Mining companies trash Shah panel report

The report has named Tata Steel, Essel Mining and SAIL among 70 companies that have violated norms

Indian mining companies have trashed the MB Shah panel report on Odisha, saying the government had received taxes and royalties from the mining companies and it will be improper for the government to go back on contracts as old as 1994.

The MB Shah commission has submitted its report to the Indian government which has, in turn, set up a Committee of Secretaries to study the report and take action, wherever necessary. The report says that Tata Steel, Birla’s unlisted company Essel Mining and government owned SAIL are among 70 companies that have violated environment and forest laws.

The report has called for stopping production in some of the Odisha’s mines which do not have clearances, capping production in some mines, and stopping production where the mines are near rivers.

The Commission has estimated iron ore worth Rs 45,453 crore and manganese worth Rs 3,089 crore have been extracted by miners illegally and without lawful authority by violating environment conditions.  The report has not been made public as yet.

While Tata Steel and Birla’s Essel Mining declined to comment, saying the report is not public, insiders say the mines had deemed status and they were paying all taxes and royalties to the government in time.

“The new investments in steel sector and mining sector will come down if mining is stopped. Odisha’s mines are very important for the country as it creates many jobs in the region,” says an official of a mining company asking not to be quoted.

“The entire Indian steel industry will be in trouble if the government implements the recommendations,” he said.

Independent analysts say if iron ore production is stopped in Odisha it will have implications for broader economy. Unlike Karnataka and Goa, Odisha is very critical for the Indian steel industry as the state's iron ore production in FY13 stood at 62 MT (accounting for almost 45% of India’s production). As exports have come off sharply, most of it went to the domestic steel industry, directly or indirectly in the form of pellets and sponge iron.

Odisha supplies 28-30 MT of ore for Indian steel production.

The Odisha report comes within few months of the Supreme Court banning iron ore mining in Goa and Karnataka. While Goa was meant only for exports, and in Karnataka, while some impact was there, large mills like JSW were able to operate at 75-80% utilisation, as NMDC was allowed to enhance production. The government has recently cleared mining in Karnataka after imposing strict conditions on exports and extraction.

“Shutting down Odisha iron ore production, would result in 40% of India's steel production going off line. Importing iron ore would not be an option, given the hinterland location of most of the steel mills. This would result in dislocation of Indian steel consumers as importing 30 MT of steel, particularly long products, is not a viable option and the impact on Indian currency it would have,” said a JP Morgan report dated January 6th.

The report says the expansion of many companies in the region including Tata Steel would be impacted if the government lays down strict environment conditions for mining.