Never again

The price of the Supreme Court's shutdown of mining

The Supreme Court last Thursday finally addressed the issue of iron ore mining in Karnataka, which it had shut down in 2011, causing great pain to the mining and manufacturing sectors, and helping send Indian industrial production into a long and continuing freeze. On Thursday, the court allowed 90 more mines in Karnataka to open operations, 63 of which will be able to do so only after obtaining necessary approvals from various regulatory agencies. An earlier court order in September 2012 had allowed 18 mines to resume operations, allowing in effect a total of 108 mines to operate in the state - much lower than the earlier 164. This is because the court, largely following the report of the Central Empowered Committee, has also cancelled the licences of 49 mines and suspended seven others as their survey sketches could not be finalised. It may take a further six months for iron ore production to even begin to recover. Still, this can be seen as, at least, the beginning of some form of closure to Karnataka's woes. Much, however, remains to be done - note also that the court is yet to address iron ore mining in Goa, which has also come to a near stop at the court's order. The Central Empowered Committee has barely begun its investigation there. Why this is taking so long is worth questioning.

The blame for this slowdown must also be shared, to an extent, by central and especially state governments. State governments in Karnataka and Goa allowed apparently illegal mining to flourish; and, together with the Centre, failed to implement transparent and effective regulation, allowing the Supreme Court to step in. This state of affairs must never be repeated; it is clear what the costs of this judicial intervention have been to industry and to India as a whole. Iron ore exports decreased from 117.4 million tonnes in 2009-10 to 61.8 million tonnes in 2011-12, the year the Supreme Court ban came into force - to an estimated 18 million tonnes in 2012-13. This precipitous fall caused the Federation of Indian Mineral Industries to warn last week that India would become a net importer of iron ore. Several steel plants have been forced to look abroad for supplies; JSW, for example, expects to import five million tonnes of ore this year. Karnataka's production of iron ore fell from 43 million tonnes in 2009-10 to 13 million tonnes in 2011-12, and may be around eight or nine million tonnes in 2012-13. Goa, which produced 38 million tonnes in 2009-10, has seen a similarly steep fall. This has crippled industry, particularly in South India - regional steel plants require 45 million tonnes of ore a year, and have had less than half that available for nearly two years now. For want of raw material, 22 out of 60 sponge iron plants have closed in Karnataka, and the remainder are operating at a fraction of their capacity, and with costs at unprecedented highs - the world iron ore price hit $200 per tonne last year, as Indian production collapsed. India's steel industry is the backbone of domestic manufacturing and affects all others - and the effects on prices, profitability and employment in downstream industries are clearly visible.

There is little doubt that brazen illegality in mining needed to be brought to a stop. But the time taken to resolve it - almost two years - is far too long. An earlier and speedier resolution would have reduced the adverse impact on a wide range of industries and the economy in general. Also, the initial instrument chosen to respond to illegal mining, an outright ban, was far too blunt. Since the court has nevertheless established this precedent, it is up to the executive to ensure, through improved regulation, that the threat of a similar episode in the future is removed.