Ore mine allocation raw deal for many

Written by Promit Mukherjee | Mumbai | Updated: Jan 12 2014, 06:32am hrs
Ore mine allocationJSW Steel has a total installed capacity of 14.3 mtpa across India (Reutes)
The lack of a proper policy on allocation of mines for producing iron ore, manganese ore and bauxite has led to a gross disparity while several new players have bagged such allocations in the past several years, the more serious ones with existing capacities for end-use products are on the waiting list.

Take for instance JSW Steel and Essar Steel. The companies, which require iron ore for producing steel, still do not have a captive mine allocation.

Indias biggest steel company in terms of domestic installed capacity, JSW Steels Vijayanagar steel plant with a rated capacity of 10 million tonnes per annum (mtpa) in Karnataka currently has zero backward integration and has to buy iron ore through e-auction, forcing it to operate at 80% utilisation due to paucity of ore. JSW Steel has a total installed capacity of 14.3 mtpa across India.

Similary, Essar Steels plant in Hazira, Gujarat, too is currently operating at 50% utilisation against a capacity of 10 mtpa.

In contrast, in the past years, especially during 2004-09, various state governments allocated mines to new players that just showed their intent at end-use, but so far have failed to either develop any mine or show actual end-use. In some cases, allottees even sold off mines allocated to them or engaged in excess mining.

A case in point is Dhariwal Infrastructure. As per data available with the ministry of mines, the joint venture company of the Kolkata-based Manikchand Group (makers of the Manikchand gutkha and mouth freshener brand) and tea-manufacturer Prithvi Group were given a prospecting licence (PL) in 2009 for a 353-hectare iron ore mine in Gadchiroli district of Maharashtra. Dhariwal Infrastructure was a company formed to produce power, which requires coal mine and not iron ore. Barely a year after bagging the mine, Dhariwal Infrastructure was sold off to CESC, the flagship company of the RP-Sanjiv Goenka Group, for a valuation of R300 crore.

Asked about the delays in developing the mines, some companies said they are still waiting for environmental clearances. However, most have not mentioned a mining plan or the current status of the mines in their annual reports or their websites.

FE sent mails to 15 such companies, but even after a month, only one replied. Ind Energy of Nagpur, which was given an iron ore mine in Chhattisgarh around 2005, said it has still not got approval to start mining and had plans to use the ore for its 0.6 mtpa steel capacity in the state. The modus operandi to be eligible for a mine allocation is simple set up a company with mining as its stated activity, get it registered with the Registrar of Companies and show end-use to the state.

Yet another instance is that of the Ex-Servicemen Welfare Association, which was given a 96-hectare bauxite mine in Ratnagiri district of Maharashtra. This was allotted to the association in 2004 and the mining lease was approved in 2009. As per the last available records as on March 2013, the association handed back to the government over five hectares and is currently awaiting environmental clearances for the rest of the mine.

When contacted, the department of ex-servicemen welfare, which is under the defence ministry, could not tell as to who would be the right person to talk on the mines, as no one was aware if any such mine was awarded. Even the Indian Bureau of Mines (IBM) feigned ignorance about the association sitting on a bauxite mine.

Canara Food Processors, a food-processing company, walked away with a 109-hectare iron ore mine PL in Goa, while Polybond Insulation, an electrical insulation material manufacturing company, bagged another iron ore mine PL in the Durg district of Chhattisgarh in 2008.

Rashmi Cement, the cement manufacturing arm of the Rashmi Group that would technically require a limestone mine for allocation, took home three separate iron ore mine PLs in the state of Madhya Pradesh in 2008 with a total land area of up to 440 hectares. A mail sent to Rashmi Group and its group companies, Rashmi Cement and Rashmi Metaliks, remained unanswered.

An official at IBM said giving away of mines such as iron ore and bauxite is a state subject. If companies or individuals demonstrate a proper end-use and request for allotment, depending on the merit of the company and its execution skills, mines are allotted by the state government.

Admitting that there are several companies in India sitting on mines, he, however, argued that this was mainly due to delays in clearances from the ministry of environment and forests.