India needs to raise iron ore production: Steel carries a weight of 17.92 per cent in the index of eight core industries. The core industries together account for 40.27 per cent of the Index of Industrial Production. Steel also provides direct employment to about 600,000 people and indirect employment to nearly two million. Government has taken the right decision to include iron ore as a separate core industry.
These numbers explain why mineral supply cannot be treated as a narrow concern of mining companies. India’s plans for infrastructure, housing, railways, automobiles and manufacturing assume a large increase in steel consumption. Steel plants cannot run on capacity announcements.
Imports offer only limited protection. India has substantial iron ore reserves, and sustained dependence on imported ore would expose steelmakers to freight costs and international price movements. Moreover, as majority of the plants are away from the coast, logistics of such volume will always be a challenge.
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Time to step up iron ore production
The immediate task is to bring auctioned mines into production. That requires state governments to resolve land and local administrative issues, while the Union government coordinates environmental approvals and transport infrastructure. The responsibility cannot end with the auction notice.
Existing mines will also need to recover more usable ore from lower-grade deposits. Beneficiation can raise iron content and reduce the volume of unwanted material entering the blast furnace. But beneficiation plants require water, power, land and other transport arrangements. Better understanding of ore quality through detailed exploration will help in implementing state of art beneficiation technology before such low-grade ore are encountered in the course of mining.
India has auctioned mineral deposits faster than it has brought them into production. Of the 152 iron ore mines auctioned since 2015 covered by available industry data, only 46 are operational as per data recorded till March 2026. The rest represent capital locked up, output deferred and another complication for a steel industry expected to expand rapidly.
The problem is not confined to the number of working mines. The quality of iron ore being extracted has also deteriorated. Ore containing at least 62 per cent iron accounted for about 60 per cent of production in FY11. Its share had fallen to roughly 42 per cent by FY25.
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Steel production outpaces iron ore output
Steel production, meanwhile, has grown much faster than iron ore output. The compound annual growth rate of steel production has been about 6.9 per cent if you compare the data of FY 20 to FY25, against 3.4 per cent for iron ore for the same period. New mines expected to start production in FY27 and FY28 may narrow this gap. Their commissioning schedules, however, depend on land acquisition, statutory clearances and the construction of evacuation links. The silver lining is the last year production of 310 MT marking a 7% increase from the previous year.
India could otherwise end up with more steel capacity and insufficient domestic ore of the required grade.
Lower-grade iron ore raises steel costs
A decline in ore quality increases the quantity of raw material required to produce a tonne of steel. It also raises the burden on beneficiation plants, furnaces and waste-disposal systems.
A one-percentage-point decline in iron content, accompanied by commensurate increase in alumina and silica, can raise the cost of hot metal by 2-2.5 per cent. More gangue produces more slag. It also requires additional fuel and flux. Steelmakers must therefore mine, transport and process more material for the same output.
The consequences extend beyond production costs. Higher fuel consumption increases emissions, while additional slag and tailings require land and disposal facilities. Delays in developing good-quality deposits thus add to the cost of steel and make the industry’s emission targets harder to meet.
Mine auctions cannot be judged by bids received or premiums promised to state governments. A successful auction is useful only when the lease is executed, approvals are secured and ore begins to move. The Centre and mineral-bearing states need to track auctioned blocks through each of these stages. Government has taken a good initiative by launching Unified Mining Portal in this direction.
Many delays arise outside the mine gate. Forest and environmental approvals can take years. Land records are disputed. Rail sidings, roads and slurry pipelines are often planned after the mining lease has been awarded. A block without an evacuation route cannot add much to national mineral security and in turn remains a sterile block.
Green steel needs better raw materials
Most large steel producers have begun with measures that offer relatively quick returns: more efficient equipment, lower electricity consumption, renewable power and better recovery of waste heat and process gases. Pulverised coal injection, coke dry quenching and top-pressure recovery turbines are already part of this programme at several plants.
The next stage will cost much more. Carbon capture, utilisation and storage remains expensive. Capturing a tonne of carbon dioxide currently costs about $45-70, while stakeholders would prefer a cost closer to $20.
Retrofitting old plants adds further difficulties. Solvent regeneration consumes lot of energy. Space constraint, absence of guaranteed downstream use of Carbon dioxide, low carbon dioxide concentration are some challenges and moreover, its concentration varies across production processes. No single capture technology will suit every plant. At a broader level, India has 629 GT of CO₂ storage potential, however, ground truthing will bring the actual number. Government is working on developing a suitable ecosystem on this aspect.
Hydrogen-based steelmaking faces a different cost barrier. One estimate places parity between hydrogen priced at about $0.88 a kg and coking coal at around $260 a tonne. Hydrogen prices will have to fall sharply before large-scale replacement becomes commercially attractive. Producers will also need reliable supplies, pipelines, storage facilities and affordable renewable electricity.
A Ministry of Steel study has estimated that greening India’s steel plants could require investment of about $283 billion. Companies cannot carry that expenditure without a credible market for low-emission steel, access to long-term finance and clarity over carbon measurement.
The European Union’s Carbon Border Adjustment Mechanism has already altered the commercial calculation for exporters. Indian producers exporting to markets that put a price on embedded carbon will have to establish the emissions content of their steel. Energy efficiency may reduce that burden, but the quality of ore entering the plant will affect the result as well.
Green steel policy cannot therefore begin at the blast furnace. It has to include mineral exploration, mine development and beneficiation.
Mine closure cannot wait until extraction ends
The pressure to cut carbon emissions has received more boardroom and regulatory attention than the effect of mining on biodiversity. For mining companies, the two belong in the same operating plan.
A mine affects drainage, soil, forests and wildlife habitats well before closure. Restoration carried out after the deposit is exhausted cannot repair every loss. Progressive mine closure is meant to restore exhausted sections while mining continues elsewhere in the lease area. Its effectiveness depends on whether companies treat it as continuing work or as a provision in a document submitted for approval.
Closure plans also need financial scrutiny. The cost of restoring land, managing waste and monitoring water can rise over the life of a mine. A plan prepared when the lease is granted may bear little relation to conditions 20 years later. Regulators should periodically review the work completed and the money set aside.
The same discipline is required for biodiversity. Compensation paid for diverted forest land does not by itself protect local habitats. Holistic plan for a given mining region is required for wildlife corridors, water sources and the cumulative impact of several operations in the same region.
India needs more iron ore, and it needs production to begin sooner at mines that have been already auctioned. That case does not justify careless extraction. Faster approvals should be accompanied by enforceable operating and closure conditions.
The steel industry’s expansion rests on two interconnected requirements: adequate supply of ore of the right quality and a lower environmental footprint for every tonne produced. Auctioning deposits addresses neither unless mines start operating, ore is beneficiated and disturbed land is restored as extraction proceeds.
The views expressed in this article are of the author and not necessarily those of the organisations he is associated with.
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Dr Pankaj Satija is Executive Vice President - Corporate Affairs, JSW. The views expressed in this article are of the author and not necessarily those of the company he is associated with.