SC allows ore mining in Karnataka with caveats

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Apr 21 2012, 09:19am hrs
Two-thirds of Karnatakas iron ore mines might resume operations over the next few weeks with the Supreme Court on Friday partially lifting the ban on mining by private operators in three districts of the state imposed last July-August following reports of rampant illegal mining and environmental degradation.

However, problems are far from over for companies like JSW Steel and Adani Enterprises as the SC-appointed Central Empowered Committee (CEC) on Friday recommended a CBI probe into the alleged massive illegal mining activities in the state said to be permitted by then chief minister BS Yeddyurappa and the role of the two companies.

The court said mines of more than 50 hectare can restart production after their environmental plans are approved by the ministry of environment and forests.

The industry was generally upbeat about the decision. Steel companies without captive iron ore mines which have been impacted by the cessation of mining activity in the state over the last eight months might benefit from increased availability of ore and reduced logistical costs.

Now, the Karnataka government will decide the amount of iron ore that each mine can produce up to a limit set by the SC, said a lawyer representing appellant Mineral Enterprise. We expect mining to resume in the next two weeks in about 4-5 months, mining in the entire state might resume, said a spokesperson of the Federation of Indian Mineral Industries.

The CEC also recommended the CBI should look into linkages between two donations worth R10 crore during March 2010 made by South West Mining, a Jindal group company to Prerana Education Society set up by the close relatives of Yeddyurappa, and alleged favours shown to JSW in respect of Mysore Minerals (MML).

The impact of the CEC report will be positive for the domestic steel and sponge iron sector. Since exports are now difficult, the additional production will go to the domestic sector which has been facing shortages for quite some time, said Rana Som, former CMD of NMDC.

Karnataka accounted for a fourth of Indias iron ore output until the SC order brought mining activity there to a virtual halt. Except NMDC, which is already permitted to mine a small amount of 1 million tonne every month, no other company is currently operating their mines in the state.

JSW sources 40% of its iron ore requirements from NMDC, but the balance is bought from private miners in Karnataka. So, the resumption of the mining would enable the company among other firms like Essar and Ispat to source ore from Karnataka miners.

The CEC also said these donations appeared to be quid pro quo for JSW receiving large quantities of illegally mined minerals.

The CEC also recommended that the land purchased by Yeddyruppa's two sons for Rs 40 lakh in 2006 and sold to South West Mining for Rs 20 crore in 2010 be looked into by the investigating agency.

The land was notified for acquisition for public purpose and then de-notified and permission granted for changing use from agricultural to non-agricultural purpose and subsequently sold to South West Mining. This, the CEC believes, prima facie involves... serious violation of relevant act and procedural lapses and prima facie misuse of office of the then chief minister of Karnataka, thereby enabling his close relatives to make windfall profits and raises grave issues relating to undue favour, ethics and morality.

The panel has also recommended to the apex court that the CBI should also investigate payments made by the Jindal mining company to two firms owned by close relatives of the former Karnataka chief minister.

The report pointed out that the net profit (after tax) of South West during 2009-10 was only Rs 5.73 crore. It has also mentioned that neither South West or any of the Jindal group firms had made such a large donation to other trusts or societies.

The probe into the role of Adani Enterprises is also recommended for the alleged illegal export of iron ore from Belekeri Port after exports were banned in the state.

However, In Bangalore, a defiant Yeddyurappa pointed out that this was still a recommendation and not an indictment. I have full faith in the judiciary and I will get justice, he said.

Counsel Prashant Bhushan demanded the investigation, citing a report by former state lokayutka Santosh Hegde. Hegde in a 25,000-page report to the government on July 27, last year had named political leaders, officials and companies, including JSW and Adani, involved in a mining scam that may have caused the revenue loss of $3.1 billion. Earlier, JSW and Adani had denied the allegations.

Adani had said that it had never had any interest in mining iron ore and it is one of the four operators providing services at Belekeri port in Karnataka and has followed rules and regulations of the port and customs authorities.

In 2011, the SC banned iron ore mining in Bellary, Chitradurga and Tumkur districts of Karnataka citing environmental violations and asked the Centre to carry out an environmental impact assessment.