MAC: Mines and Communities

Indian iron and steel: crisis or opportunity?

Published by MAC on 2008-12-09

Iron ore output from India's Jharkhand state has toppled over the past six months, " thanks to the global meltdown that has impacted demand in the steel sector."

Tata - the counry's biggest steel producer - is cutting back on some projects, but maintains that it will increase expenditure on projects in Jharkhand, Orissa and Chhattisgarh - all of which are likely to have ngeative impacts on local, epecialy tribal, communities.

Meltdown impacts Jharkhand's iron ore dispatch

The Hindu

5th December 2008

Jharkhand's iron ore dispatch has fallen in the first six months this fiscal, as compared to the corresponding period last year, thanks to the global meltdown that has impacted demand in the steel sector.

In the first six months of the current financial year, the State's iron ore dispatch was 200,000 tonnes less than the average, resulting in a revenue loss of Rs 50 lakh [500,000 rupees] in form of royalty and other fees in West Singhbhum district of the State.

Mostly iron ore mines in Jharkhand are situated in West Singhbhum.

"In the first six months of the current financial year, the total revenue collected from royalty and other fees was Rs 23.7 crore, which was Rs 24.2 crore during the same period last year," an official of Mines and Geology department told IANS.

"As a result, the state has suffered a revenue loss of Rs 50 lakh in comparison to last year," he said, adding: "If the situation persists, then we are unlikely to meet even last year's revenue target."

The State has earned revenue of Rs 45 crore during the last financial year from iron ore dispatch, and this year's target was set at Rs 85.5 crore.

Meltdown threat to iron-ore royalty


The Telegraph (India)

5th December 2008

Ranchi, Dec. 4: The ill effects of the global economic slowdown are now showing up in Jharkhand's own backyard with one mineral-rich district already losing Rs 50 lakh - and counting - in royalty after a sudden fall in iron-ore dispatches since April.

West Singhbhum, the district with the highest iron-ore reserves in India, is feeling the pinch now that the steel and sponge iron sectors have been badly hit. With rates and demands of both the commodities reaching an all-time low, the dispatch of iron-ore lumps (high grade ore) and fines (low grade ore) from 20 mines across the district has dwindled.

"There has been a reduction in dispatch of iron ore. It is 2 lakh [200,000] tonne less this year in comparison to last year. Between April and November, we have already lost royalty of over Rs 50 lakh and it is all likely that we will suffer more losses," said R.N. Prasad, the district mining officer of West Singhbhum.

Prasad, who is also deputy director in the state mines and geology department, revealed that till November 2007, total revenue collected from royalty and other fees was Rs 24.20 crore [24.20 million]. But during the 2008-09 financial year, till November 2008, revenue collection was Rs 23.70 crore, thus registering a loss of about Rs 50 lakh.

The situation, he said, was more alarming than it appeared as this year's revised target was Rs 84.50 crore as against a Rs 45-crore target of the last fiscal (that was achieved).

The reasons for the optimism were two-fold: first, the economic boom of 2007-08 and the initial period of 2008-09 and second, an expected revision of ad-valorem (based on overall price) based revenue by the Centre.

The present system of royalty fixation is based on tonnage (per tonne) and grade of iron ore. The dispatch rates for various categories of iron-ore lumps and fines from mines vary between Rs 11 to Rs 27 per tonne.

Once the ad-valorem system was introduced, market price, and not quantity, of ore would determine royalty..

Industry sources believed with general elections coming, the Centre was unlikely to introduce the ad-valorem.

Prasad said given the economic scenario, the target of Rs 84.50 crore looks an impossible task and a satisfactory figure would be around last year's collection of Rs 45 crore.

In the non-coal sector, West Singhbhum earns the highest mining related revenue in the state. There are around 20 iron-ore mines in the district and mining leases for almost half of them are held by either by the state-owned Steel Authority of India Limited (SAIL) or Tata Steel.

Over 10 mines are in the business of exporting iron-ore lumps and fines.

There was a huge demand of iron-ore fines (lower grade) in markets of China and Japan and in mushrooming sponge iron units but as demand of steel nose-dived after the Beijing Olympics, the market turned dull.

Tata Steel to delay projects, barring Orissa & Jamshedpur

Press Trust of India

2nd December 2008

India's largest private sector steel maker Tata Steel today said it will re-prioritise its capital expenditure in view of the global economic meltdown and give preference to "high-return projects" while deferring the rest.

"We will re-phase our capital expenditure, giving higher preference to high-return projects like Jamshedpur and Orissa, while delaying some of the other projects to ensure that our liquidity position continues to remain strong," Tata Steel Managing Director B Muthuraman said here.

Announcing the company's financial results for the second quarter and the six months ended September 30, he said Tata Steel will accord greater emphasis to raw material projects to secure resources faster than what it had planned earlier.

Elaborating on the company's near future plans for India, Muthuraman said Tata Steel is committed to save Rs 300 crore in next five months by reducing operational expenditures and overhead costs.

World's sixth largest steel producer Tata Steel has lined up ambitious expansion plans in India.

Besides, augmenting the capacity of its Jamshedpur plant to 10.5 million tonne from the present 6.8 million tonne by 2010, the company is in process of setting up greenfield projects in Jharkhand, Orissa and Chhattisgarh.

While, in Jharkhand it proposes to invest about Rs 42,000 crore for a 12 million tonne integrated steel plant, in Orissa it intends to pump in nearly Rs 22,000 crore for a 6 million tonne unit.

It also plans to invest Rs 18,000 crore for setting up a 5 million tonne steel plant in Chhattisgarh.

For all the proposed greenfield projects, the company claims it is in the process of acquiring land.

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