Home / Industry / Manufacturing /  Many Karnataka iron ore mines still shut, despite Supreme Court nod

New Delhi: A year after the Supreme Court permitted 90 iron mines in Karnataka to be reopened, a large number remain shut pending clearances, and production remains considerably lower than the 30 million tonnes per annum (mtpa) limit prescribed by the court.

Delays in a host of regulatory clearances like mining leases, pollution control permits and environmental clearances have put on hold operations in the state. “In total, 108 mines (including 18 mines in September 2012), were allowed by the SC to be reopened after the mining ban in 2011, but presently only 25 are operational," a mines ministry official said, requesting anonymity.

The apex court banned mining of iron ore in Karnataka in July 2011 following allegations of illegal mining that had resulted in large scale abuse of the environment. Subsequently, the court ordered resumption in mining activities in Karnataka in April 2013 with a cap on production of 30 mtpa after July 2011. The 25 mines operational in the state, including two of public sector National Mineral Development Corp. (NMDC), have a production capacity of just 19.8 mtpa.

Before the ban took effect in July 2011, Karnataka used to produce about 45 mtpa of iron ore, making it the country’s second largest producer of the steel-making commodity.

Mining company officials in Karnataka say they are unable to meet the iron ore demands of steel producers owing to the production limit.

R.K. Bansal, additional secretary general at industry lobby Federation of Indian Mineral Industries (FIMI), said demand for iron ore from the mines in Karnataka is in the range of 30-35 mtpa, including from neighbouring states like Andhra Pradesh and Tamil Nadu.

Because of the low production, steel companies are looking at other states to meet their demands. “Some steel companies are forced to purchase steel from other states like Odisha," Bansal said.

Steel producers allege the shortages also pushed up iron ore prices in recent e-auctions. In February, steel units moved the Supreme Court against alleged price distortions, but the plea was rejected.

A report by research firm OreTeam Research said iron ore sales volumes were lighter in February owing to higher costs and slow steel demand in Karnataka. In February, Karnataka sold 2,514,000 tonnes of iron ore as compared to 4,689,000 tonnes in January.

The Supreme Court-appointed Central Empowered Committee (CEC) has given reclamation and rehabilitation (R&R) approvals for 83 mines in Karnataka, but 60 of these are still awaiting various clearances.

The CEC divided the mines into categories A, B and C, depending on the level of illegalities. Of the present 19.8 mtpa production capacity in Karnataka, NMDC’s two mines contribute about 9 mtpa, and the remaining comes from 23 mines owned by private miners. Some of the private miners operating in Karnataka are Sesa Sterlite, MSPL Ltd, B Kumaragowda & Sons, and Vesco Group, said FIMI officials.

A Sesa Sterlite official said the company is fine with the slow resumption in mining activity as long as the clean-up act is completed and past illegalities are not repeated.

U.R. Acharya, director (commercial), at Bangalore-headquartered Sandur Manganese and Iron Ores Ltd, said several sponge iron companies have shut and steel companies are working under capacity due to the shortfall in iron ore.

“From a peak production of around 60 mtpa in 2007-08, the production in the state has fallen sharply to around 20 mtpa now. The cost of banning mining owing to a few illegal miners has been much more severe than what was lost on account of illegal mining," he said.

Kalpana Jain, senior director at consulting firm Deloitte India, said the delays in getting regulatory clearances have acted as a dampener in India attracting foreign direct investment in mining, despite 100% FDI being permitted in the sector.

South Korean steel maker POSCO called off a project in Karnataka in July last year because of delays in receiving iron ore mining rights and opposition from residents that had held back land acquisition.

Of the 108 mines asked to be reopened by the apex court, 45 fall under A category mines that had non-working leases with marginal illegality, 63 fall under the B category of mines having some level of illegality with 10% of the mining pits outside the lease area. 49 were declared as C category where gross violations were conducted and thus are ineligiblefor mining activity.

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