Mumbai, Nov. 13 -- India must increasingly beneficiate its low-grade iron ore rather than allow valuable mineral resources to remain under-utilised or permit the export of low-grade ore without adequate domestic value addition, BK Bhatia urges.
India's iron ore scenario is entering a new phase. The country has substantial iron ore resources, but not necessarily the grades its growing steel industry needs. The share of high-grade ore is declining, while low-grade fines are accounting for an increasing proportion of production. This emerging reality calls for a decisive policy shift: India must increasingly beneficiate its low-grade iron ore rather than allow valuable mineral resources to remain under-utilised or encourage the export of low-grade ore.
The issue is not merely one of mineral conservation. It has direct implications for the availability of raw materials for India's expanding steel industry, resource efficiency, environmental management and the competitiveness of the domestic mining and metals sector.
Why Beneficiation Matters
India's iron ore production of lumps and fines increased from about 207 million tonnes (MT) in FY2010-11 to around 310 MT in FY2025-26. However, this increase has been accompanied by a deterioration in the grade profile. The share of ore above 62 per cent Fe declined from about 60 per cent to 42 per cent during this period, while low-grade ore below 58 per cent Fe increased from 15 per cent to 26 per cent of production.
The growing availability of low-grade ore makes beneficiation increasingly essential. Beneficiation can upgrade sub-grade material into a product suitable for steelmaking, thereby extending the life of existing resources and reducing the pressure to mine higher-grade deposits selectively.
India's policy objective should therefore be clear: extract maximum value from every tonne of mineral resource within the country through scientific mining, beneficiation, recovery and recycling of mineral values.
The Ministry of Mines has also recognised the importance of upgrading low-grade ore. The policy requirement that a substantial proportion of ore below 58 per cent Fe should be upgraded to 62 per cent Fe and above underlines the need for an economically viable beneficiation ecosystem.
India's Declining Ore Grades
India does not face a fundamental shortage of iron ore resources. The emerging challenge is one of quality, recoverability and economic utilisation.
Low-grade ore stocks have accumulated over the years. If such substantial quantities of low-grade stocks, including sub-58 per cent Fe fines, are not systematically beneficiated, an increasing proportion of India's mineral inventory could remain outside the economically usable resource base.
At the same time, India's steel production is expanding and will require assured supplies of suitable-quality iron ore. Exporting low-grade ore without adequate domestic value addition would therefore not be the preferred resource-management outcome when the same material can potentially be upgraded and utilised domestically.
The policy priority should consequently be to encourage beneficiation within the mining lease itself, wherever technically and environmentally feasible.
Rethinking Mining Royalties
There is an important anomaly in the present royalty framework. Under Rule 39(1) of the Minerals (Other than Atomic and Hydrocarbons Energy Minerals) Concession Rules, 2016, where run-of-mine ore is processed within the leased area, royalty is charged on the processed mineral removed from the lease. Where run-of-mine ore is transported outside the lease for processing, royalty is charged on the unprocessed run-of-mine ore.
This creates an unintended economic disincentive for on-lease beneficiation. A miner who invests in a beneficiation plant within the lease can face royalty assessment based on the beneficiated product, whereas transporting the ore outside the lease results in royalty being assessed on the unprocessed run-of-mine material.
Such differential treatment can influence investment decisions in favour of off-lease processing, even though on-lease beneficiation can have significant environmental and logistical advantages.
The principle should be simple: royalty should be linked to the mineral extracted or removed, and beneficiation should not result in a disproportionate royalty burden merely because value has been added within the lease.
The regulatory position has also evolved. In April 2026, the Ministry of Mines notified the Third Amendment to the MCR, 2016, introducing a methodology for determining the average sale price of haematitic iron ore below the 45 per cent Fe threshold and clarifying royalty treatment where processing reduces the economic value of run-of-mine material. However, the broader case for rationalising royalty treatment to encourage beneficiation remains relevant.
This principle is consistent with the recommendation of the Planning Commission's high-level Committee, chaired by Anwarul Hoda, in its December 2006 report. The Committee recommended encouraging physical value addition through concentration, beneficiation, calibration and blending, with royalty charged on the ore at the pit mouth on the basis of its extraction cost before processing. Alternatively, it suggested a proportionately lower ad valorem royalty rate for beneficiated or concentrated ore.
On-Lease Beneficiation
On-lease beneficiation is not merely an economic proposition. It can significantly reduce the environmental footprint of mining.
Beneficiation can generate substantial quantities of tailings. Where the plant is located within the lease, tailings can be managed as part of an integrated mine plan, including reclamation and backfilling of mined-out areas wherever technically and environmentally appropriate. It also enables water recycling and more centralised management of mineral waste.
By contrast, transporting large quantities of low-grade ore outside the lease for beneficiation creates additional road and rail movements, dust, emissions, traffic and logistics costs. Since beneficiation may require 2 to 3 tonnes of run-of-mine (ROM) ore to produce one tonne of marketable concentrate, the additional movement can be substantial, depending on the ore grade and recovery rate.
Thus, from the perspectives of resource conservation, logistics, emissions reduction, land utilisation and scientific mine management, on-lease beneficiation deserves a policy preference.
Amending Rule 39(1)
A focused amendment to the MCR, 2016 can further address the present anomaly without disturbing the basic royalty structure.
First, Rule 39(1) should be amended to provide that where iron ore is beneficiated within the lease area, royalty is calculated on the quantity and grade of the ore fed into the beneficiation plant, rather than on the beneficiated concentrate produced thereafter. The applicable average sale price should correspond to the grade of the input mineral.
This would place on-lease and off-lease beneficiation on a more rational footing and remove the royalty-related disincentive to investment in beneficiation.
The amendment should also clarify that tailings, rejects or sub-grade material generated during beneficiation within the lease should not attract a separate royalty where royalty has already been paid on the ore fed into the beneficiation process, thereby avoiding double charging.
A Wider Resource Impact
India's iron ore policy must evolve with its changing resource profile. The objective should not simply be to maximise immediate royalty collections from the highest-value output. It should be to ensure scientific extraction, maximum resource recovery, domestic value addition and sustainable utilisation of the country's mineral resources.
Rationalising royalties for on-lease beneficiation would provide a strong economic signal for miners to invest in beneficiation plants, recover low-grade resources and progressively address accumulated stocks of low-grade material. It would also reduce unnecessary transportation of low-grade ore and support more integrated mine planning.
The proposed amendment to Rule 39(1) of the MCR, 2016, is therefore a relatively simple regulatory measure with potentially significant implications for India's mineral security.
As India's steel industry expands, the country should not merely ask how much iron ore it produces. The more important question is: how efficiently can India convert its entire mineral resource base into usable raw material for domestic steelmaking?
The answer lies increasingly in beneficiation. A rational royalty regime can ensure that beneficiation happens where it makes the greatest economic, environmental and resource-conservation sense: within the mining lease itself.
ABOUT THE AUTHOR
BK Bhatia is a mining policy expert and former Director General of the Federation of Indian Mineral Industries (FIMI). The views expressed are his own.
Published by HT Digital Content Services with permission from Infrastructure Today.