After twenty two months of waiting, NMDC will be able to resume mining at Donimalai in Karnataka. This however, comes at a cost – to begin with a royalty of 37.5% against the usual 15%.
Ever since the MMDR (Amendment) Act 2015 introduced auctions, and these in turn began fetching state government additional revenue in premiums, states have been reluctant to grant renewals to PSUs. Despite the Act not providing for it and a High Court order, Karnataka had refused to budge from its demand that the Steel Ministry PSU commit to paying an additional 80% in premium – which it would have got if it auctioned the mineral deposit – if it wanted its lease renewed.
A compromise solution to the long-standing dispute between Centre and state was worked between Karnataka Chief Minister, B S Yediyurappa and Union Minister for Coal and Mines, Pralhad Joshi on Saturday.
Addressing the media along with the CM, the Minister said in three months a committee led by the Mines Secretary would decide how much, in addition to royalty, NMDC would be obliged to pay. Until then, he was agreeing to the CM’s request for a 150% increase in royalty as compensation to the state.
Before mining at Donimalai came to a halt in November of 2018, Karnataka contributed about a third of NMDC’s iron ore production: 6 mn t from Donimalai and 7mn t from Kumaraswamy.
Repercussions on PSU Mines
Saturday’s development will have implications on Central and state PSUs such as Steel Authority of India, RINL or Orissa Mining Corporation when they seek either an allocation of a new mine or a renewal. Senior officials at NMDC worry this could also have repercussions on the company’s operations in Chhattisgarh which at 24 mt makes up for two-third of its production (counting Donimalai).
Senior officials in the state told SteelMint the PSU had reason to be concerned. There can not be differential policy between two states and Chhatisgarh would demand its rightful claim, said an official who asked not to be identified.
Congress ruled Chhattisgarh had renewed the PSU’s leases only last year and has been unhappy with the Centre’s decision to disinvest NMDC’s 3mnt greenfield steel plant coming up at Nagarnar. Following the board’s nod to the demerger of the steel project, Chhattisgarh CM Bhagel shot off a letter to the PM objecting to the move. In May after NMDC donated INR 150 crores to PM Cares fund, Baghel had demanded NMDC also pay up the INR 1000 crore in penalties it still owed it and pointed out that unlike BJP-ruled Karnataka, his government had been very cooperative in the matter of renewals.
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