Faced by lingering crisis over the shortage of iron ore availability, Tata Sponge has embarked on its maiden import of the ore despite having an off-take pact with the parent Tata Steel.
"We have made our first import of ore and the shipment is lying at Paradip port and it would start moving to our plant at Joda soon. It's an irony as our plant is situated at the heart of the iron ore industry and just few kilometers away from good quality of iron ore yet we are importing," Tata Sponge managing director D P Deshpande said.
"Tata Steel is not producing iron ore as much," Deshpande said when asked why his company is being forced to resort to imports.
Production at Tata Steel's captive mines in Odisha has suffered due to regulatory and legal actions and the steel maker itself is being forced to either import or even source from other domestic suppliers like NMDC.
The crisis of availability has hit sponge iron industry hard, he said. "At least we dared to import. Many have decided to shut down instead."
Tata Sponge, which has its manufacturing facility at Joda of Keonjhar district in Odisha, does not have any iron ore mine and sources its entire requirement from Tata Steel.
On a positive note, Tata Sponge on Thursday got a breather from the Delhi High Court with regards to its coal mine, allowing the company to restart the process of obtaining forest and other clearances even as the issue of de-allocation of its mine at Talcher is being decided.
"The mine was recommended for de-allocation. But we told the Delhi High Court that just because there is a risk of de-allocation, don't hold back actions and let us go ahead.
Court was conveyed that the company understands some actions are being taken at a risk as the mine may eventually get de-allocated. Our case was settled yesterday where the court asked the government to go ahead and undertake rest of the clearance giving processes without prejudice to its right to de-allocate later," Deshpande said on the sidelines of a CII conference on manufacturing.
"Where we got stuck is that the clearance for forest divergence, the technical term for replanting a forest in a new area, didn't take place. Land was bought for this for which we had deposited money with the government and all processes of divergence was completed. But since we didn't get the forest divergence clearance, the environment clearance got lapsed. We approached the court and told them that it was not because of delay on our part and submitted a chronological list of events supported by documents."
The company has already invested Rs 220 crore on buying land and forest divergence and creating infrastructure for the displaced villagers. "Once the clearances comes, we would go for mining activities," he said.
The company sources half of its coal requirement from auctions of Coal India, other half is imported. The linkage coal continues to remain unavailable, with Coal India and coal ministry connecting it to coal block allocation.
Tata Sponge meanwhile is set to raise prices on the back of proposed imposition of higher royalty on iron ore.
"Hike in royalty from 10% to 15% would raise cost of production of iron ore but we are ok with it. We source our ore from Tata Steel and so they have to pay higher royalty and we have to reimburse them. Cost of ore would go up by Rs 200-250 a tonne while the cost of sponge iron will be impacted by about Rs 400 a tonne."
Sponge iron prices are ruling at around Rs 21,600 tonne to Rs 22,000 tonne, he said.