India: Odisha Mining Revenue likely to drop 50% in FY15

Bhubaneswar: Though the Odisha government’s high level committee on mining renewal took no time to recommend lease renewal for most of the 26 mines that have been closed down after the Supreme Court’s order on 16 May, 2014 experts fear that the renewal process won’t be easy for the lease holders and could take more than 6 months.

The conditions imposed by the state committee including payment of the penalty amount for excess mining could be the main huddle on the way of the renewal. So, it is almost certain that the 26 Iron ore and Manganese mines will be closed for a longer time in the current financial year. Apart from these, 3 Chrome mines have also been asked to stop production including Tata’s Sukinda Chrome mines. The closure of the 26 Iron ore and Manganese mines with combined annual Iron ore production capacity of 40 MnT would drag down state’s annual Iron ore output to below 30 MnT which was around 72 MnT last financial year. So, state’s mining revenue is expected to fall below INR 30 billion in the current financial year, which was INR 55.1 billion in the last financial year.

“The renewal of the 26 mines could take more that 6 months has given the stringent conditions imposed on them and even if the renewal cases get cleared within 6 months, resuming normal production would take few months’ time. So, mining revenue of the state government could be dropped by 50% to below INR 30 billion,” said a senior government official in the Steel & Mines department.

The state government has set a target to collect INR 66 billion revenue from the mining sector in the FY14, but missed the target due to decline in Iron ore prices in the global & domestic market. This year also, analysts have predicted Iron ore prices will remain in the cold zone, mainly due to sluggish demand of steelmaking raw material in China, the world’s largest Iron ore consumer and high inventory of Iron ore in the Australian ports. Even Indian steel players are finding it easier and feasible to import Iron ore. So, there is least possibility that prices will rise this year and if prices decline further, mining royalty collection of the state government would drop, since the government collects 10% of the sale price as royalty.