Indian steel producers are staring at a bleak future in raw material supplies as a number of coal and iron ore mining leases are scheduled to lapse on March 31, 2020, Anil Kumar Chowdhury, chairman of state-run steelmaker Steel Authority of India Limited (SAIL) said in a statement on Monday, December 23.
A total of 334 mines, including 46 operational coal and iron ore mines, will see their existing mining leases expire on March 31 and auction of fresh leases will have to be conducted for these mines to continue production, while any delay in concluding the auctions will lead to disruptions of raw material supply to domestic steel mills.
“Today perhaps because of the change in legislation, everything has to go through the auction route, which is creating a lot of issues for the steel industry which may face disruptions by April 1, 2020 because of delays in holding fresh auctions of new mining leases,” Chowdhury said.
The SAIL official said that the production cost of steel in India is the highest and one of the major factors for this is taxes with royalty close to 20 percent on input materials like coal and iron ore, which is more than in any other country.
In India, the average cost of production per ton of steel is about $450/mt, whereas in China where steel producers have the benefit of low taxes and incentives the cost of production is as low as $350/mt, he added.