Odisha: Mining sector on the recovery trail

Odisha is poised to put behind it the disarray that resulted from the unregulated exploitation of minerals across the country

The beleaguered mining sector in Odisha is staring at a new dawn, once again throwing up the possibility of the kind of boom that had scripted a turnaround in the state's economy a decade ago.

Odisha's prized assets of iron ore, manganese, bauxite and chrome ore have catapulted it to a leading position on the country's investment map, drawing plenty of investors. Once almost in the doldrums, the state's economy felt the tectonic shift from 2003-04, when the government went on a MoU (memorandum of understanding) signing spree, mostly in the steel sector, to monetise its huge mineral assets.

But the investment trail was rocked by unregulated exploitation of minerals, pushing the mining sector into disarray and jeopardising its future.

When excess and unlawful mining between 2000 and 2010 took the proportions of a scam, the state machinery segued into damage control mode, suspending the operation of scores of mines. The slur on mining, however, was not cleared by any single masterstroke. It took a prolonged inquiry by the state vigilance department, a probe by the M B Shah Commission of inquiry, and finally by the Supreme Court-appointed central empowered committee (CEC), to clean up the Augean stables.

The winding-down of the investigation has injected some fresh air into the mining sector, which had felt stifled for the past three years.

But the state government feels that the damage to mining by inquiry commissions is nowhere as high as it is in Karnataka or Goa.

"During the course of investigation, we felt the government could take a hit of up to 70 per cent on mining revenue. But there was no complete shutdown in Odisha, unlike Karnataka and Goa. Luckily, due to the efforts of the state government and favourable reports of the inquiry commission, we are now looking at only a 20-25 per cent shortfall in revenues," said G Srinivas, the state steel and mines secretary.

He said Odisha's growth phase began from 2003-04 and it was fuelled mainly by the mining sector. Prior to this, the state had grown at less than the national average.

Mining activity in the state is at a low ebb now. Srinivas said the current scenario is due to unregulated and unchecked growth in the sector. Only 94 out of a total of 600 mining leases are operational. The state government has suspended the operation of 242 mines and temporarily discontinued 142 others. More than 200 applications for renewal of mining leases are waiting to be disposed off.

Mining revenue collection is on a downtrend since the beginning of this fiscal year. Between April and September 2014, mining revenue slumped 21 per cent to Rs 2,050 crore, from Rs 2,582.46 crore in the year-ago period.

Mining took a major blow in the state when the Supreme Court, in an interim order in May this year, announced the suspension of 26 iron and manganese ore mines awaiting second and subsequent renewal. The court held that such mines cannot resume normal operations unless the state government passes express orders under Section 8 (3) of the Mines and Minerals (Development & Regulation) Act, 1957. Together, these 26 mines belonging to Tata Steel, Steel Authority of India Ltd (SAIL), state-controlled mined Odisha Mining Corporation (OMC) and others had a combined production of 40 million tonnes. While the state government has passed express orders for eight mines, similar orders were pending for the remaining 18 leases.

The state government however is upbeat on the mining sector. "The state produced 77 million tonnes of iron ore while steel production was 12 million tonnes in 2013-14. The problem now is not ore shortage but to make it available to industries at affordable prices," said Srinivas.

An action plan has been finalised to break the raw material deadlock faced by the steel industry in the state. Steel plants based in the state require an estimated 17 million tones of ore a year.

"Our PSU, the Odisha Mining Corporation (OMC), is sitting on 35 huge leases. It is hardly running six leases - four in iron ore and two in chromite. We have chalked out a plan to scale up OMC's iron ore production to 20 million tonnes in the next three years," he added.

Srinivas said 50 per cent of OMC's production would be reserved for state-based industries and the remaining 50 per cent would be put to e-auction. "Policies and priorities for the mining sector are changing fast, but we hope that the raw material problem will be solved within six months," he asserted.