation was just 40% last fiscal. Captive mines would help the industry to hedge from the vagaries of price fluctuations and secure supply, he said.
Reiterating Sima’s plea, Tata Sponge Iron, in a subsequent letter, said the country’s target of making 300 mtpa steel by 2025 can only be met if the secondary steelmaking route expands significantly.
“The expansion of the secondary steelmaking route will necessitate efficient and environment-friendly sponge iron units to operate cost effectively, thus requiring the captive raw material source for such sponge iron ore units,” Tata Sponge Iron’s managing director DP Deshpande wrote.
Sponge iron units were considered a separate class in the allocation of captive coal blocks earlier and the said separate identity has also been retained in the recent coal auction, he added.