The lack of a proper policy on allocation of mines for producing iron ore, manganese ore and bauxite has led to a gross disparity — while several new players have bagged such allocations in the past several years, the more “serious” ones with existing capacities for end-use products are on the waiting list.
Take for instance JSW Steel and Essar Steel. The companies, which require iron ore for producing steel, still do not have a captive mine allocation.
India’s biggest steel company in terms of domestic installed capacity, JSW Steel’s Vijayanagar steel plant with a rated capacity of 10 million tonnes per annum (mtpa) in Karnataka currently has zero backward integration and has to buy iron ore through e-auction, forcing it to operate at 80% utilisation due to paucity of ore. JSW Steel has a total installed capacity of 14.3 mtpa across India.
Similary, Essar Steel’s plant in Hazira, Gujarat, too is currently operating at 50% utilisation against a capacity of 10 mtpa.
In contrast, in the past years, especially during 2004-09, various state governments allocated mines to new players that just showed their intent at end-use, but so far have failed to either develop any mine or show actual end-use. In some cases, allottees even sold off mines allocated to them or engaged in excess mining.
A case in point is Dhariwal Infrastructure. As per data available with the ministry of mines, the joint venture company of the Kolkata-based Manikchand Group (makers of the Manikchand gutkha and mouth freshener brand) and tea-manufacturer Prithvi Group were given a prospecting licence (PL) in 2009 for a 353-hectare iron ore mine in Gadchiroli district of Maharashtra. Dhariwal Infrastructure was a company formed to produce power, which requires coal mine and not iron ore. Barely a year after bagging the mine, Dhariwal Infrastructure was sold off to CESC, the flagship company of the RP-Sanjiv Goenka Group, for a valuation of R300 crore.
Asked about the delays in developing the mines, some companies said they are still waiting for environmental clearances. However, most have not mentioned a mining plan or the current status of the mines