KOLKATA (miningweekly.com) – The Indian government will permit domestic steel producers to divert iron-ore production from captive mines to any other production facilities and/or joint ventures.

The relaxation of captive mining rules follows similar liberalisation for State-run Steel Authority of India, which last month was permitted free merchant sale of iron-ore from its captive mines subject to a maximum of 25% of production from the mines in the previous financial year.

The move will benefit domestic steel companies, like Tata Steel, Vedanta and JSW. It is also expected to help tide over the anticipated iron-ore shortage in the coming months.

The National Institute for Transformation of India Commission has said in recent recommendations that existing stringent rules governing captive iron-ore mining prevent steel companies from maximising production from their captive assets beyond volumes required by their own downstream steel mills.

The changes are a precursor to the Indian government amending legislation that will pave the way for the introduction of ‘hybrid’ mining licences, wherein end-use industries will be able to own coal and iron-ore mines with full freedom to either use production for their downstream value adding plants and/or take up free merchant sale of the production in the open market.

The permission to domestic steel industry to divert production is expected to mitigate the anticipated shortage of raw material likely to be faced by steel mills that do not have captive mines.

About 48 operational iron-ore mining leases are expiring in March next year, and delays by state governments to hold timely auctions of new mining leases will likely cause a deficit of about 50-million tons in 2020/21. India is expected to become a net importer, with inward shipments of about 25-million to 30-million tons a year forecast.

“We are facing a bleak situation. If we cannot produce, we will have to import,” Federation of Indian Mineral Industries secretary general R K Sharma has said.