‘Domestic market for iron ore fast-expanding, but exports attractive too’, says NMDC Director-finance Amitava Mukherjee

State-run iron ore miner NMDC has set an ambitious 100-million tonne (MT) production target by FY30, up from 41 MT in FY22. Director-finance, Amitava Mukherjee, also holding the additional charge of Chairman-Cum-Managing Director, shares with Surya Sarathi Ray the company growth plans for the next 7-10 years while stating that reliance on a single commodity exposes NMDC to market fluctuations. Excerpts:

Q: NMDC’s iron ore production has increased consistently and is slated to reach 50 million tonnes (MT) by FY25 from 41 MT in FY23. How optimistic are you about the demand from domestic steel sector, given that exports are crubed.

A: NMDC has an ambitious goal to achieve the 50 MT production mark by FY25 and reach the 100-million-tonne mark by FY30. India envisages steel-making capacity of 300 MTPA by FY31. Domestic steel production has increased from around 82 MT in FY14 to 126 MT in FY23. Steel production in H1 rose by 13% on year. Given the capacity ramp-up plans, upcoming new capacities declared by major steel players, and various initiatives being taken by domestic steel makers to turn steel-making greener, we are confident that demand for iron ore will rise.

We will accord topmost priority to the requirements of domestic steel makers. However, as the iron ore production in India continues to increase, to ensure consistent evacuation and production, exports may be considered as an alternative market.

Q: Do you plan to extend the mining activity to more areas, rather than relying solely on existing mines?

A: We plan to produce 72 MT from the existing mines and 28 MT from NCL, a joint venture company of NMDC and CMDC by FY30. The current production capacity of our mines is 50 MT, with Kirandul at 18 MT, Bacheli at 18 MT and Donimalai at 14 MT. Capacity expansion works at Kirandul are in full swing. While expanding our infrastructure for the ambitious target, NMDC has also applied for approvals to enhance Kirandul capacity to 30 MT by FY30. In Bacheli, we are taking our production capacity to 25 MT.

With 55 MT expected from the Bailadila mines, NMDC is awaiting approval for enhancing its production capacity in Karnataka to achieve 17 MT from Donimalai. From the NCL mines, we intend to produce 28 MT.

Q: Do the new rules under the MMDR Act go against the interest of pure-play miners like NMDC?

A: Amendments in the MMDR Act 1957 and rules notified subsequently in 2016 have given certain weight to government companies, though challenges may still crop up. As per the rules, all mining leases granted to a government company or corporation shall be deemed to be granted for 50 years. On completion of the 50 years, the state government may extend the period of the mining lease for 20 years. NMDC’s existing iron ore mining leases have all been extended for 20 years, while NCL has been granted the mining lease for 50 years. With benefits of the same kind to other PSU miners as well, the amendment has been favourable to us. However, an extension of mining leases (other than for coal, lignite and atomic minerals) on or after January 12, 2015, attracts additional royalty.

It is the Mineral Auction Rules 2015, that make it very difficult for the PSUs to compete in auctions, where the average bidding price for iron ore is above 100%. Section 17A of the MMDR Act, 1957 provides for reserving mineral blocks to government companies followed by the grant of mining leases. Since these mineral blocks are not explicitly earmarked for reservations to the PSUs, acquiring new mineral blocks is particularly difficult and riddled with uncertainties.

It is a tradeoff. Some of the new rules are in our favour, and others are not.

Q: The world is rushing to secure mines in Australia and Africa. Are you also in the race?

A: As a PSU, NMDC’s approach to securing vital resources for the country’s future is guided by prudence. We prioritise value and sustainability rather than rushing into acquisitions. We already have made progress in the area. NMDC commenced Gold Mining operations at Mt. Celia in Western Australia through its subsidiary company Legacy Iron Ore, adding a new geography and a new mineral to its portfolio. Pre-feasibility studies in the Mt Bevan iron ore project are going on. ICVL, a joint venture company of SAIL, RINL and NMDC, acquired a coking/thermal coal mine in Mozambique in 2014. NMDC holds a 26% stake in ICVL.MT.

Q: What are the other challenges miners face now?

A: NMDC encounters many challenges that emanate from various sources, such as customer concentration risk, which poses challenges in terms of revenue volatility. Another risk arises from dependence on a single commodity. While iron ore remains a valuable and sought-after resource, reliance on a single commodity exposes us to market fluctuations and price volatility. The high logistics cost in India presents a relative cost disadvantage to Indian iron and steel companies. To mitigate the same, NMDC has taken up a slurry pipeline project from Bacheli to Nagarnar with further expansion plans from Nagarnar to Visakhapatnam.