Rampant illegal mining in Karnataka and other mineral-rich states, including Jharkhand and Orissa, has forced a new approach to the mining regulations that in their present format do not specify norms on grant and renewal of licences. Officials in the Union mines ministry said extended delays in grant of mineral concessions have been at the root of illegal mining in Karnataka.
It was in the interest of the mining sector that the new mining legislation should come into effect as soon as possible, otherwise a Karnataka-like situation may be reproduced in other states, said a senior ministry official. Besides laying down norms for allocation of the mining rights, the Mines and Minerals (Development and Regulation) Bill 2010 has several provisions for curbing illegal mining.
The mining-politician nexus has also prompted the Supreme Court to order a blanket ban on all mining activities in the Bellary district, which alone accounts for over 80 per cent of the state’s annual iron ore production of 45 million tonnes.
| FACTSHEET |
What MMDR Bill seeks to do: |
- Impose stricter penalties, penal actions
- Debar entities found involved in illegal mining from future allocations
- Reduce time-limit for execution of leases
- Set up special courts and give more teeth to Indian Bureau of Mines by allowing it to take direct action in cases of illegal mining
Experts said this would lead to an iron ore crisis that may not remain confined to the southern state. Friday’s Supreme Court order will bring to a halt mining operation in more than 100 leases within the state. “There will definitely be immediate negative fallout of the Karnataka mining crisis, including constrained production and resource utilisation, but in the medium-term this action will lead to cleansing of the system which will help attract world-class assets in the mineral industry owing to a conducive regulatory environment,” said Gokul Chaudhri, Partner, BMR Advisors.
India produces 218 million tonnes of iron ore annually. Karnataka, the second-largest producer after Orissa, accounts for 21 per cent of the total output. The state has already been witnessing a fall in iron ore supply to 24 mt on a yearly basis after the recent ban on mining activities was imposed, impacting 40 mining leases, earlier this year.
The apex court order was prompted by a report by a court-appointed Central Empowered Committee alleging rampant illegal mining and widespread ecological devastation in Karnataka. “The basic problem is that grant of mineral concessions takes a long time. Most state governments do not take decisions on granting concessions or renewals owing to political intervention despite the Centre’s prior approval. This is a major reason for illegal mining in Karnataka too,” a senior official from the mines ministry told Business Standard.
Karnataka witnessed an over 11 per cent fall in royalty collection from the iron ore mining industry at Rs 755 crore in FY11. So far, both the state government and the Centre have lost over Rs 10,000 crore on excise duty and Value Added Tax (VAT) collection owing to the ban on exports of the mineral from within the state since July last year. Following an order of the Supreme Court on April 5, the mineral-rich state had agreed to lift the ban and had asked for 15 days to raise the necessary infrastructure to check illegal mining.
However, exports of iron ore are yet to begin from the state. Karnataka’s ban on iron ore exports have already resulted in an 18 per cent decline in India’s exports of the mineral between April 2010 and February 2011.
The MMDR Bill 2010 has several provisions for curbing illegal mining, including stricter penalties, debarring an entity found involved in illegal mining from future allocations and penal actions and trial of officials. “The mining bill also talks about reducing the time limit given for grant of concessions or execution of mineral leases. In case the limit is not met, the tribunal will take action by issuing directives leading to penalising of officials,” the mines ministry official said.
The Bill proposes setting up special courts in states for prosecution of mining-related offences and giving more teeth to the Indian Bureau of Mines (IBM), which serves as a sectoral regulator, by allowing it to take direct action in cases of illegal mining.
