Indian Business Groups Lobby for Auction of Iron Ore Mining Licenses

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A new government in India has steel companies and iron miners rushing to it with urgent pleas on iron ore mine auction.

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One appeal is for the government to auction iron ore mining licenses held by private miners when they expire in March 2020.

If that happens, it will come as a relief for India’s steel companies, as they will no longer have to rely on costly imports.

Mining leases of at least 59 iron ore mines with a total capacity of 85 MTY are set to expire March 31, 2020. These have a combined production capacity of around 60 MTY, but none of them has been put up for new auctions.

A few days ago, the Indian Chamber of Commerce (ICC), Associated Chambers of Commerce and Industry of India (Assocham) and the Chattisgarh Sponge Iron Manufacturers’ Association (CSIMA) sent off letters to NITI Aayog, India’s planning commission, and the mines ministry, making a case for mine auctions, Livemint reported.

Experts say production at non-integrated steel companies, which do not have access to captive iron ore resources, will be disturbed if the auctions were delayed any more, affecting even major steel companies like Rashtriya Ispat Nigam Ltd, Essar Steel and JSW Steel.

The letter to NITI Aayog by the ICC said accepting merchant miners’ request to extend their license till 2030 would mean a huge revenue loss by way of auction premium for the exchequer. It takes about two years for operations to restart once regulatory clearances are received.

For India’s iron ore miners, there’s new hope, however, given that international prices are over $100 a ton, the highest in five years, which means a restart in export of lower grades of ore from India.

The Indian province of Odisha has in excess of 100 million tons of inferior grade iron ore accumulated at mine heads, which nobody wants in India. Similar inventory is to be found in the province of Jharkhand. Both provinces account for over 80% of India’s accumulated iron ore stockpile, the Business Standard reported.

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In the recent past, export of iron ore failed to pick up, despite incentives. Miners are hopeful a supply disruption in Brazil and Australia will make global steelmakers look to source more iron ore from India.

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