Uncertainty over; but no immediate relief for steel mills

The SC decision has paved way for reopening of Category B mines

The Supreme Court’s landmark decision to allow reopening all Category A and Category B mines in Karnataka has come as a big relief to the mining sector, and the ore-starved steel industries in Karnataka.

The judgement is expected to put an end to the uncertainty surrounding the mining sector in the state and will result in a steady supply of raw material to the ore-starved steel mills in the long run.

Though the Apex Court has paved way for reopening of the Category B mines, it will not result in supply of iron ore in the immediate future as mining leases of many large companies have expired and they cannot start until they secure all regulatory approvals afresh.

For example, Sesa Goa and MEL, which have large lease holdings in Category B will not be able to resume mining as their leases have expired.

Sesa Goa has a capacity of 2.29 million tonnes approved by the CEC, while MEL has an approval to produce 420,000 tonnes in one of their mines in Category B.

With the Apex Court ordering the cancellation of 49 mining leases in the Category C, only 117 mining companies, from both Category A and B, are left in the business. Of these, many mines’ leases have expired and renewal process normally takes about a year.

Till now, the CEC has approved ‘reclamation and rehabilitation plans’ (R&R Plans) for 57 mining leases of which 25 are from Category B, including Sesa Goa, MSPL, MML, MEL and SKME among others. The approved mines in Category B can produce about 7.34 million tonnes, while 20 mines in Category A, put together, produce about 2.5 million tonnes. Of these, eight mining firms have already started production with a combined capacity of 2.5 million tonnes.

“There are many smaller mining companies that may not start mining because it would not be feasible for them to operate with smaller capacities fixed by the Central Empowered Committee (CEC). Considering these facts, the industry can mine barely 15 million tonnes during fiscal 2013-14,” R K Sharma, Secretary General, Federation of Indian Mineral Industries (FIMI), said.

The steel industry can look to 15-17 million tonnes of iron ore this year assuming NMDC produces about 8 million tonnes. Though the NMDC was allowed to produce 1 million tonnes per month, they could hardly achieve 700,000 tonnes a month.

For 2014-15, production is likely to go up to 25 million tonnes and reach the 30 million tonne mark in 2015-16 provided most mines in Category A and B secure all approvals and resume mining, Basant Poddar, Managing Director, Mineral Enterprises Limited (MEL), said.

Steel companies like JSW Steel, Kalyani Steel, BMM Ispat will have to wait some more to normalise operations. These mills currently produce only 50% and 80% of their capacities.

“We are very happy with the Apex Court judgement as it will lead to normalisation of mining operations. The uncertainty is over for us. We hope to get about 20-21 million tonnes of iron ore by the end of this year. As far as JSW Steel is concerned, we will achieve 90% of the capacity utilisation this fiscal,” Vinod Nowal, Director and CEO, JSW Steel said.

Once the mining industry touches the 30 million tonne per annum mark, the company will also reach 100% capacity at its Vijayanagar Steel Plant in Bellary district, he added.

“The SC judgement is a step in the right direction and is a good development for the country. It is a big relief for us and help improve socio-economic conditions in Bellary district,” Rahul N Baldota, executive director, MSPL Limited, said.

R K Bansal, CEO, Sustainable Mining Initiative of FIMI, said, “Regulatory processes are already slow in our country and with additional factors like the R&R Plan coming into the picture, it would take more time for mining firms to implement those Plans and secure all statutory clearances.”