Steel Ministry in talks with Karnataka govt to resolve Donimalai mine issue

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The Steel Ministry is in talks with the Karnataka government to resolve the issue of Donimalai iron ore block where NMDC suspended operations after the state decided to impose 80 per cent premium on sales from the mine, according to sources.

Representatives of ministries of steel and mines, state-run NMDC and the state government met at Udyog Bhawan late last week to discuss various issues arising out of the impasse, sources said.

An action plan required to be put in place to compensate for shortfall in iron ore production resulting from delay in execution of the mining lease in Donimalai was also discussed between NMDC and the Karnataka government.

"Talks are on between Ministry of Steel, NMDC and government of Karnataka to resolve the issue," a source said.

The matter is expected to be resolved in the coming week, sources said.

Last week, NMDC said it has suspended iron ore-mining at the Donimalai mine in Karnataka following the state government's decision to impose 80 per cent premium on the iron ore sales from the mine.

The state cabinet had extended the NMDC's mining lease for the block with effect from November 4 but with an 80 per cent premium on ore sales from the mine, according to Karnataka Mining Secretary Rajendra Kumar Kataria.

The Karnataka government has indicated that it was in the process of calling for fresh tenders for Donimalai mine and might go in for auction in case NMDC did not sign the contract agreeing for 80 per cent premium in the next three weeks.

With 80 per cent premium, NMDC would be losing Rs 1,348 per tonne and may result in a loss of Rs 9.44 billion per annum as it mines about seven million tonnes of iron ore per annum from Donimalai, the state-run miner contended.

P R Tripathi, former CMD of NMDC has said the imposition of 'heavy' premium on a public sector undertaking is not tenable according to the law.

Kataria has said the state in the recent past had auctioned 12 mines where the weighted average of the premium was more than 110 per cent and NMDC also participated for mines for which it offered 95 per cent and 105 per cent as premium.