The Karnataka government plans to offer access to fresh iron ore mines for steel investors setting up or expanding in the state. Ore-rich Karnataka produces some 40 million tonnes (mt) of iron ore, of which nearly 75% is exported, mainly to China. But the state is now keen to boost revenue from the mineral reserves it owns by inviting both steel and mining firms to start steel manufacturing or upgrade ore projects within its boundaries.
This is the first time that the state will formally issue a notification to encourage captive mining, which allows steel plants to secure necessary raw materials from their own mines, with a focus on encouraging steel manufacturing.
The new National Mineral Policy, which was cleared by the group of ministers last week and could come for Parliament’s approval next session, has not made any provisions for captive mines.
The ore blocks will be given through a competitive bidding process and a notification to this effect is expected shortly, said Mahendra Jain, state commerce and industries secretary, who was in the Capital on Monday.
Several large steel players, such as Essar Steel Ltd, JSW Steel Ltd and Ispat Industries Ltd, have applied for mining leases and have held talks with the state mining authorities to explore opportunities in setting up steel mills, he said. “In the future, the state will focus less on iron exports and more on value-addition,” Jain added. “Instead of iron ore, which is sold at a lower margin, the state would encourage beneficiation and steel plants, which will fetch higher margins.”
An Essar Steel spokesperson said the company is at a “probing stage”. JSW also confirmed its application while Ispat declined to comment.
Boosting manufacturing would mean that the state could earn extra revenue in the form of value-added tax; royalties on iron ore is low at Rs16-27 per tonne.
The state earns an annual revenue of about Rs80 crore a year as ore royalty. By focusing on manufacturing and steel investment, royalties could skyrocket to Rs30,000 crore. The government hopes to earn Rs800-1,000 crore as taxes from steel manufacturing units.
Nearly 40% of the country’s ore reserves are located in Karnataka, with the famed Bellary-Hospet area in the eastern part of the state accounting for 88% of the reserves. The state now wants to open up mining areas in the Tumkur and Chitradurga area, south of Bellary, for mining for the new players.
In 2003, the government gave up some 11,000 sq. km of reserves for state exploitation to the private sector. Subsequently, it invited fresh applications from private bidders after cancelling non-operating licences.