Toranagallu/Hospet: In Karnataka’s crisis-stricken district of Bellary, the expansion plans of prominent steel plants are still on track as the mining ban that has brought production down to a minimal level is expected to be temporary.

“We are going ahead with our development plan," Vikas Sharma, senior vice-president, commercial and services, JSW Steel Ltd, said in an interview. “Work has already started. We are trying to establish our total 10 million tonnes (mt) capacity. On a parallel, (work on) 12 mt is going on."


While JSW’s Vijayanagar plant at Toranagallu is facing an acute shortage of iron ore that has cut production to 30-40%, the enhanced capacity is expected to be ready by 2012-end, said Sharma.

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About 40km away, in Hospet, medium-size iron-making company BMM Ispat Ltd is about to place orders in the next 10 days for technology and equipment from a European company for a 2 mt steel plant.

Resource play: A JSW employee checks the flow of molten iron at a blast furnace at the company’s Vijayanagar plant. Photo by Aniruddha Chowdhury/Mint

Subramanian said banks had agreed to sanction 4,200 crore and land had been acquired in what will help the company integrate forward and make steel products, especially for the construction sector, such as TMT bars, in two years.

The optimism prevails even as both JSW and BMM are staring at fast-depleting iron ore stocks and worrying about obligations they have to meet on loans and salaries.

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Under the Supreme Court’s orders, an e-auction has been taking place, offering small quantities of iron ore from a total reserve of 25 mt lying at different mines in the state, but steel companies say the disbursement at each auction is not sufficient.

MSPL Ltd, another prominent miner and iron producer, also has a steel plant on the drawing board with a first phase for 1.2 mt of specialty steel. Construction for the 4,500 crore project is expected to begin soon, said Raghavendra Rao, assistant general manager of corporate communications, MSPL.

The Supreme Court ordered all mines, except state-run NMDC Ltd’s, to close in July and August during a hearing on illegal mining and environmental degradation in the state, pushing the economy in the mineral-rich district into the doldrums and rendering people unemployed.

Details on illegal mining were written in several reports, including those by the Lokayukta and the Supreme Court’s central empowered committee (CEC), forming the backdrop of the arrest of former Karnataka minister G. Janardhan Reddy and his brother-in-law B.V. Srinivas Reddy for alleged mining irregularities.

However, executives and workers wait for the case to be resolved with a sense of hope and a feeling that the situation is only temporary, and that India’s growing steel demand will make a strong case for their comeback.

Indeed, there are signs that iron ore availability could improve.

Firstly, electronic auctions—the new online mode for selling iron ore under the Supreme Court’s order—have increased the volume of the ore put up for sale since they started last month. Steel companies said the system was facing several teething problems, but it could improve.

“The e-auction will find its way out. It’s a slow process for everybody," said JSW’s Sharma. The periodicity of the auctions has also improved.

A second sign of hope comes from the last report of the apex court’s CEC.

“The last CEC report is positive. It lists companies that were not involved in illegal mining," said MSPL’s Rao. “Once the joint team submits its report by 15 November, we are hoping we will see light at the end of the road."

Another big indication that efforts will be taken to restart the mines comes from the Karnataka government.

Last week, chief minister D.V. Sadananda Gowda in an interview said he was considering requesting the Supreme Court to allow the state government to allocate captive mines to big steel plants such as ArcelorMittal and Posco so that jobs are created.

Fourth, imports, though expensive, are still an option for steel makers, though they have not openly admitted they are considering them.

A few international miners including Australia’s Rio Tinto Ltd recently said inquiries for the supply of iron ore have come from Indian steel firms.

Finally, Karnataka’s iron and steel makers could look for foreign mines to either sell the mined ore overseas and even to bring in the supply to local plants if required.

NMDC acquired a majority stake last month in Australian deposit Legacy Iron Ore Ltd, and mid-size iron companies said they had a casual eye out for overseas buys.