Steel industry may face disruption post March 2020 on expiry of mining leases: SAIL chief

The domestic steel sector is facing challenges in form of high input costs and unavailability of coking coal in the country, SAIL chairman A K Chaudhary said on Saturday, and conveyed that the government is aware of the issues and taking appropriate measures to resolve them. He was speaking at a session on ‘India: Roadmap to a USD 5 trillion economy’ organised by industry chamber FICCI here.

High input cost is a concern for the industry, the Steel Authority of India Ltd chairman said adding that the production cost of steel in India is the highest at present. One of the major factors contributing to high production cost is tax, he said. “However, the government is well aware of the issues and is taking appropriate steps and measures to overcome these challenges,” Chaudhary said.

The royalty is close to 20 per cent on the input material, whether it is coal or iron ore and freight cost is higher than what is being paid in other countries, the SAIL chairman said adding that electricity also adds to the high production cost.”In India, average production cost of per tonne steel is about USD 450, whereas in China it is as low as USD 350 where players get benefit of low tax and incentives,” he emphasised.

Coking coal and iron ore are the two key raw materials needed for making steel. “As far iron ore is concerned, we have it in abundance. The only thing is the judicial allocation has to happen. Coking coal is not available in our country and the whole industry is dependent on import of coking coal, particularly integrated steel sector imports from Australia, Indonesia, the US etc,” he said.

All these challenges need to be addressed for meeting the ambitious 300 MT steel production capacity target set by the government under the National Steel Policy, he added. He also said that the steel industry may face disruption post March 2020 when a number of mining leases expire.

A clutch of mining leases for coal and iron ore are slated to expire by March next year. According to the amended Mines and Minerals (Development and Regulation) Act, these licences will not be renewed and the mines will be allotted through fresh auctions.

“Today perhaps because of the change in the legislation everything has to go through the auction route, which is creating lots of issues and the steel industry may face disruption by 1.4.2020 because of the auctions of coal mines,” Chaudhary said.