The Supreme Court’s decision on Thursday to allow mining in ?Category A and B? iron ore mines in Karnataka comes as a sentimental positive for the steel industry in the southern state. However, the benefits of increased production are only likely to flow in by fiscal 2014-15.

?After today’s decision, all Category A and B mines in Karnataka will start functioning only after 1-1.5 years,? said R K Goyal, MD of Karnataka-based Kalyani Steel. ?With this, we expect the availability of iron ore to reach 24 million tonne by the end of another year-and-half to two years. This would still be less than the industry demand in the region, which is anywhere between 32 to 36 million tonne.?

?The news is definitely positive, but now we have to wait for what the government does with Category C mines,? Goyal added. ?Our requirement was 1.2 million tonne of iron ore. We were buying from NMDC?s auctioned ore and we will continue to do so for now.?

The delay in operationalising the mines would be because companies would need to complete the R&R operations before restarting the mines, Goyal added.

One of the largest steel producers in the country and based out of Karnataka, Sajjan Jindal-promoted JSW Steel said the decision comes as a relief for the industry but declined to comment on the immediate benefits for the company.

?This relief not only provides breather to the steel industry in the region but also assists in providing of direct and indirect employment and livelihood for several people employed in this sector at a time when the steel industry was at the brink of closure due to non-availability of iron ore,? said JSW Steel’s joint MD and group CFO Seshagiri Rao.

JSW Steel, which was buying ore from NMDC’s E-auction and also some from Category A mines that slowly resumed production, was suffering because production costs rose nearly 30% because of the low quality of ore available. However, once all Category A and B mines resume operations, the company would start gaining.

Sources in the know also added that JSW Steel may bid for the 49 Category C mines, whose operations were declared illegal by the Supreme Court on Thursday but left the option open for re-bidding of mining leases for these mines.

Karnataka was producing nearly 55-60 million tonne of iron ore before the mining ban was imposed. However, after a petition by activist group Samaj Parivartan Samuday, the apex court banned mining in state in July 2011, which came as a big blow to steel producers in the state.

Subsequently, the Supreme Court allowed NMDC to mine 1 million tonne per month and auction 1.5 million tonne per month from the existing stockpiles in the mines of the state.

In 2012, the Supreme Court also allowed 18 Category A mines to resume operations after following proper rehabilitation and resettlement or R&R plan, based on the recommendations of the court appointed Central Empowered Committee. The CEC had also divided the mines of Karnataka into three categories ? A, B and C.

?For A and B category mines put together the licensed capacities are much more. But when you take the cap, then how much quantity a company will be able to produce and whether it will meet the requirement of the industry is the most serious issue which needs to be tackled,? said Nazim Sheikh, joint MD, Sandur Manganese. ?I don’t think 30 million tonne will be enough for already established steel plants and whatever is in the pipeline.?

Analysts also added that meaningful contribution from the the Category B mines will only come in by 2014-15 fiscal.

?We expect meaningful contribution from Category B mines, which is around 6 to 7 million tonne, to probably come in FY15,? said Jatin Damania, metals analyst, SBI Cap Securities.

?There will be a minimal contribution in FY14. The majority of the benefit will come in FY15 only and there will be hardly any volume increment we can see in FY14.?

?Looking at the Category A mines, they were allowed mining in September, but till now only 7 to 8 mines have been able to work of the 18 allowed,? said Tarang Bhanushali, Research Analyst, IIFL. ?The procedure would be elongated and hence output from these mines would come only in FY15 and it would be quite minimal in FY14.?

Shares of Karnataka-based steel companies rallied on Thursday. Kalyani Steels’ shares closed 15.30% higher on the BSE on Thursday at Rs 42.20, Sandur Manganese’s shares closed 0.32% higher at Rs 328.60, Sesa Goa closed 0.87% higher at Rs 150.65. JSW Steel’s shares closed the day lower by 2.18% at Rs 716.90, but reached a day’s high at Rs 738.