Iron ore terminal at Ennore looks to diversify cargo after mining ban

Iron ore terminal at Ennore looks to diversify cargo after mining ban

Bangalore: A joint venture between Sical Logistics Ltd and MMTC Ltd, which built India’s biggest iron ore loading terminal with an investment of Rs500 crore at Union government-controlled Ennore port in Tamil Nadu, is seeking to handle other cargo.

It has applied for the port’s permission to do so after a Supreme Court ban on mining of the key steel-making commodity in Karnataka’s Bellary-Hospet region caused exports to dry up, rendering the facility non-functional.

The iron ore terminal at Ennore port, with an annual capacity of 12 million tonnes (mt), was inaugurated in January by shipping minister G.K. Vasan, but is yet to start commercial operations. The terminal is totally dependent on the commodity originating from the Bellary-Hospet belt for its operations.

“We are looking at alternatives including handling other commodities such as coal and cars for the time being till export of iron ore resumes," said P.K. Das, a chief general manager at state-run commodity trader MMTC.

Sical Iron Ore Terminals Ltd is a joint venture company formed by Sical Logistics Ltd and MMTC Ltd to develop and operate the new terminal for 30 years. Sical Logistics has a 74% stake while the rest is held by MMTC.

“We are in discussions with Ennore port regarding this," Das said, emphasizing that the venture was looking at handling other cargo only as an “interim measure to keep the terminal running".

“We are not able to commission the terminal because of the ban on mining and export of iron ore," Das stated.

S. Velumani, chairman and managing director of Ennore Port Ltd, was not available for comment.

In July, India’s top court put a blanket ban on mining in the mineral rich Bellary-Hospet belt in Karnataka to check environmental damage arising from rampant illegal mining. The Supreme Court extended the ban in August to cover Chitradurga and Tumkur districts in Karnataka, hampering output and hurting exports from the world’s third largest supplier of the steel-making material.

Karnataka is the second-largest producer of iron ore in the country at 46 mt, of which it exported about 20mt in the year to March 2010. India’s overall iron ore production was 226 mt in 2009-10, of which it exported 117 mt.

Apart from holding a 26% stake in the joint venture terminal operating company, MMTC has also committed to support the new terminal as a customer by shipping at least 3 million tonnes of iron ore a year through the Ennore facility, according to the shareholder agreement between Sical and MMTC.

The Sical-MMTC partnership won the contract in a public tender in 2006 by agreeing to share 52% of annual revenue with the port. Sical-MMTC is contractually bound to pay Rs2.5 crore to Ennore port as revenue share in the first year of operations with this rising 5% every year thereafter. Sical Logistics is now 57.08% owned by Tanglin Retail Realty Developments Pvt. Ltd, a unit of Bangalore-based Café Coffee Day Group promoted by V.G. Siddhartha.