FIMI has projected a shortage of iron ore and increased reliance on imports by domestic steel mills largely stemming from delays in the holding of an auction of mining leases by the state government for 48 iron ore mines where current mining leases are slated to expire on March 31, 2020.

According to the domestic miners’ body, the expected delays in holding the auction and award of new mining leases to new miners risked disruptions in supplies from these 48 operational mines as these mines would need to close down in the interim period until new bidders of these renewed mining lease resumed production.

Significantly, the Ministry of Mines has ruled out a suggestion by FIMI that the government extend the mining leases scheduled to expire on March 31, 2020, until the government is able to successfully complete the auction of new mining leases and new investors are ready to take charge of the mines. The government has argued that the Mines, Minerals Development and Regulation Act 2015 made the auction mandatory for granting any mining leases and ad hoc renewals of existing leases would be a legal violation.

“We are facing a bleak situation,” FIMI Secretary General R.K. Sharma said. “If we cannot produce, we will have to import more.” “As of now everybody is trying to produce as much as they can. But we do not know what will happen after March 31, 2020,” he added.

Domestic miners have blamed the government and legislation for making the auction mandatory for awarding mining licenses and for the impending scarcity of iron ore. FIMI maintained that nowhere in the world is an auction the preferred route for allocating mining leases and favored a “first come first served” mode for granting leases.

The mining industry held that even if total iron ore production during the current fiscal year (2019-20) was maintained or increased over the previous year, steel mills would continue to face a shortage of raw material and increase dependency on import because the share of iron ore lumps in total production has been steadily falling over the years and would further get accentuated next year. Most Indian steel producers are not equipped to feed their blast furnace only with high-grade lumps and not low-grade iron ore fines.

During 2018-2019, total Indian iron ore production was recorded at 206.44 million tons, of which only 32% was accounted by high-grade lumps. During the previous fiscal year, 2018-2019, total iron ore production was 194.58 million tons, of which 34% was comprised high-grade iron ore lumps and balance low-grade fines and concentrates.