Centre to move SC for relaxing iron ore mining ban

Written by Prashant Mukherjee | New Delhi | Updated: Aug 28 2013, 10:56am hrs
It has taken a steep fall in the value of the rupee and the persistence of a high current account deficit for the government to decide on making a concerted plea to the Supreme Court to remove the ban on mining in Goa.

Finance minister P Chidambaram has said the ministry of mines would move the Supreme Court seeking relaxation in some of its orders on iron ore.

The minister also indicated that if need be, the government would also look at reducing the 30% export duty to make Indian ore competitive in markets such as China, which accounted for 80% of the countrys total ore exports.

The December 2011 Supreme Court ban on iron ore mining has had a more deleterious impact on the economy than assumed earlier. Even as the ban was partially lifted by the court early this year allowing category A and B mines in Karnataka to resume production, mining is yet

to commence in most of these locations due to delays in getting the requisite approvals.

Since the courts clampdown in the wake of the illegal mining scam, the countrys iron ore output has fallen sharply from 219 million tonnes (mt) in 2009-10 and 208 mt in 2010-11 to 140 mt in 2012-13. The official estimate is that production this year would not be any better than last years. Indeed, the ban on mining and the levy of export taxes could not have come at a worse time. Consider this: Of the 57 mines approved in Karnataka, only 14 are operating right now, with an annual production of 13.77 mt. Before the ban, the state used to produce more than 85 mt a year.

Most of the ore in Goa, which accounted for 70% of Indias exports, is in the form of fines, which cant be fully used in the country for lack of adequate pelletisation capacity.

Prior to the ban, Goas iron ore exports stood at 40 mt a year, with Sesa Goa exporting the largest amount of 14 mt. The export duty of 30% has also hit exports of iron ore traders say exports are not remunerative at current international prices of ore ranging between $110 and $120 per tonne. Chidambaram recently said the Central Board of Direct Taxes is reviewing the export duty.

But all is not lost. Said HC Daga, adviser to Essel Mining, This year we expect exports (of iron ore) to be 10 million tonnes. However, if the duty is removed, exports can be increased substantially. According to Daga, if the Supreme Court lifts ban from Goa in the next six months, exports could pick up further by 20 mt a year.

This will generate a revenue of $5 billion for the government. The country has a potential of earning more than $10 billion every year from exports, he said.

Anjani Agrawal, partner and national leader, metals & mining, EY India, said, India has lost around $12 billion revenues in the last one year due to the ban on ore mining and the export duty. Directionally, it (reviewing these) is a right move keep the current account deficit low.

Global majors like Posco and ArcelorMittal have scrapped projects planned in the country due to delays in approvals. Domestic steel companies such as JSW Steel, Kalyani and several others are reviewing their investment plans. The Federation of Indian Mineral Industries said that investment in exploration and mining activities has dried up, causing loss of revenue to the Centre as well as state governments.

The ban on iron ore mining has had repercussions on the steel industry as well, as iron ore is the primary ingredient for that sector. In 2012-13, steel imports jumped 14.6%, against a rise of 1% in 2011-12. Growth in exports of finished steel slowed to 14.3% in 2012-13 from 32.56% a year earlier. Last financial year, domestic steel production grew just 2.5%.