The order, however, has not convinced the markets that a revival in the sector is due soon. While stock prices of Sesa Goa, one of Indias leading miners of iron ore went up by 0.58 per cent, that of JSW Steel, producer of downstream steel, fell 2.18 per cent on the BSE. While more mines can be reopened, the companies will have to meet the needs of reclamation and rehabilitation before they can do so.
Most companies are, however, confident the Court order will be a precursor to the removal of the ban in other states too, once it starts hearing the cases again after a hiatus of six months. Since October last year, reports by the Supreme Court-appointed MS Shah committee has led to the imposition of total ban on mining in Goa and restrictions in Orissa, following the ban in Karnataka.
Seshagiri Rao, joint managing director, JSW Steel, in a statement sent to the media, noted the judgement will open up (more) in Karnataka region and will have a positive impact on the steel sector and the Indian economy.
Sesa Goa results are expected next week and so its managing director PK Mukherjee did not take any calls. The company runs one mine in Chitradurga district of Karnataka with a licenced capacity of 2.29 million tonnes against the original sanction of 6 million tonnes.
Government data on the mineral sector shows in the April to February period of 2012-13, the sector has grown only 2.6 per cent compared to a 5.2 per cent in 2011-12.
Cumulatively, steel production has slipped to a 2.1 per cent growth in the same period compared with a 10.7 per cent rate in 2011-12. Half of Indias pre-ban production of 240 million tonnes was exported and about a third of it illegally from ports in Karnataka and Goa.
JSW Steel is Indias largest domestic steel producer but has no mines. The company buys ore mostly from Karnataka for its 10 million tonnes plant at Vijaynagar in Bellary.
It was hit badly when in 2011 the Supreme Court banned all mining operations in the districts of Bellary, Tumkur and Chitradurga citing environmental violations and loss to the state exchequer through illegal mining.
The plant was running at 30 per cent of its capacity, through most of last fiscal buying ore through auctions from sole supplier NMDC. On Thursday, NMDC shares fell by 2.48 per cent.
The rescinding of the ban on the mines will free up about 60 mines for production in the state, estimates Federation of Indian Mineral Industries (FIMI) secretary general RK Sharma. He told agencies the order will lead to production of an additional 10 million tonnes of ore. But he complained that cancellation of leases on 49 mines in Category C was too harsh.
He was referring to the classification of iron ore mines in Karnataka made by the Lokayukta Santosh Hegde.
The basis was the level of illegality involved in their operations. Category C is the worst. Of the 166 mines that were banned by the court, 21 were in Category A, 72 in Category B and the rest 49 in Category C. Another 24 mines were abandoned. JSWs Rao said as Indian economy is expected to get back to growth mode, the opening up of mining will enable raw material linkages for further investments in steel sector in Karnataka region.