Many state MSME units on the verge of closure
The continuing shortage of iron ore has brought MSMEs industries in the state’s steel sector and mining to the brink of closure.
The steel, pellet and sponge iron units have been hit hard due to the high price and low availability of iron ore in the state. Of 109 spongy iron factories, 44 units have already been closed. Most MSME units depend on merchant mines to meet their iron ore needs. But increasingly merchant mines divert much of the iron ore produced in Odisha out of the state.
For example, in fiscal years 2019-20 and 20-21, out-of-state iron ore shipment was 58% and 60%, respectively. This created a massive gap between demand and supply, causing iron ore prices to rise sharply and the availability of iron ore to decline for state-based factories.
According to the Indian Bureau of Mines (IBM), the average selling price of 62-65% iron ore lumps in Odisha increased 176% from May 2020 to May 2021, and that of fines increased by 352%.
The price increase is highest in India. “Odisha has experienced the biggest surge in iron ore prices of any state in the past 12 months, and Odisha’s iron ore costs more than any other state in India. The impact of the iron ore crisis is already visible in the steel industries of MSMEs, ”said Brahma Mishra, president of the Utkal Chamber of Commerce and Industry (UCCI).
Recently, more than 15 sponge iron and pellet manufacturing companies requested the Department of Steel and Mining to supply the iron ore as part of the state government’s pre-emption policy.
The MSME sector in Odisha, in which the granulated and spongy iron industries share a large share, contributes significantly to Odisha’s economy in terms of job creation and income. The closure of these units will leave thousands of people unemployed, which will add to the burden on the state, especially in the economy affected by Covid-19.
Industry experts and many associations have called on the state government to take proactive steps to address the issue and secure the iron ore supply to this steel industry and MSMEs.