Rush for mining leases as ore soars

With the price of Indian iron ore reaching an all-time high of $112 a tonne in the international market, the demand for contract mining leases has gone up significantly in the last one month.

Contract mining leases are awarded by the state governments to private companies to mine iron ore from idle or abandoned mines, the leases of which are normally held by state PSUs.

The same leases will be transferred on a contract basis to private miners by the PSUs for 8-12 months. The miners, who secure contract leases, will have to pay a royalty fixed by the state government.

Karnataka, which has the second largest proven deposits of iron ore (3.5 billion tonnes) in the country, has received 36 applications for contract mining leases in the last 25 days. "The applications are from some big iron ore mining companies as well as traders. We intend to award the leases at the earliest since Indian iron ore is in great demand," a top official in Karnataka's Mining and Geology Ministry, said.

Though Karnataka has put on hold the processing of applications for fresh mining leases, it is not averse to granting contract leases. Mysore Minerals, a PSU, holds the highest number of iron ore mining leases in the state. It has several idle and abandoned mines in iron ore rich districts of Bellary, Tumkur and Chitradurga.

"Twelve contract mining leases are in operation in the state. We intend to sanction fresh contract mining leases in 30 days," the official pointed out.

According to Federation of Indian Mineral Industries (FIMI), the demand for contract mining leases has also gone up in other iron ore rich states like Goa, Jharkhand, Chhattisgarh and Orissa.

"Though contract mining leases are not permissible under law, state governments and PSUs are granting them in an effort to earn more revenue," FIMI Advisor S B Chauhan said.