JSW Steel to set up Rs 2,100 crore pipeline in Karnataka, India

30 June 2017

JSW Steel today said its board has approved the plan to set up a Rs 2,100 crore slurry pipeline in Karnataka to transport iron ore and coal for its 12 MT integrated steel plant in the state.

"As the availability of iron ore at a fair price within Karnataka is of paramount importance for long term sustainability of the company and environment friendly transportation of iron ore, the board of directors has given an approval to set up a Slurry Pipeline to transport iron ore from coastal Karnataka to the Vijayanagar works," JSW Steel said in a statement.

It said this slurry pipeline can be set up within 24 months at an estimated cost of Rs 2,100 crore.

This will facilitate transporting iron ore through slurry pipeline at a very competitive 15 per cent cost of alternate means of transport.

"This strategic project will enable the company to source almost 50 per cent of the current requirement of iron ore at Vijayanagar works from outside Karnataka either from imports or from Odisha / eastern sector at prices lower than the prevailing prices in Karnataka," the statement said.

JSW Steel has been operating its 12 MTPA (million tonne per annum) integrated steel plant at Vijayanagar works in Karnataka.

"The plant has been set up with substantial investments relying upon consistent supply of iron ore at a fair price," the company said.

The Supreme Court, in the backdrop of measures undertaken to curb illegal mining in this region, had imposed several restrictions, which inter-alia included a cap of mining 30 MTPA of iron ore per annum within Karnataka.

The company said, "Even after a lapse of over 4 years, the current rate of iron ore production in Karnataka is still around 27 MTPA, far lower than the demand by the user industries".

The statement said in the backdrop of cap on mining, the demand for iron ore is in excess of supply, while "the mining companies have started charging differential price for the iron ore produced and sold in Karnataka relative to the prices prevailing in Odisha / Chhattisgarh, contrary to the intent of making available legally mined ore at competitive price".

For instance, it said the price of 63 per cent grade iron ore loaded into wagon (including royalty) in Odisha is Rs 1,575 per tonne.

"The base price for a similar grade in Karnataka on comparable basis is Rs 3,050 per tonne. In addition to this differential price of Rs 1,475 per tonne, the Karnataka goverment charges Forest Development Tax / Fees of 12 per cent," the statement said.

It alleged that taking advantage of the scarcity of iron ore in Karnataka and inability of the user industry to source iron ore from outside Karnataka due to prohibitive freight cost, the mining companies are squeezing the iron and steel industry, which is already under severe margin pressure.

The company said transportation of iron ore through slurry pipeline is an environmentally friendly initiative and globally this shift towards pipeline transportation is evident.

Accordingly, the proposed slurry pipeline will not only contribute to alternate sourcing of iron ore from outside Karnataka at competitive price but is also highly environment friendly with no pollution.

The company said it will work towards establishing the slurry pipeline in a time bound manner. Simultaneously, the company is also exploring the feasibility to set up slurry pipelines for transporting coal from coastal Karnataka to Vijayanagar works.