Indian iron ore sector is classic tragedy which keeps haunting the Indian steel mills endlessly.

Climb down from the halcyon days of 3rd largest iron ore exporter worldwide at 101.5 million tonnes in 2009-10 to tiny player at 12.57 million tonnes in April to February 2013-14 is self-explanatory. This year iron ore exports are expected to come down by over 20% to about 13.5-14 million tonnes from 18.37 million tonnes in 2012-13.

Iron ore production has lost heavily passing through rapids of malpractices, clamped by judicial intervention and environmental regulation. Legal technicalities have clipped the wings of iron ore production in nation sitting over one of the largest reserves in the world. Iron production has slumped from the peak of 218.5 million tonne in 2009-10 to about 140 million tonnes in 2013-14.

Blanket ban on production and export in bid to eradicate malpractices has put the Indian steel mills on the brink of closure or exposed to unduly expensive domestic ore when the global price levels nosedived.

The last nail in the coffin was the recent Supreme Court judgment terming all deemed lease extension since 2007 as illegal. Apart from making several mines inoperative in Goa the closure of mining at 26 mines in Odisha has squeezed the supply line sending Indian steel mills scampering for imports.

Ironically when the global iron ore levels have plummeted to sub hundred levels, Indian iron ore behemoth NMDC has raised ore prices by up to 9% by INR 250-300 a tonne for June allegedly aimed at cashing in on subdued domestic supply scenario.

International iron ore level has slumped to USD 93 per tonne owing to owing to Chinese mills cutting down demand as with domestic market flooded with steel amidst poor demand.

Steel majors Essar Steel requires 15 million tonnes of iron each and JSW Steel needs 20 million tonnes per annum to their plants at full capacity. In a grossly undersupplied domestic market and mills unable to pass over the cost escalation to buyers in with poor finished demand the only option is to import cheaper iron ore.