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348 Non-Coal Mines: Supply squeeze likely as leases near expiry

According to Indian Bureau of Mines, Tata Steel’s 406-hectare Chromite mine at Sukinda in Odisha, Essel Mining’s 456 hectare mine at Keonjhar district in Odisha and Vedanta Limited’s four iron ore mines in Goa are going to expire on March 31, 2020.

Written by Deepak Patel | New Delhi | Updated: March 27, 2018 5:55:52 am
Indian Bureau of Mines, Tata Steel, Essel Mining, Vedanta, iron ore mines, Goa mines, coal, mine auctions, business news, indian express According to Indian Bureau of Mines (IBM) data, Tata Steel’s 406-hectare Chromite mine at Sukinda in Odisha, Essel Mining’s 456 hectare mine at Keonjhar district in Odisha and Vedanta Limited’s four iron ore mines in Goa are going to expire on. (Illustration: C R Sasikumar)

The country’s merchant mining sector is staring at a major disruption as mining leases (MLs) of 348 non-coal mines, which are assigned for non-captive purposes, are going to expire at one go on March 31, 2020. The Indian Express has learnt that MLs of top companies, including Tata Steel, Vedanta Limited, Essel Mining and Industries Limited, V M Salgaocar and Brother Private Limited and Rungta Mines Limited, are part of the 348 leases that are going to expire.

According to Indian Bureau of Mines (IBM) data, Tata Steel’s 406-hectare Chromite mine at Sukinda in Odisha, Essel Mining’s 456 hectare mine at Keonjhar district in Odisha and Vedanta Limited’s four iron ore mines in Goa are going to expire on

March 31, 2020. Tata Steel spokesperson told The Indian Express: “We are mindful of the fact that the lease for our non-captive chromite mines will expire in 2020. Suitable action as may be necessary will be taken at an appropriate time.” Rungta Mines Limited’s 666 hectare Jajang mine in Odisha, which has iron ore and manganese ore in it, is going to expire in 2020. Two of Rungta’s manganese mines in Odisha are also going to expire in 2020.

Top government officials have already expressed their worries to the state governments — which have the authority to conduct auction of MLs — by telling them to start preparing for auction right now so that it can begin by July 1, 2019. “There will be immense disruption in the non-captive mining sector due to the auctions (of these 348 mines). However, it is possible many of these mines are small or non-operative even now. Going by the experience so far of the auctioned mines, the disruption in the supply chain could be around 1-3 years,” said Anjani K Agrawal, Partner and National Leader – Metals and Mining, EY.

In Odisha itself, other than Rungta Mines, major companies including Orissa Manganese and Minerals, Serajuddin and Company, B C Mohanty and Sons as well as K J S Ahluwalia are going to see their MLs expire in 2020. These Odisha mines either have iron or manganese ore. Some of them are quite big in size, like the K J S Ahluwalia’s iron ore mine in Nuagaon is of 767 hectares. According to the IBM, total 29 Odisha mines will expire in 2020.

When asked about the capacity of mining companies to bid for these 348 mines, whenever they are put for auction in coming two years, Agrawal stated: “The merchant mining sector in the country has been struggling to generate surplus free cash flows due to margin squeeze and production disruption etc. It will be challenging for the current mining industry to build cash reserve and confidence to energetically pursue the mining lease being put on auction. However, for those mines which are of economic size, may attract attention from the serious players. However, such mines are only a few and current uncertainties deter many a new serious player to engage with the Indian mining industry.”

According to the IBM, total 46 Karnataka mines — only three of them have Manganese ore while rest have Iron ore — are going to see their MLs expire in 2020. More than 50 per cent of these Karnataka mines are small in size: less than 50 hectares. However, the state that will see a major effect of this expiry of mines in 2020 is Goa. According to the IBM data, Goa’s 142 mines will have their MLs expired in 2020. 99 per cent of these 142 mines are of Iron Ore. V M Salgaocar and Brother Private Limited, Sociedade Timblo Irmaos, Pandurang Timblo Industries, V M Chowgule and Timblo Private Limited are some of the ML owners in Goa that will be affected by 2020 expiry.

The central government has been asking the states since August 31 last year to submit their action plans for auctioning leases of aforementioned 348 mines. However, even after repeated reminders, only two states — Andhra Pradesh and Rajasthan — have submitted their action plans till February 22 this year, according to a senior government official. When The Indian Express asked the Vedanta Limited if Goa government has discussed with it the plan to auction its four iron ore mines — which are going to expire in 2020 — the company replied that “no discussions have been held with state government on this subject”.

On November 24, 2017, Arun Kumar, the then Union mines secretary, wrote a letter to all mineral-rich states, wherein he requested them to submit their action plans by December 9, 2017. “Though the leases expire on March 31, 2020, it would be appropriate for the states to start auction of the (348) mines by July 1, 2019. This will give successful bidders time to mobilise as well as time to obtain various clearances before commencing mining operations. It is therefore of utmost importance that an action plan for auctioning these expiring leases is prepared at the earliest,” he added.

Kumar stated that the action plan would require “finalisation of exploration proposals, exploration within the lease hold area by the lessee, identification of the agency for exploration outside of lease area if required, finalisation of geological reports and carrying out auction of the mines”. Before the November 24 letter, the Ministry of Mines had sent letters to mineral-rich states on August 31, 2017 and October 9, 2017, asking them to submit the action plans.

As per the new mining law — the Mines and Minerals (Development and Regulation) Amendment Act, 2015 — which came into effect from January 2015, the non-coal mines have to be auctioned by the respective state governments. Under the old 1957 mining law, the states had the powers to grant the mining lease to any company as per their discretion.

The 2015 mining law clearly states that if a company has already got the ML of a non-coal block for captive purposes, it can continue to mine it till the lease period ends. Once it ends, such a company will have the first right of refusal. Moreover, the law stated that if a company has the ML of a block for non-captive purposes, the company can keep the mine till 2020 or till the lease period ends, whichever is later. According to Union mines ministry, MLs of 348 non-coal blocks will expire on March 31, 2020, and they will have to be auctioned by states.

In response to a query on how the states should go forward in auctioning these 348 mines in order to get a good response from industry, Agrawal stated: “It is strongly recommended that mines of economic value below a meaningful threshold should not be put through auction and rather be continued; if required with some value extraction should the government so decide. Auction process should focus on larger mines with long residual life bundled with all necessary approvals in place so that they invite serious interest and also maintain business continuity. We would assume the auction would be without any restrictive conditions such as end use or disposal of associated mineral etc. Also governments should keep in mind the impact caused by loss of employment due to closure/disruption of the mining operations and its social implications, and take decisions accordingly.”

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