The company has approached the state commerce and industries department for obtaining tax exemptions on its domestic sales (from its new projects) as per the 1996 state industrial policy. It is already eligible for sales-tax waiver on its exports.

In a communique to the company, the state government said: "Kudremukh Iron Ore will be eligible only for its new projects which were under different stages of implementation since 1996."

"The proposal is likely to be cleared on Saturday by the Karnataka high-level committee. The meeting will be chaired by Chief Minister JH Patel," said an official with the state commerce and industries department.

However, the state is yet to take a decision on the quantum of sales-tax exemption applicable to thecompany. As per the 1996 Karnataka industrial policy, every new project is eligible for a five-year sales-tax exemption. "The company may get these benefits with retrospective effect (from 1996 onwards)," a company official said.

The new projects of the company include a shaft pelletising furnace project worth Rs 65 crore and a Rs 30-crore column-floatation unit and a Rs 30-crore DG set for captive power consumption at its mining facility.

The official said that Kudremukh Iron Ore, which had posted a fall in its net profit during 1996-97, was setting up the flotation unit for improving the quality of concentrate to meet the export standards.

At present, the company exports 90 per cent of its production of iron ore concentrate and iron-ore pellets. The concentrate is exported to Iran, Japan and China, while pellets are exported to Japan, China, Turkey, Australia, Indonesia and Taiwan. Domestically, the company sells only to two companies, Vikram Ispat and Ispat Industries of the Nippon Denro group.

Thecompany had estimated a production level of 6 million tonnes and a turnover of Rs 560 crore for 1997-98. The company hopes to maintain its bottomline in the next few years owing to an ease in the power situation by setting up of of two DG sets of 9.36 MW each.

Meanwhile, the Karnataka government is yet to renew the 30-year mining lease which will be getting over in July. The Government, which has to give the licence extension, seems to be more influenced by the union ministry of environment and forest and is now having second thoughts on extension of the licence. The ministry was of the view that open-cast mining in some parts of the state was damaging the ecosystem. The mining licence was granted in 1969.