Lacklustre despatch from iron ore mines has prompted Odisha to settle for a lower cap on iron ore output from non-captive mines in Joda and Koira, the two most prolific ore producing sectors spread across mineral rich Keonjhar and Sundargarh districts.

Iron ore production from these two mining circles has been capped at 50 million tonne (mt) for this fiscal, 12% less than 57 mt for last fiscal.

The downward revision could have an implication on ore availability for steel industries who have been clamouring for higher production from merchant mines to stabilise prices.

"There is not much demand for iron ore from steel industries within the state. The offtake from mines is unsatisfactory. Hence, we have gone for a lesser ceiling on iron ore production from Joda and Koira this fiscal despite the fact that more iron ore mines have opened up for operations", said a senior government official.

The state government has formed a sub-committee under the aegis of the state level task force on mining. The committee, chaired by secretary (steel & mines) has met twice to draw up the plan on capping iron ore production. The ceiling has been arrived at after considering a host of factors like environmental impact, condition of road infrastructure and carrying capacity of the region.

As per government data, steel industries lifted 59% of the iron ore allocated by Odisha Mining Corporation (OMC) in the April-July period of tis fiscal.

OMC allocated 0.95 million tonne (mt) for 18 MoU (memorandum of understanding) signed steel units for the April-July period. The steel units actually lifted 0.58 million tonne. Lower offtake is attributed to high floor price set by OMC at its e-auctions.

Steel units feel putting a cap on mineral output is a restrictive trade practice. They feel hike in production would release more iron ore to the market and help stabilise prices.

"Putting a cap on iron ore output is a restrictive practice. But if the government has come up with the cap after considering different factors, it should ensure that the prescribed production limit is met. Punitive action needs to be taken against the merchant miners who do not keep to the production limit", said Manish Kharbanda, executive director and group head (mines & minerals), Jindal Steel & Power Ltd (JSPL).

Last week, the Indian Steel Association (ISA) made a plea to the state government to enhance iron ore output from merchant mines and state owned OMC.

As of now, only 46 out of 143 iron ore mines are operational in the state. Of the 46 operational mines, eight are captive mines while the rest 38 being merchant mines. The merchant mines have a combined production capacity of 106.07 million tonne per annum.

Iron ore production in Odisha crashed to 47.35 million tonne (mt) in 2014-15 compared to 77.91 mt in the year ago fiscal as several key mines remained under shutdown due to the Supreme Court's order.