MMDR Bill and its implications
Chandrakant / 19 Dec 2011
Iron ore mining companies' problems due to illegal mining issues don't seem to have ended yet. With the imposition of the ban first in Karnataka and then in Goa, it is now Odisha that is facing similar allegations.
Iron ore mining companies' problems due to illegal mining issues don't seem to have ended yet. With the imposition of the ban first in Karnataka and then in Goa, it is now Odisha that is facing similar allegations. Karnataka, which accounts for 1/3rd of the total iron ore shipments, is yet to resume trade after the ban on export.
To investigate the illegal mining in Karnataka, Goa and now Odisha, the govt. has appointed the M B Shah Commission to investigate into the matter and to come up with a report on the same. The Commission has submitted its interim report, with a recommendation for a pan-India blanket ban on exports, which is yet to be finalised. If the suggested recommendation is accepted by the Centre, we will see a huge impact on the business of iron ore mining companies.
As per media reports, in a recent visit to the Odisha, the Shah Commission members asked the state govt. to restrict excess ore production to conserve the resource for future requirements. "They have also stressed on earmarking more funds by lessees for peripheral development”, said an official source.
Further, in order to bring discipline in the mining region, the Odisha state govt. has already enforced a ban on transport by trucks, and has also reportedly not been issuing export permits to 2 of the ports for the past 2-3 weeks. However, this move will not have much impact on the export of iron ore from the country, as the ban from the 2 ports in Odisha account for 6%-7% of the exports since April 2011.
However, the Shah Commission report, which suggested completely banning iron ore exports, has been deferred to Jan 2012. There is also news that the govt. will not go with the pan-India ban, and would prefer to opt for channelising the export of minerals through govt-owned mining companies. This means that companies like Sesa Goa, MSPL, etc. would be exporting through govt-owned companies like NMDC, MMTC or the state trading corporations. This move will allow the govt. to keep the checks and accounts of all the exports that have been carried out illegally over the past few years.
In conclusion, we, at DSIJ, believe that the outcome of the Shah Commission's report in Jan 2012 remains a key concern. Any policy to curb mining will impact iron ore mining companies like Sesa Goa, which has a presence in Goa region. Further, the proposed mining bill recommends the doubling of royalty payments, which could significantly hurt the operating margins of the mining companies. Therefore, we suggest that investors keep a watch on these policies which will have direct impact on the business.
To investigate the illegal mining in Karnataka, Goa and now Odisha, the govt. has appointed the M B Shah Commission to investigate into the matter and to come up with a report on the same. The Commission has submitted its interim report, with a recommendation for a pan-India blanket ban on exports, which is yet to be finalised. If the suggested recommendation is accepted by the Centre, we will see a huge impact on the business of iron ore mining companies.
As per media reports, in a recent visit to the Odisha, the Shah Commission members asked the state govt. to restrict excess ore production to conserve the resource for future requirements. "They have also stressed on earmarking more funds by lessees for peripheral development”, said an official source.
Further, in order to bring discipline in the mining region, the Odisha state govt. has already enforced a ban on transport by trucks, and has also reportedly not been issuing export permits to 2 of the ports for the past 2-3 weeks. However, this move will not have much impact on the export of iron ore from the country, as the ban from the 2 ports in Odisha account for 6%-7% of the exports since April 2011.
However, the Shah Commission report, which suggested completely banning iron ore exports, has been deferred to Jan 2012. There is also news that the govt. will not go with the pan-India ban, and would prefer to opt for channelising the export of minerals through govt-owned mining companies. This means that companies like Sesa Goa, MSPL, etc. would be exporting through govt-owned companies like NMDC, MMTC or the state trading corporations. This move will allow the govt. to keep the checks and accounts of all the exports that have been carried out illegally over the past few years.
In conclusion, we, at DSIJ, believe that the outcome of the Shah Commission's report in Jan 2012 remains a key concern. Any policy to curb mining will impact iron ore mining companies like Sesa Goa, which has a presence in Goa region. Further, the proposed mining bill recommends the doubling of royalty payments, which could significantly hurt the operating margins of the mining companies. Therefore, we suggest that investors keep a watch on these policies which will have direct impact on the business.
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