SC bar on mining operations in Odisha locks in 40 mt of iron ore

Written by fe Bureau | New Delhi | Updated: May 17 2014, 10:48am hrs
In a major setback for the domestic steel industry, the Supreme Court on Friday imposed a Goa-like restriction on iron ore mining in Odisha. Noting that a blanket ban was against the national interest and detrimental to the economy, a bench headed by justice AK Patnaik imposed a ban on 26 mines that have not had their leases renewed after they expired for the second time since being granted.

Odisha has a total of 56 iron ore mines, of which 16 have all the lease renewals in place and can function normally. Of the remaining 40, 14 can function because they are under deemed extension for the first time since grant of lease, which is permissible under law. The 26 mines that cannot mine now would have to apply and secure fresh lease extensions. The state government has been asked to take a decision on their applications within six months.

The 26 suspended mines produced about 40 million tonnes a year, according to Odishas mines director Deepak Kumar Mohanty. We will abide by the courts decision and work on renewing the licences for the affected mines within the stipulated six months, Mohanty said.

However, in the meantime the steel industry may have to import iron ore to meet its needs. If that happens, it would be the second time that the country would be importing iron ore. During the last fiscal, around 1.3 million tonnes (mt) was imported for the first time.

Tata Steel and Jindal Steel and Power are some of the companies that mine and use ore from Odisha. Tata Steel shares fell more than 4% on Friday.

The company's executive director Koushik Chatterjee said its mines were operating with all necessary clearances.

Odisha produced around 79 mt in 2010-11 when there was no mining ban or any kind of restriction. However, during 2013-14, after a clampdown on illegal mining and attendant restrictions, output from the state fell to around 50 mt.

Karnataka, another ore producing state, produce around 43 mt in 2010-11 but is now able to produce only around 18 mt (half coming from state-owned NMDC) despite the SC lifting it ban a year ago while capping the annual output at 30 mt. Goa's output is fully exported and no mine in the state can function currently because all of them are under deemed extension and the SC has directed that they can start production only once fresh licences are granted.

In this scenario, it is the domestic steel industry that feels the pinch. The country produces around 80 mt of steel. Since it takes 1.5 mt of ore to produce 1 mt of steel, domestic steel companies need around 120 mt of iron ore. Though during FY14 the total output of iron ore was at 120 mt, around 15 mt was exported. Steel imports have been increasing. From a level of 5.8 mt in 2008-09, it climbed to 7.8 mt during 2012-13. The import of scrap, a substitute for iron ore for steel making, also rose to a record high in FY13 at 7.9 mt.