Ore lore

Ore lore

The obvious conclusion to the Supreme Court lifting the two-year ban on iron ore mining in category A and B mines in Karnataka state—which has had a turbulent relationship with the commodity used as the basic raw material in steel—is that slumping production and falling profits will inevitably lead to judicial activism being re-examined.

The total mining ban, which some might argue was heavy handed, was justified in the face of rampant profiteering by private iron ore mining companies, many with small leaseholds, who were clearly overstepping environmental and prospecting regulations while conducting illegal mining drives.

State governments, Karnataka and Orissa in particular, clearly ignored fair and transparent operational procedures while allotting mining licenses in brazen violations of rules. They have only themselves to blame for the situation following the Supreme Court’s clampdown on illegal mining resulting in falling iron ore output and shrinking shipments.

The steel industry, which has shouldered high overheads against acute shortage of raw material, is turning uncompetitive.

The SC’s revoking the ban will benefit the likes of JSW Steel and Sesa Goa whose raw material flows will be revived. But the catch is that Karnataka is yet to issue transport permits for many mines in Bellary, Chitradurga and Tumkur, and hence, exports will take time to resume in full force.

Post the clampdown, iron ore mining in Karnataka could take ages to become fully operational, especially when out of the 115 mines eligible to restart operations, as many as 35 to 40 will likely not start operations anytime soon. Karnataka’s production in the current fiscal may not exceed even 15 million tonnes (MT) from a peak ore output of around 40-50 MT per annum before the mining ban.

Demarcation of the boundaries between Karnataka and Andhra Pradesh, where category A mining leases across the state borders are being disputed, could hit output in coming years.

While the ban has turned out to be crucial in influencing the regulatory approval process for mining companies, it is also a moot point if the decision to investigate and penalise offending companies, before lifting the ban comes rather late in the day. In any case, the industry will have enough procedural headaches to grapple with going ahead, besides the regulatory overhang. Going ahead, state governments should work out stringent mechanisms to avoid repeats of this situation.

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