From Our Special Correspondent

Daijiworld Media Network

Bengaluru, Aug 19: The Federation of Indian Mineral Industries (FIMI), Southern Region has urged the state government to take appropriate submissions backed by facts before the Supreme Court in order to rectify the gross imbalance that has arisen due to the prohibition on exports and seek urgent rectification of the situation by permitting the export of iron-ore from Karnataka.

The restrictions on the trade of iron ore in Karnataka is suppressing the growth of the sector and have significant deleterious effects on the industry and also the public exchequer, the Federation said.

Restrictions on the sale of iron ore in Karnataka were imposed by the Supreme Court keeping in mind the situation prevailing in 2011-12.

"At that time, mining operations had come to a complete halt in view of prohibitory orders made by the Apex Court. As per estimates, the gross loss over a 10-year period to the state of Karnataka is approximately Rs 29,058.8 crore due to ban of iron ore exports,’’ it said.

The rest of India is exporting iron ore as per the EXIM policy of the Government of India thereby ensuring fair revenue to the state Exchequer including foreign exchange as well as overall growth of the nation by using the railways, port facilities etc.

As per the data available, the total export in the year 2019 from other parts of India shows export of 10.34 million tonnes of fines and 1.16 million tonnes of lumps.

While, during the same period, Karnataka has lagged when there is a surplus of 5.19 million tonnes of fines arising due to additional production from auctioned C category leases and expired leases.

Hence, an alternative market is urgently required since surplus iron ore may remain unsold even if the entire domestic demand is met from leases in Karnataka and without recourse to material from outside the state, the Federation said.

In Karnataka, approximately 70% of the sourcing is by single major steel player. These restrictions are also distorting the market as the buyer has the freedom of trade right to purchase iron ore from either the e-auction or from other states or even to import from overseas. This has created a skewed market, disadvantageous to sellers as they can only sell to domestic end-users.

At present, the value of iron ore which is consumed captively is derived from the IBM prices. This is affected by the monopsony arising from the e-auction system. The huge pressure on the lessees due to large scale imports (sometimes at higher prices than local ore) has forced lessees to resort to distress sale (since the iron ore remained unsold for many months and in some cases years).

Consequently, IBM index price for Karnataka is low. From Jan 2018 to May 2019, iron ore prices have gone down in Karnataka by -18.7 %, although IBM prices for Odisha and Chhattisgarh have only marginally reduced by -2.7% and -7.7% respectively.

The reduced price of iron ore sold in the e-auction, also has a direct impact on levies to be paid to Karnataka since the same is fixed ad valorem and on the basis of the sale price.

The state’s revenue is 30% of the sale price. Hence, the recovery of true value will substantially enhance the revenue of state Exchequer. Pertinently, revenue at the aforesaid rate will accrue to the state even on export. On the other hand, where ore is imported by consumers in Karnataka, the state earns only 2.5% import duty, the Federation contended.

In 2018-19, approximately 6.67 million tonnes of iron ore was imported into the state, as a substitute for locally produced iron ore, thereby leaving the unsold stock in mines and causing loss of revenue to Karnataka. These imports have also affected the sale of 8 million tonnes of old stocks.