How a small word change cleared the air over NMDC's future mine renewals

Govt notification replaces the word 'may' with 'shall' in a move that will even bring back Donimalai and Chhattisgarh mines

A notification issued by the Government of India is expected to have far-reaching and positive implications for NMDC, as it will remove all ambiguity regarding the future renewal of mining leases for NMDC. The public sector firm will even be able to take back Donimalai without paying any premium, and all concerns regarding the renewal of Chhattisgarh mines will be addressed too.

In a gazette notification issued in this connection, the Ministry of Mines simply removed the word 'may' and inserted the word 'shall' in one of the rules.

Analysts said that essentially, this will remove all ambiguity on future renewals of mines of NMDC.

"Even Donimalai will come back without paying any premium. Earlier,  Karnataka govt interpreted this word 'may' and decided not to extend mining lease of Donimalai to NMDC, assuming that state has a power to do so. Now, with (this) modification, the Karnataka govt will not have any other option but to renew it. This will remove all fears of renewal of Chhattisgarh mines too," said an analyst.

Last year NMDC and Karnataka Government got into legal tussle over Donimalai, after the then Congress-JDS-led state government decided to levy a premium equivalent to 80 per cent on the iron ore extracted from that mine as a pre-condition to extending the lease. NMDC did not agree with this condition and stopped mining operations in November 2018. The company also moved to the Court against the decision, and received a favourable order. While the public sector miner was planning to start the operations, the new BJP-led government decided to cancel the lease.

Earlier, company officials said the company's basic precedence is renewal of Chattisgarh mine under the same Act and Rules without any premium. He said, the Chattisgarh Government renewed the licence for a 10 million tonne mine named Deposit 11, for 20 years starting from 2017.

While analysts say NMDC earnings and profits may take a hit in 2020-21, company says despite, loosing around 0.5 million tonnes every month from Donimalai mine, the public sector miner is expected to achieve its target of 31 million tonnes for 2019-20 as it has increased production at Bacheli Complex and Kirandul Complex at Bailadila Sector, Chhattisgarh.

During the first quarter, despite Donimalai not operating, NMDC’s production of iron ore was 8.43 million tonne (mt) against 6.98 mt in Q1FY19, registering a growth of 21%. Sales of iron ore increased to 8.67 mt in Q1FY20, reporting a growth of 28% over 6.78 mt in Q1FY19. Company posted a 21% rise net profit to Rs 1179.28 crore in Q1FY20 up compared to a net of Rs 975.27 crore reported in Q1FY19. Total income went up to Rs 3386.56 crore in the quarter under review an increase of 33% over Rs 2547.13 crore in the same period last year.

Iron ore deposits in the Donimalai mine are estimated at 143 million tonnes (MMT) and worth around Rs 40,000 crore. NMDC had leased the mine in 1968 for a period of 50 years. The lease expired on November 3, 2018.