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Business News/ Companies / Steel firms, miners fear hike in ore prices, imports
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Steel firms, miners fear hike in ore prices, imports

The consequences of an SC decision to act on the Commission's report has steel makers and miners worried

The 180 miners and steel makers named in the Commission’s report are worried that the Supreme Court, which is hearing a case on illegal mining in Odisha, could take the findings into account. Photo: Abhijit Bhatlekar/MintPremium
The 180 miners and steel makers named in the Commission’s report are worried that the Supreme Court, which is hearing a case on illegal mining in Odisha, could take the findings into account. Photo: Abhijit Bhatlekar/Mint

Mumbai: Steel manufacturers and miners with operations in Odisha fear iron ore prices could rise if the Supreme Court decides to act on the Shah Commission’s report on illegal mining in the state.

The justice M.B. Shah Commission report on illegal mining of iron and manganese ore in Odisha, tabled in Parliament on Monday, said 80% of the mines in the state were illegal and that around 59,000 crore worth of ore was mined illegally between 2008 and 2011.

The report asked for a Central Bureau of Investigation (CBI) inquiry. In the action taken report, the central government sidestepped the issue of having CBI investigate the case; said the environment ministry would institute measures to prevent degradation of the environment on account of mining (and listed the measures); and passed the buck to the state.

In the same report, the state said it had already issued notices to several companies, denied that the instances of illegal mining were as rampant as suggested by the commission’s findings, claimed no politicians were involved in any of the instances of illegal mining, and said there was no need for an investigation by CBI.

However, the 180 miners and steel makers named in the Commission’s report are worried that the Supreme Court, which is hearing a case on illegal mining in Odisha, could take the findings into account.

Tata Steel Ltd, Steel Authority of India Ltd (SAIL), Aditya Birla Group’s Essel Mining and Industries Ltd and Jindal Steel and Power Ltd (JSPL) have operations in Odisha.

The Supreme Court on Monday said it would hear legal activist and Aam Aadmi Party leader Prashant Bhushan’s plea seeking a CBI investigation into illegal mining in Odisha on 3 March.

“In case any adverse action is taken by the Supreme Court, iron ore and manganese ore availability and consequently the production of sponge iron, pig iron, ferro alloys and steel will be severely affected," said a spokesperson in JSPL, adding the company did not violate rules.

“Hundreds of small, medium and large industries not only in Odisha but in adjoining Chhattisgarh, Jharkhand and West Bengal will be closed down or their production will be drastically cut down," this person said.

Spokespersons of Tata Steel and Essel said they would need to study the entire report before commenting. A spokesperson for Tata Steel said that only one part of the report had been tabled in Parliament on Monday.

“We have followed all the rules and regulations in force," said a spokesperson of SAIL. “We are examining the report and in due course, we will react to it."

Tata Steel has the largest mining operation in the mineral-rich state with seven iron and manganese ore mines and a new 6 million tonne (mt) integrated steel plant in Kalinganagar.

Three of its mines—Joda East, Khondbond and Katamati—produce about 8-10mt of iron ore that comprises about 50% of the iron ore input for its Jamshedpur steel plant in Jharkhand.

The other mines—Joda West, Guruda Tiring Pahar, Malda and Bamebari—have manganese ore, which is used in the same Jamshedpur plant.

SAIL owns three captive iron ore mines, Bolani, Barsua and Kalta. JSPL owns one captive iron ore mine, Tensa.

In 2010, M.B. Shah was asked by the central governmentto study illegal mining in iron and manganese ore across India. Since then, the commission has submitted an interim report on illegal iron ore mining across India, and another on illegal iron ore mining in Goa.

Mining in Karnataka was banned by the Supreme Court in 2011, although this was allowed to resume, in stages, in 2013. Full production in the state is yet to resume. The court also stopped mining in Goa in 2012 and continues to hear a case on this.

Steel and mining executives fear a similar fate for Odisha, and say this could cripple the industry. In 2013-14, Odisha is expected to produce 70mt of iron ore, 45% of India’s production.

“The Supreme Court can act without regard to the economic situation," said Rakesh Arora, managing director and head of research at Macquarie Capital Securities (India) Pvt. Ltd, “but Odisha is different maybe because much of the ore produced is for captive use and also the state government there has taken a lot of clean-up measures in the last few years."

Many companies are already fighting a fine imposed by the Odisha government in 2012. The fine was stayed by the mines tribunal under the Union mines ministry.

Tata Steel has been fined 5,900 crore by the state, Mint reported on 6 January 2013. But this matter may take years to settle with the possibility of the companies filing legal petition in the courts in case they are not satisfied with the mines tribunal’s ruling, company executives said.

Their immediate concern is the Supreme Court case.

“We are not clear what the objective of this case is, but if they ask for a complete ban on mining, it will be very harmful for all of India’s economic growth," said one executive working for one of the companies that operates in Odisha. He asked not to be identified.

“Employment will be hit in the state, besides almost all steel companies will face a shortage of iron ore which many simply can’t import as logistics don’t facilitate it. In such a scenario, will India have to import more steel?"

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Published: 12 Feb 2014, 12:00 AM IST
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