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Resource centre on India's rural distress
 
 

‘We’ll take the burden for employees for some time, but how long?’ by P Vaidyanathan Iyer

RV Gumaste, a member of Kirloskar’s project team that set up Bellary’s first iron-making unit in 1994, has never seen such times since he first moved base from Pune 17 years ago. “We will take the burden for our regular employees for some time. But how long?” says the industry veteran, who was appointed Managing Director of Kirloskar Ferrous Industries Ltd in July 2003. The Rs 1,100-crore company has 800 workers in its pig iron unit in Bevinahalli village near Hospet.

The Supreme Court’s decision on Friday to ban all mining activity in Bellary has overnight put the entire iron and steel industry in crisis. Bellary supplies iron ore not only to steel units in Karnataka, but also to companies in five other states: Tamil Nadu, Gujarat, Andhra Pradesh, Goa and Maharashtra. Besides JSW Steel, that has the largest plant with an annual capacity of 10 million tonnes at Toranagal, and employs some 22,000, there are several small sponge iron, pig iron and pellet plants in the region—all suddenly strapped for the basic raw material.

Says Suketu Shah, Joint Managing Director, Mukand Ltd — that has a strategic alliance with Kalyani Steels for a 6,00,000-tonne per annum steel plant in Hospet — “It is like cutting off milk and vegetable supply to Mumbai one fine day.”

Mukand and Kalyani together employ 2,500 in their facilities and require about 1.2 million tonnes a year of iron ore. “We set up our unit here in 1999-2000 only because of its proximity to the raw material. All iron ore needs for us are met from the region. Getting ore from other states is not viable given the margins,” says Shah.

But in the last 10 years, the region’s economy has transformed dramatically, with mining becoming the predominant economic activity. “Agriculture is there but I know that farmers are struggling. The Bellary region depends considerably on mining today. It provides employment to hundreds of thousands of people—either directly with miners and steel and iron companies, or with transporters or as mechanics, etc,” Gumaste says. “The decision will have a huge socio-economic impact on the region.”

Kirloskar’s unit makes castings for automobile and tractor companies. Its entire iron ore requirement of 1 million tonne a year to produce 4 lakh tonnes of pig iron is met from local miners. It supplies to leading auto companies including Tata Motors, Mahindra & Mahindra and Eicher Motors. “Of the two blast furnaces, we were able to fire only one for 45 days now. That too was operating at 50 per cent capacity. We may stop that too completely in a couple of days,” says Gumaste.

Smaller units will have no choice but immediately shut shop since they do not carry raw material stock. Even mid-sized companies such as Hospet Steels, the joint venture of Kalyani and Mukand is running just one of its three blast furnaces. “Tomorrow, I may have to stop this one too,” says Shah, who notes that shutting down a continuous process operation such as Hospet Steels had its own safety implications.

RK Goyal, Managing Director, Kalyani Steels, says at least a third of the total 45 million tonne of iron ore mined in Karnataka is legal. Those who are on the ground, sourcing iron ore for their steel plants, say administrative tightening due to the Lokayukta probe and Supreme Court interventions have greatly curbed illegal mining in Bellary. “There needs to be some balance—one rotten apple cannot make the orchard bad,” adds Mukand’s Shah.

According to Gumaste, the state government and the Central Empowered Committee of the Supreme Court can distinguish between good and illegal miners.

“There are legal miners, some of whom I know for 30 years now—they used to load iron ore on donkeys then, now they do it in mini-trucks. We respect the Supreme Court decision, but our contention is distinguish between legal and illegal. Take appropriate action against illegal miners.”