Orissa doesn’t cancel mine leases but levies Rs 58,000 crore of fines

fe Bureau Posted online: Saturday, Jan 25, 2014 at 0000 hrs
New Delhi/Bhubaneswar : As a fallout of the MB Shah Commission report on illegal iron ore mining in Orissa, the state government has levied a fine on 27 mining firms, including for captive mines held by state-owned Steel Authority of India and the private sector Tata Steel, totalling around R57,904 crore.

According to the state government, these companies had mined in excess of the quantity permitted under various statutory clearances during 2001-10 and, therefore, need to pay the price of the excess ore mined.

However, sources in the Orissa government said the state has no plans of cancelling the mining leases of these firms, so there’s no immediate threat of any crisis in terms of supply of iron ore to the steel industry, for which it is the chief raw material. This is crucial because Orissa contributed around 62 million tonnes (mt) of iron to the country’s overall production of 140 mt during FY13.

The central government has also said that rather than banning production of ore or cancelling mining leases, a more prudent approach would be to look into alleged violations on a case by case basis. For instance, the Orissa government has said that action has already been taken against illegal mining in the Joda circle. Similarly, the railways will look into and take action in cases where excess ore was transported by rail by evading freight and other duties.

Industry sources told FE that almost all the companies that have been fined by the state government under Section 21(5) of the Mines and Minerals (Development and Regulation) Act, 1957, have challenged it before the mining tribunal under the Union mines ministry.

The companies contend that there were no regulatory violations by them.

For instance, industry sources said that both SAIL and Tata Steel are steel producers who use the mined iron ore for steel making and are not allowed merchant sales. The two companies mined in excess of the approved amount because they did not get ore of ferrous content of 60%, which is required in their blast furnaces. Similarly, the sources said, the Aditya Birla Group's Essel Mining, whose two mines — at Jilling and Kasia — have been levied a total fine of Rs 4,308 crore, also did not resort to any regulatory violations.

Industry sources said that there may have been some statutory environmental violations as during 2005-06 the environmental parameters were not very clearly laid down. All three companies declined to officially comment on the matter.

To avert a crisis situation as occurred in the other two major iron ore producing states — Karnataka and Goa, which had to face a ban on production — the central government has agreed with the recommendations of the Shah panel to amend rule 24(1) of the Mineral Concession Rules, 1960, to provide that applications for renewal of a mining lease shall be made to the state government at least 24 months before the expiry of the lease, instead of the six-month period at present.

The Shah commission report, along with the government's action taken report on its recommendations, would be tabled in the Parliament as per the decision of the Cabinet earlier this month.

A mining plan initially includes only a tentative scheme of mining and annual excavation plan for the first five years. At the start of the mining operations, the tentative scheme of mining is conceptualised based on preliminary information on geology and reserves.

The scheme is reviewed every five years. Officials said that laying down limits for annual production for the entire lifespan of a mine, which is normally 20-30 years, at the time of approval of the initial plan is not practical because complete information on geology and reserves is not available.