No information from Karnataka: NMDC on amendments to mining lease extension

Mining major NMDC on Tuesday said it has not received any communication from the Karnataka government on non applicability of recent amendments on extension of mining leases. 

The Central government-owned company's Donimalai mine in Karnataka remains non operational since 2018 after NMDC and the Karnataka Government got into a legal battle. While extending the mine's lease, the earlier Congress-JDS-led state government decided to levy a premium equivalent to 80 per cent on the iron ore extracted. NMDC did not agree with the condition and stopped mining operations in November 2018. 

The company moved to the court against the decision, and received a favourable order from the Karnataka High Court that struck down Karnataka government’s demand for premium as a precondition for lease renewal. While the public sector miner was planning to start the operations, the new BJP-led government decided to cancel the lease.

In October, the Centre government through a Gazette Notification amended rule 3 (sub-rule 2) of Mineral Rules, 2015 which replaced the words “may, for the reasons to be recorded” to “shall, for the reasons to be recorded”, making it effectively imperative for the state government to renew the mining lease of a government company. This meant that the Donimalai lease will be renewed at no additional cost to NMDC, setting a precedence for upcoming renewals.

N Baijendra Kumar, CMD, NMDC, today tweeted saying "country shouldn't be deprived of 7 MT of iron ore of Donimalai during disruption time." He said no communication from the Karnataka government on non-applicability of recent amendments on extension of mining leases has been received even as the Chattisgarh government has already renewed lease for 39 MT iron ore mines at Bailadela under the same rules.

He added the extension of Donimalai is sub judice in Mine Tribunal. Notification of the Karnataka government for auction is stayed. It is mandatory now for the state government to renew the existing leases to the PSUs, he said. 

"NMDC is very sure of starting Donimalai operations very soon. Legally and morally NMDC is on the positive side," he said.

In 2018-19, NMDC’s overall production was around 33 million, including around 2.5 million tonne (during five months of the operational period) from Donimalai. The company stopped production due to the dispute and increased capacities from Chhattisgarh.

NMDC expects to close 2019-20 with production of around 33-34 million tonnes and hopes to increase it to 34-35 million later, in spite of not having Donimalai.

If Donimalai comes in, there is an advantage of an additional six million tonne, and it would take the production to 40 million tonne.

Besides, there was a restriction on the Kumaraswamy iron ore mine, which is adjacent to Donimalai. Kumaraswamy could only produce seven million tonnes. Recently NMDC has got Indian Bureau of Mines clearance to go up to 10 million tonnes of capacity in this mine.

An analyst said with around 32.5 million tonne production, its turnover was around Rs 12,000 crore.  For 40 million tonne, turnover will be growing to around Rs 15,000 crore at the rate prevailing during the first half of 2019-20.