Over a year after the Supreme Court (SC) imposed a complete ban on all mining operations in Karnataka, on environmental grounds, mining is set to partially resume in the state after the SC-appointed Central Empowered Committee (CEC) accepted the reclamation and rehabilitation plans for some of the mining companies. The SC, in its order on April 20 this year, had allowed mining to partially resume in the state. About 20 mines, which fall under category ‘A’ (where no illegalities were found by the CEC), were accordingly approved. In the next six months, it is expected that around 50 mines in Karnataka with an annual output capacity of 15 million tonnes (MT) could restart operations.
In FY2011-12, the mining sector witnessed a negative growth of 0.9% as against a 5% growth a year before. “Worldwide, production is rising, but in India we seem to be moving in the opposite direction,” says H. C. Daga, Senior Vice President, Federation of Indian Mineral Industries (FIMI). In fact, overall production during the current fiscal year is likely to fall to 140 MT from 169 MT recorded in FY2010-11. In April this year, when the mining sector registered a growth of -3.1%, India’s industrial output grew by 0.1%.
While steel mills continue to import iron ore (imports stood at 3 lakh MT in FY2011-12), exports, which stood at 96.93 MT in FY2010-11, fell to 60 MT in FY2011-12. Lower exports have in turn prompted miners to slash overall production as domestic steel makers lack the technology to utilise iron ore fines or inferior grades. “Iron ore exports will likely fall to no more than 40 MT this year from about 60 MT last year,” says R. K. Sharma, Secretary General, FIMI.
The mess in the mining sector, which prompted the apex court to take some harsh measures, can largely be attributed to the ease with which unbridled corruption was allowed to flourish. The complete absence of oversight and connivance at every level invited such wrath of the SC that it has now taken a serious toll on the entire industry. “The CEC survey team has found that 18 mines had not carried out any violations. SC closed all mines, good or bad,” says Sharma of FIMI, adding, “You can’t brush everyone with the same broom.” Former Karnataka Lokayukta Justice (Retd.) Santosh Hegde, who had recommended the Karnataka ban to the SC, believes that it is a price the industry and its stakeholders have paid for the crimes of a few greedy mining firms, which flouted every rule in the book to make a quick buck at the expense of genuine people. “The state government should change the mining policy to ensure the natural resources are not exploited for profit trading and exports but mined for value-addition by manufacturers through transparent bidding process,” he says. The ban on mining in Karnataka came after a report prepared by Hegde recommended an immediate halt on private mining. The SC was later told that mining was being done in a reckless and irresponsible manner with the prime objective of over-exploitation of iron ore for purely short term private gains.
“Illegality is a matter of governance. If the government wants, nothing illegal can take place. It’s just not possible. At every stage, there is a government machinery involved. Ultimately genuine mine owner gives way to mafia,” argues Sharma, pinning the blame of Karnataka’s mining mess on the governance machinery. A case in point, according to him, is the Bharatiya Janata Party (BJP) leader Janardhan Reddy, who was recently reported to have offered crores in bribe to a judge for bail. “Till the political bosses and bureaucrats join hands, nothing illegal can take place. We have all regulations you can think of, but what good is a regulation that cannot be implemented,” says Sharma.
While the mining industry can be partially held responsible for the current mess and its adverse impact on allied industries, there are examples where the state governments have been accused of creating instability in the business environment. Currently, there are over 40,000 mineral concessions and about 25,000 renewal applications pending with different states. In Orissa, for instance, even a company like Tata has not been given renewal of their mining leases by the state government. “We have a huge reserve in this country, but production is not being encouraged. Instead, imports are being allowed,” says former Planning Commission Additional Secretary L. P. Sonkar. “Not only that, people are even trying to remove import duty. It’s strange,” he adds. In Orissa, there has been violation of environmental law. If production increases beyond the permissible level, there are provisions in the Environmental Protection Act where you can penalise the companies. “But to restrict the movement for people who have not been carrying out operations illegally, like they did in Karnataka, is not right,” says Sharma, referring to Orissa government’s transport restrictions.
As per the data available with the steel and mines department of the Orissa government, in the first quarter of the current fiscal, traders in Joda mining circle (the largest mining circle in terms of iron ore production in the country, accounting for 25% of India’s total output) lifted 57% less iron ore for export purpose over last year’s figure, despite sharp rise in production. Even for FY2012-13, the state government has capped the iron ore production for Joda mining circle at 40 MT. As a result, a maximum of 400 trucks can be allowed in a day to carry material from this circle for the purpose of export.
Even the proposed Mines & Minerals (Development & Regulation) Bill (MMDR Bill) 2011, which wants mining companies to share 26% of their net profit with the local community, has had miners worried for long. They fear that the new profit-sharing formula could well be an end of the road for the industry. Countering the industry’s contention that the proposal to allot shares to project affected persons (PAP) will change the holding pattern of the firm with time and, thereby, is not a workable idea, the ministry has argued, “The concept of allotting the share to the PAP is to inculcate a sense of belonging among them with that mining company. They will be a part of the process by attending the general body meetings of that company.”
The MMDR Bill 2011 laid in the Lok Sabha is currently being debated by the Standing Committee. The bill provides for hefty fiscal burdens on miners in addition to what they already pay to the state governments and other utilities by way of fees, tax, royalty, freight, etc. “The MMDR Bill will ruin the mining industry. With such stringent laws, you will not get any FDI or technology. Domestic firms that invest will also suffer from negative growth and only illegal miners will prosper,” says Sharma. Another major point of contention is states getting full powers of grant of mineral concessions.
here is no denying that both mining and environmental protection need due attention. However, with several regulations already in place to check illegalities, it is the will to implement that is clearly lacking. The mining sector has already been subject to some genuine flak, but blanket bans have also led to slow growth. In the absence of genuine miners and government permits, illegal mining continues to rob this country of natural resources. Reports suggest that illegal mining is flourishing in the states of Gujarat, Andhra Pradesh, Rajasthan, Uttarakhand, as well as in the Aravalli Range, thus depriving the nation of its rich resources, technology and FDI. In such a scenario, it becomes imperative for both companies and the government to urgently define standards for the mining industry, failing which sustainable growth could well elude the sector.
