Mumbai: After a hiatus of more than three years, Vedanta Ltd sent its first iron ore shipment from Goa to China on Monday amid a slump in global iron ore prices and falling demand in that country.

Vedanta shipped 88,000 tonnes of iron ore, making it the first iron ore mining company to start operations in Goa after three years due to a ban on mining, said a statement issued by Vedanta on Monday.

“This achievement of resuming operations after three years of suspension on mining activity is with multiple/significant challenges. Iron ore prices are in free fall and are nose-diving. We also are faced with an arduous task of recovering our fixed costs and look forward to a complete utilization of the manpower and resources. We are positive that we will overcome the tough times with the support of the government and all other stakeholders of the industry and well positioned to achieve our production target," said Kishore Kumar, chief executive officer, Vedanta Ltd’s Iron Ore division, in the statement.

The iron ore division expects to mine 5.5 million tonnes of ore from its mines in Goa and export it as mines in Goa have an iron content (Fe content) of 58% and below, making it unsuitable for steelmakers in India.

The company has also sought a hike in production capacity, which is now capped at 20 million tonnes a year in the state by the government.

Issues of removal of export duty for low-grade iron and dumping of overburden and waste outside the lease area need quick resolution if the mining industry has to go full steam in Goa, Kumar added in the statement.

In the past, analysts have said that even if Vedanta starts mining and exporting ore from Goa, it will not be profitable for the company due to a raft of taxes that are levies on mining companies in the state.

Mining in Goa attracts a 10% export duty on below 58% Fe grade iron ore, a 15% royalty paid to the state, a 5-15% levy in the form of a district mineral foundation tax and a 10% levy on the export price of iron ore under the Goa Mineral Ore Permanent Fund Scheme, according to a publicly available data shared by the Goa Mineral Ore Exporters’ Association (GMOEA).

Mining in Goa was stopped in September 2012 when the state government banned all mining activities in response to a report by justice M.B. Shah Commission which alleged rampant illegal mining in the state.

The Supreme Court upheld the ban a month later. It lifted the ban in April 2014 on the condition that all mining leases have to be renewed and fresh approvals from the environment ministry and the state pollution control board have to be sought.

The state government finally revoked its order in January 2015 and the final permission for mining was given in July when mining leases were renewed and pollution control board gave its nod.

“The industry has suffered and so have the people of Goa due to the mining ban. The industry still faces many hurdles of taxation, dumping outside lease area, and increase in production capacity. The need of the hour is the support and cooperation of all other stakeholders, especially the truck and barge owners to work towards attaining complete mining in Goa. I am positive and confident that very soon we will be able to see the mining industry resume business in full swing," Goa chief minister Laxmikant Parsekar was quoted as saying in the Vedanta statement.

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