Supreme Court cancels Goa iron ore mining leases due to hasty renewal

In a blow to the Goa mining industry, the Supreme Court on Wednesday cancelled all iron ore mining leases that had been renewed by the state government for a second time, instead of granting fresh licences.

The apex court had directed the state government to grant fresh licences in accordance with mining laws. The court said the renewal granted was “unduly hasty, without taking all relevant material into consideration and, therefore, not in the interest of mineral development”.

The court said the decision was taken to augment revenue of the state, which was not permissible.

The environment and forest ministry was also indicted. The court said the ministry “played ball by lifting the abeyance order with respect to environmental clearance. The inferences that can be drawn are quite obvious”.

The court said the ministry granted environmental clearance to 72 mining lessees “without any application of mind, mechanically, at the behest of the Goa government without considering the multiple illegalities and irregularities committed by the lessees”.

The orders were passed on a public interest petition filed by Goa Foundation against top companies, including Vedanta.

The leaseholders can carry on operations till March 15. After that, only lessees with fresh mining licences and environmental clearance can operate the mines, which will be awarded through an auction.

The state's economy is entirely dependent on iron ore mining; nearly all of the iron ore mined is exported because low-grade iron ore from the state does not have any takers in the domestic market. The mining ban would impact the job market, as it is the second-biggest industry after tourism in the state.

The Route to Goa Mining Ban
 

• Oct 2012: Supreme Court bans mining in 90 leases on Shah Commission findings
   
• April 2014: SC lifts ban but imposes annual cap of 20 million tonnes on iron ore output

• Aug 2014: Bombay HC directs Goa govt to execute lease deeds

• August 2015: Mining operations resume in Goa after receipt of all clearances

• Feb 2018: SC orders shutdown of all Goa mines after March 15, 2018

R K Sharma, secretary general, Federation of Indian Mineral Industries (Fimi), said, “It is unfortunate that the Supreme Court has set aside the ruling of the Goa Bench of the Bombay High Court. The shutRs  of iron ore mines after March 15 will cripple the state economy. But, the domestic iron ore market would not be impacted as Goa’s ore was largely exported.”

Iron ore mines turning inoperative in Goa would have a negligible impact on the export markets, as demand for lower-grade ore had collapsed, said an industry source. “Miners in Goa were struggling to find takers for their lower grade iron ore (iron content of 54-57 per cent). Buyers in China and Japan, two of the biggest export markets for Goa’s miners, are turning away from low-grade material and opting for higher grade iron ore,” he said.

Vedanta, which has 21 mine leases in Goa, produced 2.6 million tonnes (mt) of iron ore in the state and recorded sales of 2 mt in the first half of the current financial year ended September 2017, compared to 2.9 mt production and 2.4 mt, sales respectively, in the corresponding period of FY17. 

Production and sales at the company’s Goa mines were affected by the low-pricing environment. During FY17, Vedanta’s production at Goa was 8.8 mt and sales were 7.4 mt. Production in FY16 was significantly lower as the company was ramping up operations, following the lifting of the mining ban, said a company source. The company produced nearly 11 mt of iron ore across its mines in Goa and Karnataka in FY17 and had inventory of around 3 mt at Goa and 1.2 mt at Karnataka by end-September 2017.

Mining operations resumed in Goa in August 2015 after various clearances, including environmental, were secured. During September 2015-October 2017, 32.29 mt iron ore was extracted in Goa. Total exports from the state during September 2015-November 2017 were 17.64 mt. The Anil Agarwal-led Vedanta is one of the biggest iron ore players in the state. The company had planned to mine 5.5 mt iron ore this year from Goa.

The ban comes at a time when six iron ore mines in Odisha have been shut since January 1, due to non-payment of compensation to the state government before the December 31, 2017 deadline. This has created a supply shortage of around 5.5 mt in the current quarter, which led to lump ore prices rallying sequentially by around ~400-500 per tonnes in January.

The apex court had banned mining in all 90 mines in Goa in October 2012, based on the findings of the Justice MB Shah Commission. At that time, the loss to the Goa exchequer was estimated at ~350 billion due to alleged illegal mining spread over 12 years. The apex court lifted the ban in April 2014, but imposed an annual cap of 20 mt on excavation.

The apex court Bench, presided over by Justice Madan Lokur, directed the Goa government to recover amounts from the lessees according to the show-cause notices issued to them and reports of the special investigation team. The amounts due were “staggering”, the court said, citing some instances in which the lessees had to pay ~15 billion.