SC's K'taka mines ruling impact will show up in long term

The Supreme Court's order partially lifting the ban on mining activity in Karnataka will benefit the steel makers and mining industry there in the long-term, India Ratings said today.

 

"Supreme Court verdict...Will not result in instant gains for regional steel-makers and miners. However, the judgement augurs well in the long-term," the rating agency said in a report.

 

The apex court's recent judgement allowed opening of category-A and B mines in Karnataka, while ordering complete closure of category-C mines.

 

According to the report, iron ore production in Karnataka fell from 18 % of total production in the country in FY2009-10 to 8 % in FY2011-12 due to the ban on mining."The lifting of the ban is a major step towards alleviating the iron ore shortage in state. However...Positive impact will not been seen until the miners obtain statutory approvals which might take anywhere between 12-18 months or more," the report said.

    

 While some mining leases have expired, others will have to take various statutory approvals before resuming production.

 

As per the report, the category A and B mines are estimated to produce about 22-25 million tonnes of iron ore. Though inadequate for requirement of 35 million tonnes, it will provide some relief to those steel-makers and miners whose margins have been impacted in the past 12 months."The impact of removing the ban might be reflected fully in FY2014-15...," it said, adding that utilisation levels of companies such as JSW Steel and Kalyani Steel are likely to increase steadily in the medium-term.

 

While JSW Steel's plant is operating at 80 % of capacity, Kalyani plant is operating at 50-60 %.

     

The report also said that Sesa Goa, a Sterlite Industries group company, will also benefit as its mines fall in category-B; it should see improved profitability in FY2014-15.