Karnataka mining in limbo

In the state that produces more than 35 million tonne of iron ore every year, accounting for more about 25 percent of the nation’s output, mining and exports of iron ore from the state have come to a complete standstill National Minerals Development Corporation (NMDC) being the sole exception owing to Supreme Court orders, environmental reasons and state policies all thanks to the explosive Lokayukta report that exposed a mining scam and implicated the Reddy brothers, who are now cooling their heels in judicial custody in Hyderabad. JSW has cut production in its Bellary plant because of paucity of iron ore and is threatening to close its plant. Karnataka has more than 175 iron ore mining leases, employing approximately 100,000 people.

As of now, NMDC, with mining operations in Bellary district, is extracting iron ore to meet the demand of the domestic industry. The NMDC mines in Karnataka produce only about 7 million tonne annually, far less than the 25 million tonne consumed by the steel, sponge iron and blast iron plants just in the state.

In July 2010, the Karnataka government imposed a blanket ban on exports of iron ore from any of the ports in the state and stopped issuing permits through the Mines & Geology Department to the miners. A state is not entitled to ban exports of minerals, and as the companies fought the issue through the courts, it took nearly a year for the exports to be lifted.

Consequently, the Supreme Court directed the Karnataka government in April to commence issuing permits for iron ore extraction and exports. But then a Bench of the Supreme Court, which was hearing the alleged violations of environmental laws by miners in Karnataka, delivered the shocking ban bringing the entire mining activity to a standstill until, as the Court has ordered, Karnataka formulates poli­cies to reclaim and rehabilitate ecology in the mining areas.

Spanner in the technology works: Reforms in the Karnataka mining industry are long overdue, and the ban on exports came at the wrong time. Now, just as technology seemed to come to the state’s rescue as the Department of Mines & Geology (DMG) set up a central server where every lease holder had to update the amount of iron ore extracted every day, the Court order has halted it. Subsequently, the DMG officials would visit each mines once every week to physically verify the stock. Once the DMG officials certified the stock, the miner could apply for e-permit through the central server after paying royalty to the state.

The process for e-permit is simple: The miner has to enter the particulars of the truck (tonnage, registration details and route) and the date. Within minutes, after calculating the royalty and deducting it for that particular trip, an e-permit is automatically generated. For every vehicle, a separate permit is generated, thereby giving no room for creating counterfeit versions. The government also plans to track the trucks using GPS.

Industry losses: According to the Federation of Indian Mineral Industries (FIMI), the apex body of the mining industry, if the ban on mining is not lifted, it will lead to a foreign exchange loss of Rs 13,000 crore to the Centre, and royalty and other fees to the state worth Rs 3,000 crore approximately. “Companies have had to retrench nearly 60 per cent of their workforce,” said Basant Poddar, Chairman-South, FIMI. “This will severely impact the local economy. The court could have been lenient with traditional miners, who have followed all environment rules.”

The Karnataka government pleaded the Supreme Court to relax its order, following which a direction has been issued to e-auction the existing inventory of 25,000 mt of iron ore for the domestic needs. But nearly 10 million tonne of the stock comprises iron ore fines and low grade iron ore (below 53 grade) and there are no takers. Such low grade iron ore stock is in demand in the international market, but the ban on exports has hampered their disposal.

Besides, the sponge iron and blast iron units, which number over hundred in Karnataka, need hard and lumpy iron ore (5 million tonne annually). This kind of iron ore is produced by miners in Tumkur and Chitradurga districts only. While the ban is in place, these units are not even in a position to procure iron ore from Chattisgarh or Orissa because it is not
economically viable for them.