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India has eased its ban on iron ore mining in the state of Karnataka, allowing 63 mines to resume operations. The Supreme Court of India ruled that these mines either had no illegal mining issues or only minor ones. This decision comes as miners in Goa continue to wait for clarity on the future of their operations. The relaxation is expected to boost iron ore production in Karnataka to around 15 million tons in the 2013 fiscal year, although this is still significantly lower than the pre-ban levels of 40 to 50 million tons annually.
The mining ban, which began in 2011 due to corruption scandals, led to a sharp decline in iron ore output and exports. Steel companies like JSW Steel and mining firms such as SesaGoa were heavily affected. In February of this year, India’s iron ore production dropped by 8% compared to the same period last year, marking the third consecutive month of decline. This has had a ripple effect on global steel markets, with India's iron ore exports dropping to just 18 million tons in the 2012/2013 fiscal year—down to one-third of the previous year’s level.
JSW Steel, one of India’s largest steel producers, had to cut production by 70% at its Vijayanagar plant after the initial ban. However, with the recent court ruling, the company has seen its capacity utilization rise to 80%. Seshagiri Rao, co-director general of JSW, welcomed the decision, stating it would provide much-needed relief to the steel industry and create employment opportunities.
Despite the positive news, industry analysts remain cautious. They believe it will take at least two years for all suspended mines to fully resume operations. According to Agrawal from Ernst & Young, while the decision is good news for steel companies, the recovery will be gradual, and output may never reach pre-ban levels. Poddar of the Federation of Indian Mineral Industries estimates that full capacity in Karnataka could take up to two years, with production reaching around 25 million tons annually.
Meanwhile, the mining ban in Goa remains a major concern. Goa is India’s primary source of iron ore exports, and current restrictions have kept mining activities completely halted there. Ambar of Fomento Resources noted that even with partial resumption in Karnataka, India’s iron ore exports are unlikely to recover soon. All newly produced iron ore must now meet domestic demand, and high rail freight costs make exporting unattractive.
To compensate for the domestic shortage, Indian steel companies have turned to overseas sources. JSW plans to import 5 million tons of iron ore annually from Australia and South America. Jindal Steel and Power has also sought iron ore from West Africa, investing $2 billion in projects to supply its plants in Oman and back to India. Additionally, the National Mining Development Corporation of India signed a deal with Brazil’s Amplus to acquire iron ore assets in Amapá, aiming to secure future exports.
As India continues to navigate the challenges of its mining sector, the path to full recovery remains uncertain, but the recent court decision marks an important step forward for the industry.