Yearender: Worst not yet over for India's mining sector

Dec 29 2013, 16:39 IST
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SummaryWhile ban on iron ore mining in Goa continued throughout 2013, production of the mineral in Karnataka is yet to stabilise.

As the new year knocks on the door, iron ore mining industry - which is going through the most trying times following the Supreme Court restrictions - continues to grapple with challenges.

While ban on iron ore mining in Goa continued throughout 2013, production of the mineral in Karnataka is yet to stabilise.

Many mines in the Southern state are yet to reopen for want of clearances, even though the Supreme Court in April had lifted nearly 2-year old ban with some stiff conditions.

The impact of the decisions on mining will continue to be felt in the new year, especially in Goa where the economy to a large extent is dependent on mining and related activities.

Odisha - the largest iron ore producing state - is also facing issues like excess production and may possibly be heading for a ban in the new year due to a 5-volume explosive report of Justice M B Shah Commission that was submitted to the Union Mines Ministry in two parts - in July and October.

Contents of the report have not yet been made public but official sources said that the Commission has said that "all modes of illegal mining is being carried out" in Odisha and miners are "making super normal profits".

Besides, it has also said that miners in the state "illegally and without lawful authority" have extracted iron ore worth thousands of crores, they said.

Various issues including large scale violation of environment and forest laws, pollution in the mining areas and its impact on local population, flora and fauna have been dealt extensively by the Commission, whose report led to the Supreme Court banning all mining in Goa, the sources said.

The report is likely to be tabled in the next Parliament session and may provide the much needed ammunition to the political parties and activists against the Naveen Patnaik government just before the Lok Sabha elections.

The Indian economy also felt the tremors of the impact of mining bans in 2013. While the Indian GDP grew at the rate of 4.6 per cent in the first half of the current fiscal, the mining sector continued its negative growth trend of two previous fiscals and contracted by 1.6 per cent during April-September, 2013.

Commerce Minister Anand Sharma told PTI: "It (mining ban) has hurt our economy. It has hurt exports, (particularly) iron ore exports... We could have earned by exporting around 100 million tonnes of iron ore, we have been deprived of the precious foreign exchange."

Rejection of Vedanta's bauxite mining proposal at Niyamgiri hills in Odisha by the tribals was among the other major issues which hogged the limelight in 2013 for Indian mining sector.

This led to Vedanta Chief Anil Agarwal expressing regret over setting up Rs 5,000 crore Lanjigarh alumina refinery and stating that his firm is now looking at securing some other bauxite mine in the state.

To bring back the mining sector on track, the government contemplated reducing duty on iron ore exports during the August-September period after the official data showed that Indian GDP growth had plunged to a decade low of 4.4 per cent. However, it dropped the idea following opposition from the Steel Ministry and steel companies.

Output of the mining sector, with a weight of about 14 per cent in Index of Industrial Production (IIP), had shrunk by 2.7 per cent during April-October as against a contraction of 1 per cent.

The category's biggest contributor, iron ore, is expected to end at around the same levels of 2012-13 (136 MT) in the current fiscal as well, which will be a decline of over 62 per cent from the peak of 218 MT achieved in 2009-10.

The mining ban also led to Indian firms going for large scale iron ore imports in 2013, which was in stark contrast to India's image of being third largest iron ore exporter. While there is hardly any export happening, imports are expected to be around 7-8 MT in 2013-14.

While Karnataka, being the bigger economy, sustained the nearly 2-year long mining ban as it has many other industries to contribute, the apex court-imposed ban of October 2012 hit hard the Goan economy, where a third of the population is dependent on iron ore mining.

In January, the Goa governor pegged the loss to state economy at Rs 20,000 crore for 2012-13.

In November, the apex court, gave a partial relief and allowed e-auction of nearly 11.48 million tonne of extracted iron ore lying unused in the state but it will be monitored by a 3-member panel and the money will not be released till the Court finally decides on the matter.

Besides, the court ordered the setting up of a 6-member panel to conduct macro-environmental impact assessment studies and suggest an annual cap on volume of iron ore. The Committee has been directed to file its report by February 15, 2014.

For miners in Karnataka, 2013 brought some good news as in April, the court lifted nearly 2-year ban with conditions. While leases of all Category 'C' mines (the most polluted and having maximum violations) were scrapped by the apex court, Category 'A' and 'B' mines were allowed to be reopened.

However, the production in the state is yet to stabilise as most of the mines have not been reopened due to a long clearance process. Total annual production by the private miners is expected to be 5-6 MT in 2013-14, which, together with NMDC's production, is unlikely to meet the local demand.

Among other issues, government failed to table the final Mines and Minerals (Development and Regulation) Bill, 2011 in Parliament, even though a Parliamentary Standing Committee gave its recommendations in way back in May.

It proposed sharing of 26 per cent of the profits by the coal and lignite miners with people impacted by projects. For other miners, it has proposed to levy an amount equivalent to royalty paid by the companies to the state government for the project affected persons.

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