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Tata Sponge starts importing iron ore as supplies from Odisha halt

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23 August 2014

Tata Sponge has started importing iron ore for the first time, in the face of a severe shortage of the raw material, even as the lingering crisis of iron ore shortage is also being felt at its parent company 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.

The ore for Tata Sponge comes from Tata Steel's captive mines in Odisha, but with the parent company itself forced to close these over regulatory and legal issues, and the steel maker itself being forced to either import or even source iron ore from other domestic suppliers like NMDC, there is no alternative for the company.

According to Deshpande, the iron ore crisis has hit sponge iron industry hard. "At least we dared to import. Many have decided to shut down instead," he said.

Tata Sponge, which has its manufacturing facility at Joda of Keonjhar district in Odisha, manages to survive just because it has an assured buyer in Tata Steel, which consumes its entire sponge iron production.

Meanwhile, 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 despite the government's plan to deallocate its mine at Talcher.

"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 were 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 Rs220 crore on buying land and forest divergence and creating infrastructure for the displaced villagers. "Once the clearances come, we would go for mining activities," he said.

Tata Sponge imports half of its coal requirements and sources the other half of its requirements from auctions of Coal India. Coal India and coal ministry connecting coal linkage to coal block allocation, which remains elusive, he said.

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 per cent to 15 per cent would raise cost of production of iron ore but we are okay 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 Rs200-250 a tonne while the cost of sponge iron will be impacted by about Rs400 a tonne."

Sponge iron prices are ruling at around Rs21,600 tonne to Rs22,000 tonne, he said.





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