Iron ore export from India rose sharply in the December quarter due to the opening of new mines in Chhattisgarh, Madhya Pradesh and Rajasthan. Activity in the traditional mining states of Karnataka, Jharkhand, Goa and Odisha remained low, resulting in rising dependence on import for steel mills.

Data from the Federation of Indian Mineral Industries (Fimi) showed a 253 per cent increase in ore export during the October-December quarter of this financial year, at 3.75 million tonnes as against 1.06 mt in the corresponding period of the previous year.

This is significant, as steel mills have faced acute shortage of the key input, reducing their operating capacity. Overall export during the first nine months of 2013-14 (April-December), however, was lower by 28 per cent than in the same period of 2012-13, at 11.2 mt as compared to 15.6 mt.

Mining has stopped in Goa, which used to export a little over half of India’s total. It will take months to re-commence excavation there. The other large producing state, Karnataka, has been facing a similar issue, of clamps due to a crackdown on illegal mining. While activity has resumed here in one of three categories of mines, the quantity excavated from these is inadequate to feed mills in the state.

Large steel mills are, therefore, importing ore. R K Sharma, secretary-general of Fimi, says mills have imported a little over three million tonnes of ore so far this financial year.

"In our view, the surge in (ore) export could be of pellets, as a number of steel mills have focused of late on forward integration to produce pellets for exports. As against nil duty on pellets, iron ore attracts 30 per cent export duty. Also, the realisation on pellets is higher than ore,” said Hitesh Avachat, senior analyst, CARE Ratings.

Of the 18,000 million tonnes of iron ore reserves in the country, Chhattisgarh and Madhya Pradesh are estimated to have 18 per cent and Rajasthan 1.5 per cent. Government-owned Steel Authority of India has given five applications to the Madhya Pradesh government for grant of a prospecting licence to set up benefication and pelletisation plants in ore-bearing areas, in Chhattarpur district.

Another public sector steel major, Rashtriya Ispat Nigam Ltd (RINL), was allocated a large iron ore block at Bhilwara by the Rajasthan government in June last year. RINL plans to initially invest Rs 2,500 crore to set up a benefication unit and a two-million tonne pellet plant for value addition of the ore, before using it at its Vizag steel plant.