Iron ore mining in Karnataka: Challenges massive, but here is what will bring respite

Published: January 15, 2018 4:00:58 AM

In a major relief to steel and mining industry, the Supreme Court (SC), on December 14, increased the cap on the production of iron ore from 30 million tonnes per annum to 35 million tonnes per annum for the ‘A’ and ‘B’ category mines in Karnataka.

Iron ore, Iron ore mining, Iron ore Karnataka, Supreme CourtIn a major relief to steel and mining industry, the Supreme Court (SC), on December 14, increased the cap on the production of iron ore from 30 million tonnes per annum to 35 million tonnes per annum for the ‘A’ and ‘B’ category mines in Karnataka.(Image: IE)

In a major relief to steel and mining industry, the Supreme Court (SC), on December 14, increased the cap on the production of iron ore from 30 million tonnes per annum to 35 million tonnes per annum for the ‘A’ and ‘B’ category mines in Karnataka. The SC stated in its verdict that the ground situation, including significant improvements in the infrastructure, had changed and even the “assessment of reserves has changed over the years and today the iron-ore reserves across Karnataka, comprising haematite and magnetite reserves, is to the tune of 10.071 BMT (billion metric tonnes) and so the solution had to be realistic.” The verdict also shows that the SC had duly taken into consideration scientific and technical parameters, mining reserves, dumping areas, evacuation infrastructure, etc, besides industry and economic development impact.

What the SC order stated:

• As per the recommendations of CEC, overall cap in Karnataka for A & B category mines increased to 35 mmtpa
• Annual production cap for the district Bellary has been enhanced by 3 mmt to 28 mmt, and 7 mmt for Chitradurga and Tumkur
• As recommended by CEC, NMDC and MML will operate with maximum annual production ceiling of 12 mmt and 2 mmt for the year 2017-18, respectively, and thereafter from 2018-19, these will also operate at the MPAP limit as per the approved R&R Plans, subject to district cap
• The existing ceiling of 5 mmt fixed for ‘A’ & ‘B’ mining leases for districts Tumkur and Chitradurga has been enhanced by 2 mmt to 7 mmt
• As far as C-category mines are concerned, the SC, after considering the submissions that C-category mines may become operational only after 18 months and many A & B mines will expire around 2020, has refused to grant any separate allocation for C-category mines at this stage. Separate cap for C-category mines will be worked out later independent of the cap increase for A & B mines. At present, the C-category mines becoming operational will work as per their R&R capacity
• Explicit direction to consider pending proposals for enhancement of MPAP without further delay (pg.34)

The steel and mining industry welcomed the verdict. This is probably the first time a scientific methodology has been adopted for determining the limit to mine iron ore on the basis of the three main factors—reserves and resource, dumping capacity and transportation capacity. The central empowered committee approached the subject in the utmost professional manner and discharged its responsibilities like a pure technical advisory. However, a few industry quarters have raised the concern that dual capping by the SC, ie, the individual cap of mine and proportionate reduction within the zonal allocation, may hinder the organic growth of industry. There is a clear indication that a robust sustainability framework has been spelt out. This will encourage investment in exploration, planning for better dump and waste management and improved logistic infrastructure. The cascading effect of all such measures will augment the supply of iron ore to the local steel manufacturing units to feed their current operation and increase investment in the region for more steel plants.

However, steel mills are selective in buying iron ore in the e-auction and still resort to procurement of ore from far situated states like Odisha. Iron ore is also imported from Australia and Brazil at high prices. With increased iron ore production limit, such practices can severely affect the miners. When such a scenario arises, what is the remedy? Another order by the SC disallows export of inferior grade iron ore not purchased by domestic industry from the state of Karnataka. However, there is no restriction on its finished product, (which is steel), for exports. This is a complete distortion and does not provide a level playing field between the miners and the user industry. Why is it that the steel industry can import and export while the same cannot be applied to iron ore when there is a surplus? Our country’s credentials as free-market economy and consequent attraction of investments may be dented due to this anomaly.

The mining industry remains focused on tackling the challenges that manifest the business in all forms, such as e-auction, export ban, forest clearance permits and other regulatory hurdles. It still has to straddle a large gap between gearing up for the optimism and promise that the verdict holds to meandering its way out with umpteen regulatory clearances as part of routine business. The industry looks forward to enhanced transparency through digitisation and technology to end impractical methods. This is where the Indian Bureau of Mines can step in and rightfully perform its function of a national technical regulator of the mining sector. It can proactively develop solutions to the demands and problems faced by the industry. Fund allocation for the various infrastructure projects envisaged under CEPMIZ for the Karnataka mining region can be utilised from the idle funds collected from the miners on account of special purpose vehicle. Despite the SC verdict coming as a breather, the mining industry continues to stare at many challenges. While the sustainability framework, rules/penalties will act as deterrents to ensure miners operate responsibly, greater transparency and practical solutions alone shall bring in the much needed respite.

-Manoj Kumar

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