New Delhi: The Supreme Court on Friday allowed state-owned NMDC Ltd to mine as much as 1 million tonnes of iron ore per month in Karnataka’s Bellary district to meet the needs of local steel makers.
The apex court also ordered a thorough assessment of the environmental damage in the area by experts. Last week, the court had imposed a blanket ban on iron ore mining in Bellary.
• Supreme Court Latest Order(PDF)
About 27.7 million tonnes of Bellary’s production is consumed locally every year, according to an estimate by the court-appointed Central Empowered Committee (CEC).
“In order to balance the environmental concerns with economic development and keeping in mind the mandate of Article 21 of the constitution, including inter-generational equity, we are of the view that in extra-ordinary circumstances, NMDC alone be allowed to operate its mines to the extent of providing one million tonnes per month commencing from 6 August, 2011,” ordered the court’s forest bench led by Chief Justice S. H. Kapadia.
One of NMDC’s two mines in Bellary had been restrained by an order of the Karnataka high court in a different case, which the Supreme Court lifted on Friday.
NMDC said it would try to meet the requirement, but it looked difficult.
“Donimalai mines will not be able to produce 1 million tonnes of iron ore in a month. It can deliver 5-6 million tonnes in a year. The rest will have to come from Kumaraswamy, which the Supreme Court has cleared today,” Rana Som, NMDC’s chairman and managing director, said in an interview. “If the Supreme Court has ordered, we must try to get it.”
Mining industry blames Reddy Bros
The counsel for the Federation of Indian Mineral Industries, Dushyant Dave, asked the court not to tar the entire industry with the same brush and said many of the industry’s members were not involved in illegal mining.
“The Lokayukta report has damned the entire industry. Who could have stopped the Reddys in this country? We are suffering because of others,” Dave told the court.
The bench rejected Dave’s pleas and sustained the ban on all private mining in Bellary. It also told NMDC’s counsel to check if the state-run company could meet the production requirement.
The bench suggested that if NMDC was not able to meet demands from its own mines, then NMDC would operate private mining leases on behalf of the miners.
Dave objected to private miners’ leases being handed over to NMDC. “This is nationalisation,” he said. “Where will they get the equipment, manpower?”
“It is not legal or illegal. This is about Article 21, intergenerational equity, sustainability. Profits will come later on. Production concerns will come after environmental concerns,” said the court.
The court permitted NMDC to operate after the Union ministries of environment, steel, mines and commerce responded to the court’s questions last week on the iron ore demand from the domestic steel industry. The court chose to go with the CEC’s estimate of demand for ore as it was the highest amongst the projections given by the Union ministries and experts.
“NMDC will sell the production to the states in consultation with Ministry of Steel,” ordered the court.
In 2010-11, about 26 million tonnes of iron ore from Bellary was used by domestic industry in Karnataka, said the CEC.
The court directed the ore mined by NMDC will be used only for local consumption and cannot be exported. It also revised the royalty rate from 10% on the pit head rate fixed by the Indian Bureau of Mines to 10% of “current market value” of iron ore.
The differential from the new royalty is to be accounted for by the Karnataka government and used for rehabilitation and restoration of the area.
A senior official in the Ministry of Mines said on the condition of anonymity that the court’s order to raise royalty was a worry given the mining rules say royalty is charged at 10% of the price of the iron ore at the pit head of the mine. Also, he said the shortage of iron ore will continue to persist as NMDC may not be able to ramp up production to meet the industry’s demand.
“We may have to technically worry about how the royalty will be calculated in terms of the rules. But the real issue of shortage will continue to dog the steel plants in and around the state,” he said.
Mines ministry officials would meet their steel ministry counterparts to consider the court’s order as NMDC falls under the purview of the latter, the official said.
The official in the mines ministry said that the method of calculating royalty has been enumerated in rule no 64 of the Mineral Concession Rules and it says it is to be charged on the price of iron ore at the pit head of the mine or the price of unprocessed iron ore if it is outside of the mine.
The official said that the pit head price is set every month by Indian Bureau of Mines, which polls 10 private miners and arrives at an average price. The latest price, he said, was at Rs 1,300 a tonne in Karnataka. This means Bellary miners are currently paying Rs 130 per tonne as royalty.
Pit head prices are different in each state as it is linked to the demand from the steel sector. In Orissa, the largest iron ore producer, the pit head price is much higher, he said.
Macro environmental study
The court also directed a macro-level environmental impact assessment to determine the damage to the whole area because of mining, an initial report of which will be submitted in three months. The court will then decide on whether to further relax last week’s blanket ban.
The environmental impact assessment will be made by the Indian Council of Forestry Research and Education in collaboration with the Wildlife Institute of India and Forest Survey of India, while the Federation of Indian Mineral Industries will give inputs to the experts.
Separately, the Karantaka government was asked to submit a rehabilitation and restoration plan for the area within three months