SC panel for reservation of cancelled mining leases for state PSUs

Iron ore-starved steel mills can now look forward for supply of more raw material for their blast furnaces as the Supreme Court panel has recommended that the Karnataka government can enter into formal agreements/memorandums of understanding (MoUs) with end users for sale of iron ore.

The Supreme Court-appointed Central Empowered Committee (CEC) has recommended that leases falling under Category C mines may be reserved for state government undertakings after cancelling their licences. In its report dated February 3, 2012, the CEC had recommended that the mining leases falling in Category C should be cancelled after they were found involved in illegal mining on a large scale. “Such mining leases should be assigned in a transparent manner to the end users, based on the market value of the mineral and without any hidden subsidy,” it said in the report.

In its latest report dated October 10, 2012, the CEC said, “After considering that the MMDR Act, 1957 or the rules made under it do not specifically provide for allotment/assignment of mining leases at market value, such cancelled leases may be reserved for the state government undertakings after following the procedure provided in Section 17 (A) of the MMDR Act, 1957.”

It also said after granting the leases to state undertakings, they may enter into formal agreements/MoUs with the end users identified through a transparent process for undertaking the operations and purchasing the minerals at pre-determined prices.

“The CEC recommendation is a welcome step as it ensures supply of more raw materials to the user industries. However, it provides for sale of ore only through the e-auction process, and the private sector can only engage in extracting the ore,” industry sources said.

There are 49 mining leases in Category C, with a total lease area of 1,914.66 hectares. The annual permissible production of those leases is estimated at 5 million tonnes.

The end users (steel plants and associated industries) located in Karnataka and adjoining states and which have been using the ore obtained from the mines in the state will be eligible to participate in the transparent bidding process for carrying out mining operations and supplying the minerals.

The CEC has also stipulated that the allotment of Category C mining leases be done only after the lease-wise Reclamation and Rehabilitation (R&R) plans are prepared and the mining operations are found environmentally feasible and sustainable, either by individual lessee or by two or more lessees together.