The apex court last week ordered interim stay on iron ore mining in Odisha by companies whose lease agreements have expired and were not renewed by the state government.
Thus, the temporary closure of about 26 mainstream mines in Odisha has created severe crisis for domestic iron and steel industry may result in significant fall in capacity utilisation, Assocham said today.
The paucity of key raw material like iron ore will lead to rise in imports of finished steel in the country, it added.
In a letter to Finance Secretary Arvid Mayaram, Assocham said: "There is a need to temporarily ban iron ore exports from NMDC despite commitments made to customers in the international market which can be fulfilled by procuring iron ore from Australia or Brazil, thereby fulfilling its export obligations...
"It will also improve NMDC’s export sales realisation which is far lower than domestic realisation."
As per Assocham estimates, steel production in India is likely to remain about 86 MT in 2014-15 and the country is likely to face about 40 MT iron ore shortage in the fiscal.
It said if NMDC does not stop exporting iron ore it may lead to an additional iron ore shortage of about 2.5-3 MT besides 40 MT reducing the steel production by about two MT.
The comments of the NMDC officials could not be obtained in this regard.
NMDC is the largest iron ore producer in India with a annual capacity of about 32 MT and sells over 90 per cent of its produce in the domestic market apart from exporting to Japan and Korea under long-term supply agreements.
Its iron ore production was over 27 MT in 2012-13 and 30 MT in 2013-14, while it had exported about 1.6 MT and 2.5 MT in 2012-13 and 2013-14 respectively.
The industry body has also suggested that the new government should reduce import duty on iron ore (lumps, fines and pellets) to zero from the current levy of 2.5 per cent in order to safeguard the cost-competitiveness of the domestic industry.
"The recent Supreme Court order to ban illegal mining in Odisha (which accounts for over half of India’s total iron ore production), may result in domestic iron ore production falling to 100 MT in the current FY 2014-15 thereby jeopardising job safety of about 1.25 lakh people directly and indirectly engaged in production.
The output has notably declined to 136 MT in 2013-14 from peak production level of about 218 MT in 2009-10, said Assocham Secretary General D S Rawat.
"This will not only impact the domestic iron and steel industry alone but will have a cascading effect on other sectors of the economy depending on steel," he added.