JOIN USNMDC mine closure leads to Rs 1,000 crore revenue loss
The suspension of the Donimalai iron ore mine in Ballari district by India’s largest mining company NMDC Ltd has resulted in a huge revenue loss to the state and central governments. The mining operations came to a halt since November 3, 2018, following the imposition of 80% premium by the state government on ore sales from Donimalai. The levy of premium came when the government renewed NMDC’s licence for Donimalai on November 2, 2018.
NMDC (National Mineral Development Corporation) has permission to extract around 7 million tonnes of iron ore from this mine and going by the current value of iron ore, the loss of revenue to both state and central governments is estimated to be in excess of Rs 1,000 crore, according to top company officials.
The share of state government is about Rs 450 crore in the form of royalty, contribution towards NMET (National Mineral Exploration Trust), DMF (District Mineral Fund), special purpose vehicle on ecological restoration, and GST. The central government has lost an estimated Rs 583 crore in the form of corporate tax on 8 million tonne production loss over the last year.
During the last fiscal till October, NMDC produced about 2 million tonnes of iron ore from this mine.
“As a merchant miner, we cannot give an 80% premium because we are already paying around 20% in the form of royalty and other taxes. In addition to this, if we pay another 80% premium, we will run into huge losses,” said N Baijendra Kumar, Chairman and Managing Director, NMDC Ltd.
The company has also lost around Rs 1,560 crore revenues from Donimalai mine which includes a net margin loss of Rs 650 crore.
NMDC has invested close to Rs 3,000 crore in Donimalai to develop the mine and support infrastructure such as conveyor belt for transportation of mined iron ore among others.
“We have requested the Karnataka government to extend the mining lease as per the earlier terms and conditions. The state government has been very positive towards us and I hope the issue will be resolved very soon,” Kumar said.
Subsequent to the government’s imposition of 80% premium, NMDC had moved the high court of Karnataka and got relief. However, the state government cancelled the lease instead of honouring the court verdict. Thereafter, NMDC appealed to the Mines Tribunal and got a stay order.
Apart from the loss of revenue to the company and governments, the suspension of mining lease has also resulted in a loss of job for around 2,000 contract workers and another 700 permanent workers of the company are sitting idle.
Iron ore deposits in Donimalai are estimated at 143 million tonnes. NMDC had leased the mine in 1968 for a period of 50 years. The mining lease contributes to around 20% of the company’s total production as well as the state’s total iron ore production.