SC Order: Odisha Miners Face Challenge to Restart Operations

The Supreme Court order in a case related to rampant, illegal mining in Odisha has come as a shocker for iron and manganese ore miners in the state. The apex court has ordered for full payment of compensation for the excess ore lifted by mine leaseholders beyond the limits approved under the mandated environment clearance (EC). The penalty prescribed by the court is to be coughed up miners on or before December 31 this year if they are keen to resume operations of the shut mines.

Even as the complete implications of the court order are yet to sink in, the juggling has already started on the penalty figure. There are discrepancies with respect to the amount to be shelled out by the lessees, both captive and merchant. The Odisha government had originally put the amount at INR 58,000 crore for iron and manganese ore mines. The Supreme Court appointed central empowered committee (CEC) disputed it and assessed the penalty at INR 17,576.16 crore- INR 17,091.24 crore for iron ore and INR 484.92 crore for manganese ore. CEC in its report on illegal mining in Odisha had advocated for recovery of 30 per cent of the cost of production. The CEC’s calculation is based on benchmark price issued by the Indian Bureau of Mines (IBM) instead of the state government’s methodology of determining penalty amount on current market prices for ore extracted even 10 years back. An industry source pegs the amount at INR 25,000 crore after including the penalty for violations under Forest Conservation Act, 1980.

A senior official with the Federation of Indian Mineral Industries (Fimi) said, “It would not be easy for the miners to rustle up the penalty amount. Most of the standalone miners are operating at tiny margins. Even the captive lessees would find the going tough.’’

Besides this, the miners have been burdened with additional levies in the form of District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET). Apart from raising the compensation, miners are also tasked with obtaining various statutory clearances. Mining companies in dock include Tata Steel, Essel Mining & Industries Ltd, Indrani Patnaik, Rungta Mines, Serajuddin & Company and even state run entities like Odisha Mining Corporation (OMC).

“If there has been illegal mining, the defaulting lessee must bear the consequences of the illegality and not be benefited by pocketing 70 per cent of the illegally mined ore. It simply does not stand to reason why the state should be compelled to forego what is its due from the exploitation of a natural resource and on the contrary be a party in filling the coffers of defaulting lessees in an ill gotten manner”, the court order read.

Considering 2000-01 as the base year, the apex court in an indictment of illegal mining said, “The mining lease holders cannot have their cake and eat it too, along with the icing on top.”

Odisha: Mine-wise iron ore production : FY17 vs FY16

Fig in MT & includes material type of fines, lump and concentrate
Provisional data
Source: Odisha govt, SteelMint Research

The court verdict was in response to a petition filed by Common Cause in 2014 with respect to large scale unlawful mining in Odisha. Out of 187 iron and manganese ore lease cases in the state, 102 lease holders were without valid clearance with either pending EC or forestry clearance or lack of mining plan approval. In its interim order dated May 16, 2014 the apex court had suspended the operations of these mines.

Click here to view show cause/demand notices issued to mining companies for recovery of cost of excess production