The government-owned Steel Authority of India (SAIL) may have to cut production capacity two months down the line if there is any delay in getting clearances for mine leases from the state government and ramping up production from its other mines.
"All SAIL plants are currently operating at more than 100% capacity. They have an ore inventory of nearly 4-6 weeks, after which, they may face shortage of raw material leading to a cut in production. At Rourkela and Bhilai, production capacity could come down to 70-80%," Prakash Duvvuri, head of research at OreTeam, said. He, however, adds that Odisha state government is likely to move rapidly on the clearance of its mining leases.
Last week, the Supreme Court ordered closure of 26 mines in Odisha on non-reneweal of leases impacting major steelmakers like SAIL and Tata Steel which have captive mines in the state. The suspension on mining activity impacts two major mines of SAIL. While the Bolani mine used to supply iron ore to its Durgapur plant, production from the Barsua mine used to feed Rourkela Steel plant. It also impacts operations at its Kalta mine, but this a very small one.
In a statement issued on Monday, SAIL chairman CS Verma said, "Steps required for expediting the approvals of renewal of mining leases by the state government have been speeded up. We have sufficient stock to sustain our plant operations for the time being and thus, there is no cause of any worry on this count."
Currently, SAIL produces around 10 million tonne (MT) of iron ore from Odisha state. The three mines which are currently facing closure were producing some where between 6-7.5 MT of ore annually.
"SAIL could increase production from its Chhatisgarh mines. It also has nearly 100 MT of dumps, which they are not using right now. These dumps could be utilised post beneficiation," Giriraj Daga, a senior analyst with Nirmal Bang brokerage, said.
Duvvuri, however, cautioned that these dumps are on forest land, and for using them, government's permission would be needed.
The steelmaker which has a total installed capacity of nearly 12 million tonne also has mines in other states like Jharkhand and Chhatisgarh. SAIL's total iron ore mining capacity is close to 22-23 MT which it plans to increase to 42 MT in near future.
Meanwhile, further violations in the state have come to light, this time contravening forest laws. The recently released minutes of meeting of Union environment ministry's forest advisory committee (FAC) shows that two mining projects of SAIL and Odisha Mining Corporation Limited (OMC) have flouted an important condition of approval for stage 1 or in-principle clearance for forestland diversion.
FAC and Ministry of Environment and Forests have recommended for revocation of stage one (forest) clearance of Bolani and Koira mines of SAIL. Both these mines together produce nearly 8 MT of ore annually.
Koira mine mainly cater to the company's Rourkela nd Bhilai plant. However these clearances can be sought within 3-4 days, said an industry expert.