Donimalai (Bellary): At NMDC Ltd’s Donimalai mines in Karnataka’s Bellary district, large posters featuring chairman Rana Som’s photograph and captioned “Mission 35,000” urge employees to produce more so that iron ore-starved steel plants in the state can be saved from closure.
NMDC is the only functional miner in the state after the Supreme Court ordered a closure in July to check illegal mining and environment degradation. For the state-run producer, supplying enough iron ore to the 64 steel and iron factories is a tall order.
In August, the Supreme Court ordered NMDC to produce 1 million tonnes (mt) of iron ore a month from its Donimalai and Kumaraswamy mines in Karnataka. But officials said NMDC’s daily output ranges between 28,000 and 32,000 tonnes a day, compared with the 35,000 tonnes a day required to meet the target.
Som said NMDC was confident that its mines in Karnataka will start producing the desired amount with the help of several measures that were being implemented.
“We have increased the points of operations, hired machinery and redeployed workers,” Som said in an interview. “We are using our existing workers on more points.”
Boosting production: The NMDC mines in Donimalai in Bellary district. Photograph by Aniruddha Chowdhury/Mint
NMDC had also stepped up exploration work at its mines to expedite the process of setting up new mines in the existing areas, he said.
Still, if India’s largest iron ore miner has to deliver on its promises, it will have to better its track record of missed targets. In 2010-11 the company produced 25 mt of iron ore against a target of 30 mt, blaming slow evacuation and fewer rakes as a reason for having to reduce production.
In the year before that, NMDC could produce 24 mt, lower than its target of 28 mt as Maoists blew up a slurry pipeline in Chhattisgarh.
NMDC does have a chance of producing 1mt a month provided it successfully meets its challenges, said Giriraj Daga, senior analyst at Nirmal Bang Securities.
“It takes time to step up production,” said Daga. “By January, they will be able to meet the target of 1 million tonne per month.” The biggest challenge NMDC faces is to boost production from its new mine, Kumaraswamy, where it has been allowed to mine temporarily.
“The company could refrain from ordering new equipment because the litigation on Kumaraswamy will resume,” Daga said.
The Kumaraswamy mine was earlier shut by the Karnataka high court owing to a litigation. For NMDC, this mine is crucial as it has to supplement production from the aging Donimalai mine.
Donimalai, set up in 1977, has reserves for seven years, according to company officials, but analysts say high-grade iron ore can be produced only for two more years if the current rate of mining continues. The other big challenge NMDC faces is the evacuation of the iron ore from its mines by the buyers.
Currently, iron ore in Karnataka is being sourced from NMDC and old stocks from around 100 mines to the tune of 25 mt, via online auctions.
These auctions are facing teething problems and buyers have been complaining about the series of permits required for transporting the ore, delaying deliveries.
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These delays could hurt NMDC as it will increase pit head stocks and even force the company to halt production.
“After the Supreme Court order to sell iron ore through electronic auctions, NMDC will have to store entire material in its own stockyard,” Daga said. “We believe, the company will find it difficult to store more than three-four days of production at the peak production capacity.”
The demands from the four integrated steel plants and the 60 big and small sponge iron units in the state are high.
“There are many practical constraints. Instead of iron ore flowing in, it is just trickling in,” said Vikas Sharma, senior vice-president—commercial and services at JSW Steel Ltd, which has a 10mt steel plant in Toranagallu.
“Our request is to let us continue (our long-term contract) with NMDC till the electronic auction gets stabilized.”
In a district where miners have ravaged hills and valleys in search of ore and the punitive action by the Supreme Court has thrown 200,000 people out of jobs, NMDC stands out as the ethical miner that has taken care of its mines, its people and the environment.
Now, it is time for it to show that the company can also step up production to meet the needs of its customers.
This is the fourth part of a series on the aftermath of a Supreme Court ban on illegal mining in Bellary. The third part dealt with lorry owners’ loan repayment issues and rising social unrest in the area.