The Odisha government announced this month that it would attach the properties of mine lessees who had not paid compensation for the illegal mining they had carried out in the state during 2000-10. This compensation was mandated by the Supreme Court, which ruled in August 2017 that “mineral extracted either without an EC [environmental clearance] or without an FC [forest clearance] or without both would attract the provisions of Section 21(5) of the MMDR [Mines and Minerals (Development and Regulation)] Act and 100% of the price of the illegally or unlawfully mined mineral must be compensated by the mining lease holder”. The court set the deadline for paying the compensation at December 31, 2017.
The order triggered concerns in several mineral-rich states, at least three of which — Karnataka, Andhra Pradesh, and Telangana — approached the Centre this January to complain about its potential “pandemic effects” on mining and related activities. In Odisha, miners initially tried to get the state government to allow staggered payment of the penalty, but backed off subsequently. The Centre is now reportedly considering tweaking the MMDR Act to limit the definition of ‘illegal mining’ to mining outside the lease area — under the current interpretation, which takes note of environmental violations within the lease area, state-run Maharatna Coal India Limited stares at hefty fines.
How did the case reach the Supreme Court, and what questions did it raise? What did the court say, and why?
Shah Commission and PIL
Following a series of mining scandals (Karnataka, Aravallis, Madhya Pradesh, Goa, etc.), the Centre in November 2010 appointed a commission of inquiry on illegal mining of iron ore and manganese, headed by former Supreme Court Justice M B Shah. The Commission submitted the first two volumes of its report — on Odisha — in July and October, 2013. The Supreme Court took up the matter on a PIL filed by NGO Common Cause and, on April 21, 2014, a Bench of Justices A K Patnaik, S S Nijjar and F M Ibrahim Kalifulla directed the Central Empowered Committee (or CEC, which was first set up by the court in 2002) to make a list of mining lessees operating without, or without renewing, ECs and FCs.
The CEC found that between 2000-01 and 2010-11, some 2,131 lakh metric tonnes of iron ore and 24 lakh MT of manganese was mined either without ECs or beyond what was authorised by the terms of the ECs. “In terms of rupees”, a Bench of Justices Madan B Lokur and Deepak Gupta noted in its August 2, 2017, order, “according to the CEC the total notional value of minerals produced without an environmental clearance or in excess of the environmental clearance, at the weighted average price of minerals as proposed by the Indian Bureau of Mines comes to about Rs 17,091.24 crore for iron ore and about Rs 484.92 crore for manganese ore, making a total of Rs 17,576.16 crore… not including mining without forest clearance”.
An ‘enormous scandal’
The Supreme Court’s August 2 order delivered a powerful indictment: “The facts revealed… suggest a mining scandal of enormous proportions and one involving megabucks. Lessees in the districts of Keonjhar, Sundergarh and Mayurbhanj in Odisha have rapaciously mined iron ore and manganese ore, apparently destroyed the environment and forests and perhaps caused untold misery to the tribals in the area.” It called the CEC’s figures “frightening”, and directed the Odisha government to recover, by December 31, 100% value of the illegally extracted minerals from 2000-01 — rejecting the CEC’s recommendation that only 30% of the value be recovered from the errant miners. The lessees could restart mining only after they had complied with statutory requirements and paid up the compensation and other dues in full, the court ordered.
Definition of illegality
The court rejected as “narrow” the CEC’s understanding of “illegal mining”, which only included mining activities carried out in an area without a mining lease, and not the violation of mining rules within the lease area. The court clarified that the scope of illegal mining must extend to the area taken under lease, and include violations of mining scheme and mining plan, as well as the provisions of The Environment (Protection) Act, The Forest (Conservation) Act, The Water (Prevention and Control of Pollution) Act, and The Air (Prevention and Control of Pollution) Act. Within the lease area, mining in excess of 20% of permissible limits would warrant punitive action, the court said.
Fallout in Odisha
The recovery ordered by the court — Rs 17,576 crore, based on the CEC’s rationalised calculation — was much less than the Shah Commission’s estimate of about Rs 60,000 crore. Less than half of that amount — Rs 8,223 crore — had come in by the court’s December 31 deadline, a senior official in the Odisha Mining Department had revealed to The Indian Express in January. Only 72 of the 131 leaseholders had paid up. On March 8, Odisha Mines Minister Prafulla Mallick said that the government would now start attaching properties of the defaulters to recover remaining dues.
While the Supreme Court focussed on violations in the mining of iron ore and manganese, officials say the state government sees the principle of the judgment applying to all illegal mining in the state. The government had in November sent a showcause notice to Mahanadi Coalfields Ltd, an arm of Coal India Limited, for excess coal production estimated at Rs 20,169 crore, and followed it up with a demand notice for Rs 8,297 crore for violating The Environment (Protection) Act.
In the case of iron ore and manganese, the CEC found that the state government-run Odisha Mining Corporation Ltd “heads the pack”, which also includes other private players. Miners initially argued how their mining could be termed illegal when they had paid royalty and taxes, and warned that shutting down operations after December 31 would hit lakhs of jobs. In February, some miners urged the government to bring an Ordinance to create a deferred penalty payment mechanism. After the March 8 announcement, however, the East Odisha Miners Association struck a more conciliatory note, saying defaulters could pay their dues to protect their leases.
Odisha Finance Department officials say the compensation amount will be used specifically by the Odisha Mineral Bearing Areas Development Corporation (OMBADC), a special purpose vehicle constituted in 2014 for the development of the local area and population.