The allocation of captive iron mines has been eluding Visakhapatnam Steel Plant ever since its inception. The employees of VSP and members of Ukku Parirakshana Porata Committee (UPPC) are of the opinion that giving captive mines to the only shore-based integrated steel plant in the country is the only way to prevent it from incurring losses and retaining it under the public sector set-up.
In 1971, when M.N. Dastur had submitted the DPR for the plant, it clearly mentioned about the allotment of a block in Bailadila range of NMDC.
However, this never happened and VSP was forced to buy iron ore at market price since 1991, when the plant became operational, said Ch. Narasinga Rao, chairman of the UPPC.
According to him, since 1991, the cost per tonne of iron ore has risen drastically and it is affecting the cost of production, which is leading to losses.
In 1991, the cost per tonne of iron ore was ₹396 and till 2003 it was well below the ₹1,000 mark. In 2003, the cost per tonne was ₹821.
But from 2004, iron ore was listed under mineral trading with the commodity trading and since then there has been a steep hike in price per tonne.
In 2004, the price was ₹1,085 and from there it has risen to ₹4,779 in 2019-20. Between 2013 and 2015, the prices shot up to ₹5,424 per tonne, said Mr. Narasinga Rao.
Of the total cost of production, raw material accounts for 61% and of which the major share is taken by iron ore, as it is basic raw material.
For production of 1 MT of steel, there is a requirement of about 1.6 MT of iron ore. The production capacity of VSP has been increased from 3.3 MPTA to 7.3 MPTA, and hence the cost of iron ore is playing a key role in its profitability, said Mr. Narasinga Rao.
According to him and other employees of VSP, in 2020 SAIL, which has its own mines, had spent around ₹2,396 for every tonne of iron ore. But at the same time, VSP spent around ₹6,584 per tonne.
“This clearly indicates that VSP had incurred an additional expenditure on iron ore to the tune of ₹4,188 per tonne, for not having its own captive mines. This additional expenditure could have easily been converted to profit for the plant,” explained Mr. Narasinga Rao.
Bad investment
For the last two decades, in an attempt to get mines, VSP had submitted 28 applications, including seven to Andhra Pradesh and others to seven other States such as Odisha, Jharkhand and Chhattisgarh. But they had fallen on deaf years and to add misery to the fate of VSP, it was made to buy stakes in the Bird Group of Companies that has holdings on mines belonging to OMDC, by investing ₹361 crores of its hard-earned money, said a senior executive from VSP.
The mines were under legal tangle due to renewal of licences and it is still to wriggle out. Moreover, VSP was forced to pay another ₹500 crore as penalty for damage to environment, for which it was not responsible and till date not single ore of iron was transshipped to the plant from those mines, said Mr. Narasinga Rao.
