Jharkhand HC Allows Resumption of Operations at Tata Steel Noamundi Mines

Jharkhand HC has passed an order whereby the steelmaker needs to make a payment of around INR 3.72 bn in 3 equal installments. Forwarding notes for dispatches of iron ore would be issued in proportion to the amount deposited. 

Case History at a glance

1. Tata Steel discontinued its mining operations on 31 Aug’14, and sought formal orders under sections of MMDR Act.
2. In compliance of the order dated 11 Dec’14, the state govt passed an order on 31 Dec’14 but reduced area from 1,160.60 hectares to 768.55 hectares and further demanded penalty of around INR 35.68 bn towards alleged mining
3. After the grant of express order, Tata Steel made a payment of INR 1.52 bn to the state govt under protest and resumed its mining operations on 01 Jan’15
4. The Central govt. made an amendment in MMDR Act wef 12 Jan’15. The state govt. by order dated 12 Feb’15 modified earlier order. Thereafter, state raised demand of around INR 4.22 bn and stopped issuing forward notes for dispatches of iron ore to its steel plant
5. Thereafter, the steelmaker made a payment of INR 0.50 bn under protest on 24 July’15 in anticipation of receiving forwarding notes in the meantime supplementary lease deed is executed

State govt has divided the payment of penalty into 3 parts- first is from 01 Jan’12 to 20 Apr’14 which is the subject matter in the pending matters before this Court, the second part is from 18 Jul’14 to 31 Aug’14 for an amount of INR 1.52 bn and the third part is from 21 Apr’14 to 17 Jul’14 for which total of  around INR 4.22 bn was demanded. 

The payment of INR 1.52 bn made by the company was adjusted to the 2nd part . Out of the dues of third part the petitioner has paid INR 0.50 bn and now, as per state around INR 3.72 bn is still due.

Tata Steel is directed to make the payment of the said amount again within three equal installments; the first installment to be cleared by 15th Oct’15, second installment by 15th Nov’15 and third installment by 15th Dec’15. It is further clarified that the forwarding notes (challans) shall be issued for lifting /transporting iron ore in proportion to the amount deposited. 

Noamundi Mines is crucial to Tata Steel as it supplies raw material to its Jamshedpur steel plant of capacity 9.8 MnT. Its production stood at 5.5 MnT in FY15.

How would it impact merchant market?

The steelmaker raised its iron ore and pellet purchases from merchant market after its dispatches from Noamundi Mines were stopped. This lead to stability in pellet prices in Barbil and Jamshedpur. Resumption of operations at its mines might lead to decline in pellet prices in eastern India.