India’s Steel Ministry has proposed a merger of NMDC – the largest iron-ore merchant miner – with Kudremukh Iron Ore Company Ltd (KIOCL) – another CPSE of the Ministry – following the latter’s inability to start mining operations at Devadiri in Karnataka. The merger proposal has been placed with the Department of Public Enterprises (DPE), under the Ministry of Finance, “around a month-back”, a senior Ministy official told businessline.

Detailed proposals are being worked out, including the financial implications or transactional value if at all some needs to be made, the official said. Details of the merger are likely to come post green-light from the Finance Ministry. Regulatory approvals are also required for the same.

“So there are some discussions around a merger of KIOCL by NMDC. And NMDC is keen on it too as per initial understanding. A proposal in this regard has been sent to the DPE,” a Ministry source will direct knowledge of the matter said.

The merger will allow the ₹22,000 crore NMDC – a CPSE – to access close to 4 million tonne per annum (mtpa) plant which has export clearances in-place.

“It is a beneficial move for NMDC since it gets access to a ready-made export oriented unit, which otherwise would have taken over 5 years for the iron-ore miner to set-up,” another official said.

NMDC is yet to respond to queries from businessline; and the story will be updated post response from the Hyderabad-based merchant miner.

The Mini Ratna company, KIOCL – which is an export-oriented unit, and the only iron-ore miner to have one – was set up in 1976 for iron-ore mining and beneficiation at Kudremukh.

For FY24, its pellet production was at 1.90 million tonnes while revenue from operations was ₹1854 crore. However, the company reported a net loss of over ₹83 crore for the year. Last fiscal its borrowings were at ₹64 crore while lease liabilities were approximately ₹116 crore. Its average net worth was pegged at ₹1,960 crore and earnings per share was – 1.37.

Absence of Mines for KIOCL

According to the official, KIOCL has not yet got permission to re-start iron ore mining at Devadiri; and its pellet plans are lying under-utilised or not-utilised. The company has been buying iron ore from the market – mostly indigenous sources, but these are the bare minimum required to keep pellet plants running.

Recently, KIOCL had floated tenders for securing hematite (high grade iron ore) from indigenous sources. As an alternative, it recently leased out operations of one of its pellet plants to NMDC.

“If the pellet plants lie unused for a long time, it becomes difficult to re-start operations. So in order to keep the plants afloat and also keep the company running, KIOCL has leased out a pellet plant to NMDC. If NMDC takes over the pellet plant, then it also makes sense since the miner will be using its own iron ore and cost of operations for the plant will be lower,” the Ministry official said.

KIOCL Conundrum

KIOCL’s ₹1,500 crore mining project at Devadiri was halted following a failure to obtain clearances from the Congress-run Karnataka state government. In June this year, the state government directed officials to stop transfer of forest land in Bellary’s Sandur taluk to KIOCL for mining operations, amid protests from environmentalists.

The withdrawal of permission was initiated just days after Kumaraswamy signed the file – his first project as Union Minister – to operationalise the iron ore mining project.

In January 2017, the then Karnataka state government issued a notification for reserving an area of 470.40 hectares (Ha) for the CPSE. A modified mining plan was necessitated due to change in land use pattern because of reduction in mining lease area during forest clearance. Approval was for 388 Ha.

The project involves setting up a 2 MTPA captive iron ore mine and a beneficiation plant of 2 MTPA capacity. Devadiri was supposed to be operation by December 1, 2024 as per dashboard timeline, the company said in its Annual Report for FY24.