Lack of state approvals offsets SCs mining ban relief, output crawls

Written by Prashant Mukherjee | New Delhi | Updated: Nov 21 2013, 06:11am hrs
Dont blame just the industry for the countrys mineral production falling 2.5% in April-September, dragging down the overall industrial output and GDP. Seven months after the Supreme Court lifted the ban on iron ore mining for the majority of lease areas in Karnataka that accounted for 70% of the states ore output before the crackdown, production from these mines continues to crawl. The reason: The state governments failure to give the necessary clearances.

Out of 115 mines (categories A and B) that are eligible to start operations after the Supreme Courts April verdict, only 15 have commenced operations so far and, according to mines ministry data, their production up to the end of October has been around 6 million tonnes (mt). Annual production from these 115 mines stood at 35 mt in 2009-10, the year before the illegal-mining scam erupted, leading to imposition of the ban by the apex court in July 2011.

Karnataka and its mineral-rich Bellary district had produced a little over 50 mt of iron ore in 2009-10 from 166 mines, including 51 category C mines, the permits for which now stand cancelled. That was 23% of Indias total output then.

There is no proof that approvals being granted by the government to the mining companies have helped them begin operations; the process is very slow. It is getting worse, Mineral Enterprises MD Basant Poddar said. Global majors like Posco and ArcelorMittal, it may be recalled, had scrapped proposed steel projects in the state due to delays in land acquisition.

Thankfully, state-run NMDC, whose mining activities in the state havent been affected by the ban, has increased its output to 9 mt (April-October) from an annual 2 mt four years ago.

By the end of this financial year, iron ore production from the state is likely to touch 20-22 mt, including that of NMDC, RK Bansal, additional secretary general of Federation of Indian Mineral Industries, said. NMDC, now the largest iron ore producer in the state, operates two mines Kumaraswamy and Donimalai.

Around 73 mines under the A and B categories have received approvals for rehabilitation and reclamation plans as prescribed by the central empowered committee (CEC) and are awaiting further necessary approvals.

According to industry experts, at the current estimated annual production level of 140 mt and taking an average ore price of $100 per tonne, the size of the Indian iron ore industry is likely to be $1.4 billion this year, much lower than the level two years ago when production was uninterrupted and exports were booming.

Steel makers in Karnataka, which used to produce about 17-18 mt every year before the ban, have been facing a severe iron ore crunch due to the mining ban. Most of the producers, including JSW Steel, which is the largest producer in Karnataka with a 10-mt annual capacity, have been running their plants at a reduced capacity due to the shortages.

But its not just Karnataka, in Goa too a mining ban has hit the iron ore industry and the states economy. Economic activity in the mining areas in Goa have come to a halt after the Supreme Courts mining ban.

Before the proscription, Goa used to export over 40 mt of iron ore as the low quality of ore produced in the state was not of much use for domestic steel producers. Exports from Goa used to be 70% of Indias iron ore exports. Sesa Goa before the ban used to be the largest iron ore mining firm in the private sector, with a production of about 14 mt from the state.

Over the last few years, there has been a steep decline in production and exports of iron ore. Output has come down from 219 mt in 2009-10 to 140 mt (projected) this fiscal while exports have fallen from 117 mt during 2009-10 to 17 mt in 2011-12. The industry estimates that during the current year, exports of iron ore will be less than 20 mt.

The Supreme Court, in its April 18 order, allowed mining leases under the A and B categories in Karnataka to commence operations. The court-appointed CEC had classified mining leases in to A, B, and C categories based on the gravity of illegalities/irregularities. There are 49 mining leases in category A, 66 in category B and 51 in category C. According to the apex court order, the Karnataka government has cancelled 51 iron ore mining leases in category C.