Supreme Court Allows Iron Ore Mining In ‘A’ Category Mines

After a long wait the Supreme Court has, on Monday, ordered the resumption of iron ore mining in the ‘A’ category 18 mines in the Bellary region of Karnataka. The order has come after a ban of 14 months that was imposed by the premier court due to environment concerns. Steel companies such as Kalyani Steel, JSW Steel, Essar Steel and some mining companies will benefit from the order as these companies had to scale down their production levels after the ban order in July 2012.

CEC, the investigation agency in the matter, submitted its final report to the Supreme Court with their recommendations, one of which was to allow mining at least in those mines which have caused the least environmental damage. These were categorised as ‘A’ category mines which include 21 operational and 24 non-operational mines. The Supreme Court, after considering the CEC report and the iron ore situation in the region, has ordered resumption in the ‘A’ category mines. One of the major beneficiaries from this order will be Kalyani Steel which had scaled down its production level to 30 per cent due to scarcity of iron ore. The other major beneficiary will be JSW Steel that was also facing similar issues.

However, JSW Steel had been able to procure enough iron ore from e-auction and the government’s stock piles to run its production at 80 per cent of utilisation. But since the stock piles were on the verge of completion, the Supreme Court order has come at the right time. In fact, JSW Steel had no option but to procure iron ore from other states or to reduce the production levels. The benefits though will be limited as of now as the eventual start-up of the mining activities will take at least a month or so as Supreme Court has asked all the lessees to fulfill certain statutory requirements like getting certificates from the forest and environmental authorities, including the Indian Bureau of Mines and then a consent for operation (CFO) from the Karnataka State Pollution Control Board.

As per media reports, 18 mines in the ‘A’ category can start mining after obtaining the statutory approvals with a cap of 6.96 million tonnes. Out of these, 12 mines need to get the required statutory approval. While one of these mines is unwilling to obtain approval, there are five mines that are not eligible to start for other reasons. The net production that can potentially come into the market therefore is of 4.5 million tonnes.

The CEC, while submitting its report, has also recommended capping the production to 25 MTPA in Bellary and 5 MTPA in Chitradurga and Tumkur.  For JSW Steel the uncertainty about timelines and production quantity from the mines will continue and hence we believe that increasing steel production from the current levels would continue to remain a challenge in the near-term.