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With the Supreme Court ordering the shutdown of mines involved in irregular mining in Odisha on May 16, the Indian steel industry is staring at an acute shortage of iron ore. While imposing restrictions on the operation of 26 mines, the leases of which have not been renewed for decades, the court had asked the Odisha government to decide within six months on whether or not to extend their leases. The imbroglio is, however, likely to continue longer than that.
After the court order, a high-powered committee of the state government recommended the renewal of the leases of 13 of the 26 mines - provided they fulfilled three conditions. One, pay the penalty for excessive mining. Two, get permission for total diversion of the forest land inside the lease area, instead of seeking forest diversion in parcels. And three, get approval for using tribal land.
The miners hope to get around the first condition by filing an affidavit stating that they would pay the penalty if the court orders them to do so, given that the matter is sub judice. (Odisha had imposed a fine of Rs 65,500 crore on over a hundred miners for extracting more than the permitted ore between 2000 and 2010).
It's the other two conditions that have the miners worried. Earlier, mine-owners would seek diversion of forest land in parts, as and when they required the area within the lease boundary to expand their mining operations. Now, according to a circular issued by the Union ministry of environment and forest, it is mandatory for them to get the ministry's nod for diversion of the entire forest land within their lease area. "Getting a clearance for the entire forest land in one go will be a Herculean task," says a mine-owner. "Given the pace at which forest clearances are given, this will take three to five years."
Getting approval for using tribal land within the lease area is another big concern. Since 2002, the Odisha government has disallowed sale or leasing out of tribal land to non-tribal persons. Hence, those mine-owners who had not taken possession of the tribal land within their lease boundary before the cut-off date and were mining the land by paying a rent to the tribal land-owners now find themselves in the soup. "It is virtually impossible for them to get approval for using tribal land falling within their lease boundary," says an official working with a mining company. "Given these stiff conditions, this is going to be a long battle."
Steeling for loss
The ban has brought iron ore output down by 40 million tonnes, severely impacting the supply of raw material to the steel industry. The worst affected are two of India's largest steel producers - Tata Steel and state-owned Steel Authority of India (SAIL). Tata Steel's seven captive mines - Joda East, Joda West, Khandbandh, Bamebari, Katamati, Manmora and Guruda - have gone off operation. The company used to source about 60 per cent of the iron ore it needed from these mines. Now it is weighing the option of importing ore to meet its needs, says a source.
Two mines of SAIL - Bolani and Barsuan-Kalta - have also suspended operations. SAIL was sourcing iron ore for its Rourkela and Durgapur plants from these mines. Though SAIL Chairman C S Verma has said the company has enough stock to run its plants, sources say if the problem persists, it might be forced to either cut production or import ore.
The hit taken by merchant miners, who were supplying iron ore to different standalone steel plants, besides exporting to China, has choked the ore supply channel.
"Odisha caters to nearly 60 per cent of the domestic steel industry's iron ore demand. If you ignore the material meant for export, the fall in ore supply from Odisha is likely to impact roughly 20 million tonnes of steel production across India," says B K Mohanty, former state mines director. The impact on the domestic steel industry might encourage steel imports, fears Assocham Secretary General D S Rawat. He calls for an immediate ban on ore exports to deal with the shortfall.
The shortage has already pushed prices up. While pellet rates have risen by 10 to 12 per cent, merchant miners propose to increase iron ore prices by about 20 per cent. Before the crisis, iron ore rates (ex-mines) were in the range of Rs 1,900 to Rs 2,200 per tonne for fine and Rs 3,500 to Rs 4,500 per tonne for lumpy ore, depending on the grades.
A minefield of issues
Most of the mines in Odisha, which made windfall profits following the boom in metal prices since 2001, were operating without statutory clearances under the Environment (Protection) Act, 1986 and the Forest (Conservation) Act, 1980. They were also functioning without their leases being renewed. After the media highlighted these anomalies, a number of public interest litigations were filed. In 2010, the Justice M B Shah Commission was constituted to probe illegal mining in the state. The state government then shut down 102 mines.
Eventually, only 56 iron ore and manganese mines, which had valid forest and environment clearances, were left. However, 40 of these mines were operating under the deemed extension clause of the Mineral Concession Rules (MCR), 1960 as their lease had expired. While 14 of them were pending first renewal, the remaining 26 were waiting for second and subsequent renewals. According to Rule 24A (6) of MCR, a lease is deemed to have been extended if the state government does not dispose of the renewal application before the expiry of the lease.
The Supreme Court, while acknowledging the lessees' right of first renewal for a maximum period of 20 years, however, denied such a right to properties seeking second and subsequent lease renewals. It said, "The provision of deemed renewal in Rule 24A (6) of the MCR, 1960 is not available for the second and subsequent renewals of a mining lease considering the language of Section 8 (3) of the Mining and Minerals (Development and Regulation) Act, 1957. Hence, these 26 leases cannot be allowed to operate until the state government passes express orders … after it forms an opinion that in the interests of mineral development, it is necessary to renew the leases".
Tug of war
Mine-owners accuse the state government of delay in processing their 'renewal of mining lease' applications, despite them having submitted the documents well in time. But the government has a different view. "Most of the renewal cases are of quasi-judicial nature, hence it is not easy to decide them swiftly," says a senior official at the Odisha steel & mines department. "Besides, according to law, the government has to ensure that the renewal of the lease is in the interest of developing the state's mineral wealth. How can a private mine-owner booking windfall profit by selling the mineral and not going for value addition in the state and also not paying penalty for extracting excess quantities of ore be viewed as an act of mineral development?" asks the official. "All these issues need to be resolved. That's what is causing the delay."
Odisha Chief Secretary J K Mohapatra declines to comment on the time it will take to resolve the impasse. But he says "the cases will be cleared within the time (six months) stipulated by the Supreme Court or even before that." How this feat will be achieved, given the face off between the mine-owners and the government, that, he doesn't explain.
GOVT TAKES A HIT
The state government too is staring at a loss of Rs 2,000 crore in revenue annually from royalty on minerals extracted from the mines. Meanwhile, thousands of workers who have been rendered jobless since the Supreme Court order have launched an agitation demanding payment of full wages till the mines remain closed
LOSSES ABOUND
* 26 No of iron ore/manganese mines closed after SC order
* 40 million tonnes Annual production loss
* 20 per cent Rise in input cost for steel companies
* Rs 2,000 cr Per annum loss of royalty revenue for state government
* Rs 65,500 cr Amount of fine imposed on mines for excess production
MAJOR MINES IN TROUBLE
CAPTIVE MINES
- TATA STEEL: 7 mines
- SAIL: 2 mines
- KJS Ahluwalia: Nuagaon iron ore mines
- AMTC: Narayanpasi and Mahulsukha iron ore mines
- RUNGTA MINES: Kolmong and Kantharkoida
- OMC: Kurmitar Pahar iron ore mines
