It doesn't work out economically for the steelmakers," said Gunjan Aggarwal, senior consultant at research firm CRU in Mumbai.
Of the 800 iron ore leases in the country, only around 300 are operational, said a senior mines ministry official, adding that the supply squeeze should be short lived.
"Systems are being tightened at state-level ... but once the system stabilises, the supply crunch will ease out," said the official, who declined to be named as he is not authorised to speak to the media.
NEXT STATE TARGETED
The mining bans in Goa and Karnataka, which at one point shut all mines in the two states, could now spread to the eastern state of Odisha, which was visited by the Shah
Commission earlier this month. Odisha's state government has fined several mining companies nearly 680 billion rupees ($12 billion) for excessive mining of iron ore over the past 10 years, state Steel and Mines Secretary Rajesh Verma said.
None of those fined has been paid up so far, said Verma. Tata Steel Ltd and Aditya Birla Group-owned Essel Mining dispute the allegations.
A major difference from Goa and Karnataka is that Odisha's ore is high grade and intended for the domestic steel industry rather than export.
If mining in Odisha is stopped, Indian steelmakers may need to import 30 million tonnes of high-grade ore a year, said CRU's Aggarwal, adding that overall exports could fall to as low as 5 million tonnes.
India's federal government maintains the way to crack down on illegal mining is through better enforcement of existing laws, higher export duties and improved tracking of transport. The mines ministry has rejected a recommendation by the Shah
Commission for a blanket ban on exports.
The government instead decided to impose a 30 percent duty on all iron ore exports despite opposition from the mines ministry. It could raise this further or hike rail freight rates, where it already charges a much higher rate for ore intended for export.
The wrangling is not just within the federal government. In Karnataka, the opposition-run state government banned shipments in 2010 in response to pressure from the federal government over illegal mining. Then its chief