Goa mining clamp: Sesa Sterlite resigned to idling capacity

Says SC cap allows operationalising only half its ability to produce; central clearance still awaited

The Supreme Court-imposed cap on iron ore mining in Goa would see Sesa Sterlite producing at only half its  capacity once the required permissions are in place.

The apex court had in April lifted the mining ban in Goa but had imposed an annual cap of 20 million tonnes on the industry. Sesa Sterlite was producing 15 mt of ore before the ban was imposed in October 2012. It would be able to mine around seven mt annually once operations resume.

“Our limitation would be because of the cap; we would have the capacity to mine more than the allocation.We hope with the resumption of mining as stipulated by the SC, the expert panel would review mining conditions on the ground and will, over time, allow the lifting of the cap or increase in cap limits,” said Tom Albanese, chief executive officer at Vedanta Resources and its subsidiary, Sesa Sterlite.

Sesa Sterlite had 10 mining leases in Goa and one in Karnataka. Of these, seven belonging to the Vedanta group have been cleared by the Goa bench of the Bombay High Court for renewal. In all, 28 leases for which stamp duty had been paid in 2012 were cleared for renewal by the Goa bench in its judgment of August 13. In Karnataka, the company has 2.29 mt mining capacity within the cap and had last year disposed of stocks there.  

Alongside the mining ban, the Union ministry of environment and forests had put environment clearances (EC) to all mines in Goa in abeyance. “They are still in abeyance and need to be reinstated. We are in touch with government authorities on early reinstatement of the ECs,” said Albanese.

The apex court had allowed disposal of stocks. In Goa, the stock was about 15 mt. Of this, Sesa's share was about 6.5 mt. In the e-auctions conducted by the Goa government so far, one mt of Sesa's ore has been sold.

Albanese said they'd wanted to resume iron ore export this year but there had been a drop in global prices.

"Our effective price for Goa ore would be very low. We might find ourselves in a difficult situation, where we have clearances but the mining is not economical, due to combination of lower prices and large export duties, put in place during a time of higher ore prices," he said.

Iron ore attracts 15% royalty and an export duty of 30%. Beside, 10% of the sale price is contributed for a Goa iron ore export fund set up under an SC directive.

Albanese said it was important to see resumption of ore production to incentivise future reinvestment.

"Right now, it is difficult to incentivise that investment because the sector gets turned on and off. It is not a predictable business model. There is lack of capital. It needs to be incentivised to stay invested in the sector; otherwise, that capital will be reinvested somewhere else," he explained.

In 2010, up to 180 mt of iron ore was exported from India; it is now 18 mt. Albanese said Australian production had risen to fill the space vacated by Indian export. Australian export increased from 525 mt in 2011-12 to 681 mt in2013-14. Brazilian export rose from 327 mt in 2011-12 to 386 mt in 2013-14.