CEC submits report on Illegal Mining to Supreme Court

A committee set up by the Supreme Court to carry out an investigation into the issue of illegal mining by various entities in Karnataka has submitted its final report. The report includes details about the loss to the environment and the economy by way of illegal mining. In the past the Central Empowered Committee (CEC) had come up with its interim report, making a mention about such activities.
 
Though the document has not been officially released, according to certain media reports, the committee has classified the mines into three categories. Category A has mines with minor violations and the CEC has given clearance to about such 45 mines which will be allowed to continue with their operations as soon as the Supreme Court lifts the ban. These include mines of companies such as NMDC, Minerals Enterprises Ltd, Mysore Minerals Ltd, etc.

Category B includes mines with up to 10 per cent violations in terms of illegal mining. There are 72 such mines and they will be allowed to resume mining only after paying a penalty to the government. These include Sesa Goa, MSPL, Mysore Minerals, and others. The CEC will levy a sum of Rs 5 crore each for mining outside the sanctioned area and Rs 1 crore for dumping outside the sanctioned lease area.

Those under Category C are companies which have indulged in up to 15 per cent illegalities and the CEC has recommended the cancellation of 49 mines falling into this bracket. The licenses of these mines will be re-sold through the auction route to other players. The production of mines in this category was to the tune of 10 million tonnes of iron ore in the last one year.
 
We believe that the resumption of the mines under Category A and B will provide a lot of relief to the steel players based in the Karnataka region. JSW steel will be one of the major beneficiaries considering that it had been struggling to maintain its steel production ever since the ban had come into effect. Of its total requirement of 17 MTPA iron ore, JSW Steel was procuring 3-5 MTPA from NMDC, 2-2.5 MTPA from Mysore Minerals and the rest from 15 other players under the open market route, including Sesa Goa.
 
However, new issues could come to the fore in connection with the CEC’s agreement with a report that recommends the capping of iron ore production in the Karnataka region to 30 MTPA as compared to 45 MTPA produced in 2008-09. If the capping recommendation is accepted by the Supreme Court, this will be a major blow for the steel players in Karnataka since it will impact their steel production. This may also lead to a significant increase in the iron ore prices.

JSW Steel runs a 10 MTPA plant and its total iron ore requirement is of about 18-20 MTPA of iron ore. There are many sponge iron and small steel mills which require iron ore in large quantities and these may eventually have to shut down. Moreover, there are other major steel players like Arcelor Mittal who had acquired the land to set up a 6 MTPA steel plant in the region but will now have to reconsider the situation given the shortage that will be brought about due to capping. If these companies decide to get iron ore from outside, the freight cost will not make it viable.