CCI Report On Iron Ore: Types, Distribution, Uses,

Mines in India
pwonlyias.com/current-affairs/iron-ore-sector-in-india/

February 5, 2024

Context:
This article is based on the news “Iron ore faces challenges of
sustainability and fairness” which was published in the Live Mint. The
Competition Commission of India (CCI) along with the Institute for Studies in
Industrial Development has recently published a market study report on India’s
iron ore sector.

Relevancy for Prelims: Competition Commission of India, Indian GDP, Mineral &
Energy Resources in India, and Mines and Minerals (Development and
Regulation) Amendment Bill 2023.
Relevancy for Mains: India’s Iron Ore Sector: Current Status, Significance,
Challenges, Infinitives, and Way Forward.

India’s Iron Ore Industry and Its 2.3% GDP Contribution

Minerals Auction Target: The report coincides with the government’s
recent announcement, setting a target to put 500 blocks of minerals on
auction by 2025-26 which will include rare earth elements (REEs) and
precious metals.
Iron Mining in India: India produces 87 types of metallic and non-
metallic minerals and mining activity accounts for roughly 2.3 percent of
India’s GDP in 2022-23.
Iron Ore Mines in India: There are 1319 reporting mines. Of these, 97
percent mines are located in seven states, namely Odisha, Chhattisgarh,
Rajasthan, Karnataka, Jharkhand, Madhya Pradesh and Maharashtra.

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About Competition Commission of India (CCI)

It is a statutory body of the Government of India, was established in March
2009 under the Competition Act, 2002.
Goal: To create and sustain fair competition in the economy that will
provide a ‘level playing field’ to the producers and make the markets work
for the welfare of consumers.
Headquarters: New Delhi.

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Types of Iron Ore
Based on the amount of ore and iron content, iron ore is classified into various
types:

Magnetite (FE3O4): It is a good quality ore and has very high iron content
(about 70%). Black in colour and has magnetic properties.
Haematite (FE2O3): Reddish ore with 60-70% iron.
Limonite: Yellowish ore with 40% to 60% iron.
Siderite: Ore with less than 40% iron. It contains many impurities and hence
mining, in many places, is economically unviable.

Uses of Iron Ore

Its most common uses are for making steel and iron products such as nails,
tools, and pipes.
It plays a vital role in creating machine parts for the automotive, aerospace,
and other industries.

Iron Ore Sector in India

The Backbone of Industrial Development in India: Iron ore is the basic
mineral and the backbone of industrial development. The total reserves of
iron ore in the country were about 22,487 million tonnes in the year 2015.
Primary Ore Varieties in India: The two main types of ore found in our
country are haematite and magnetite. India’s iron ores are mostly
Hematite and India is the 2nd largest producer of hematite after Russia.
Iron Ore Production in India: India is self-sufficient in iron ore production,
and contributes 7 percent of the global production and India is the fourth
largest producer of iron ore in the world after Australia, Brazil, and
China.
Iron ore holds a dominant position, accounting for 79 percent of the
total mineral value produced in the country.
State’s Share in Iron Ore Production: Iron ore is highly concentrated in
some states with Odisha accounting for 53.82 percent of the iron ore
production in India, followed by Chhattisgarh (16.3 percent), Karnataka
(15.9 percent), and Jharkhand (9.7 percent).
Iron Ore Exports: The value of iron ore export in recent years has been
much higher than that of imports. India’s export competitiveness
(measured in terms of Revealed Comparative Advantage Index) in iron
ore has increased post 2015.

Major Iron Ore Belts in India

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 Orissa-Jharkhand Belt
In Orissa high-grade hematite ore is found in Badampahar mines in
the Mayurbhanj and Keonjhar districts.
In the Singhbhum district of Jharkhand haematite iron ore is mined in
Gua and Noamundi.
Jharkhand has some of the oldest iron ore mines and most of the iron
and steel plants.
Durg-Bastar-Chandrapur Belt
It lies in Chhattisgarh and Maharashtra. Very high grade hematites
are found in the Bailadila range of hills in the Bastar district of
Chhattisgarh.
The range of hills comprises 14 deposits of super high-grade
hematite iron ore. It has the best physical properties needed for steel
making.
Iron ore from these mines is exported to Japan and South Korea via
Vishakapatnam port.
Dalli, and Rajhara in Durg are also the important mines of iron ore.
Bellary-Chitradurga-Chikmagalur-Tumkur Belt
The Kudermukh mines, one of the largest deposits in the world
located in the Western Ghats of Karnataka.
The ore is transported as slurry through a pipeline to a port near
Mangalore.

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Maharashtra-Goa Belt

Includes the state of Goa and Ratnagiri district of Maharashtra.

Mineral Map Of India

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Distribution of Iron Ore in the World
Africa: Liberia, South Africa and Algeria are important producers.
China: There are large iron ore reserves in the Shenyang region of
Manchuria, Wuhan and Tai-ye in Chang Jiang valley, Hainan island etc.
important centres.
Australia: Its reserves are found in Western Australia.
South America: Brazil has the largest reserves.
North America: USA and Canada’s Great Lakes area has abundant reserves.
Russia: Kerch peninsula and Kursk region, Ural Mountains have important
iron ore mines.
Europe: Sweden and France have major reserves. The Rhine valley in
Germany, Lorraine, Normandy and Pyrenees of France are important
centres.

Challenges Faced By India’s Iron Ore Sector

Sustainability: The iron ore mining industry often faces scrutiny due to
environmental concerns. Strict environmental regulations, especially related
to deforestation, air and water pollution, and land degradation, can lead
to operational challenges and increased compliance costs.
For instance, Mineral Conservation and Development (MCD) Rules
require mining lease holders to take all possible precautions for
undertaking sustainable mining which further raise the cost of
mining operations, and thus big firms already attuned to these
practices have an advantage over the new and small firms trying to
enter the mining sector.
Fairness: Iron ore is classified into different categories based on its ‘Fe’
content and there is a possibility of misrepresenting high-grade iron ore
to reduce the average sale price (ASP) determined by IBM, giving rise to
an unfair advantage that genuine firms would not have obtained.
For instance, the Odisha government has imposed penalties worth ₹
341 crore on three mining leaseholders in the state in 2023, for
allegedly downgrading iron ore quality.
Viability: The effective tax rates and the royalty payments for iron ore in
India are much higher than in most mineral-rich countries, namely Brazil,
Australia, Canada, Chile, and South Africa. This results in an increase in
cost, which has a pass through effect in steel pricing.
For instance, the report highlights the fact that high prices of iron
ore in Odisha are affecting the viability of small-scale pellet and
sponge iron manufacturers that use iron ore as their primary raw
material.

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 Regulatory Issues: Changing regulatory frameworks and policies
related to mining and exports have created uncertainties for stakeholders in
the iron ore sector, impacting investment decisions and long-term
planning.
For example, the allocation of mining leases has witnessed a
significant decline after the implementation of the Mines and Minerals
(Development and Regulation) Amendment Act (MMDR Act), 2015.
The Shah Commission report on illegal mining and subsequent
Supreme Court rulings had put a hold on mining activity, particularly in
Goa and Telangana.
Infrastructure Constraints: Inadequate infrastructure, including
transportation and logistics, hampers the efficient movement of iron ore
from mining sites to ports or steel plants. This results in delays, increased
costs, and a less competitive position in the global market.
For example, the steel industry’s logistics cost represents around 16-
18% of total revenue of steel players which is significantly higher than
best in class benchmarks which are at around 10-12% globally.
Illegal Mining and Smuggling: Illegal mining is a major concern leading to
revenue loss, and creates a huge unorganised sector characterised by
information asymmetry, preventing legitimate players from entering the
sector.

Way Forward
Stable Regulatory Framework: Establish a stable and transparent
regulatory framework for the iron ore sector to provide clarity and
encourage long-term investments. Consistency in policies will enhance
investor confidence.
The reforms introduced through the Mines and Minerals
(Development and Regulation) Amendment act of 2021 are aimed
to benefit the iron ore sector, however, the actual implementation of
these reforms at the ground level would be crucial.
Discourage Iron ore Export: The export of iron ore should not be
encouraged as it is not a renewable material. As the country transitions to
Aatmanirbhar Bharat, India should prioritise the export of higher value-
added products, such as finished steel.
India should consider adopting the Chinese strategy of importing
iron ore even though China is one of the leading global producers of
iron ore, which has helped China to become the world’s top
manufacturer of steel.

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 Environmental Sustainability: Implement and enforce stringent
environmental standards to ensure responsible mining practices. Promote
eco-friendly technologies and reclamation efforts to minimise the sector’s
ecological footprint.
For instance, converting fines into pellets is an important option to
minimise carbon emissions compared to other production methods.
The government may introduce schemes like Production Linked
Incentive (PLI) for intermediary businesses to encourage the adoption
of better technologies and thereby mitigate carbon emissions to a
great extent.
Further, promoting the use of solar energy in all plants can help
complement their energy requirements with green technology,
thereby contributing to environmental sustainability.
Combat Illegal Mining: Strengthen law enforcement and monitoring
mechanisms to curb illegal mining and smuggling activities. For instance,
state governments have enacted rules for preventing theft, smuggling, and
illegal mining.
Orissa Minerals (Prevention of Theft, Smuggling & Illegal Mining and
Regulation of Possession, Storage, Trading and Transportation) Rules,
2007.
Jharkhand Minerals (Prevention of Illegal Mining, Transportation and
Storage) Rules, 2017.
Karnataka (Prevention of Illegal Mining Transportation and Storage)
Rules, 2011.
Infrastructure Development: Invest in upgrading transportation and
logistics infrastructure to streamline the movement of iron ore from mines
to ports or steel plants.
While Odisha possesses relatively better infrastructure, states like
Karnataka must focus on developing their infrastructure. It is essential
to establish effective road and rail connections between mines and
processing plants to ensure that the sector operates seamlessly.
Regularise e- Auctions: To address the bottleneck in availability of iron
ore under e-auction process, the report recommended that e-auctions could
be held weekly or bi-weekly, as per the business requirements of the firms.

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Captive Mines
Captive mines are the mines that are owned by companies.
The coal or mineral produced from these mines is for the exclusive use of
the owner company of the mines.

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 Captive Mines: According to the report, allocation of captive mines to some
players creates entry barriers in the iron ore and steel sector as entry and
successful operation becomes costly for new firms. It emphasised on
monitoring the prices charged when a captive mine sells its surplus
input to other entities.
Further, to compensate for those without captive mines, preferential
treatment should be granted to those entities.

Also Read: Interim Budget 2024-2025

Mains Question: Despite India being one of the countries of Gondwanaland, its
mining industry contributes much less to its Gross Domestic Products [GDP] in
percentage. Discuss. [150 Words, 10 Marks]

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