The Ministry of Mines has put an interim stay on Karnataka government's decision to cancel the lease given to NMDC for the Donimalai iron ore mine, till the next date of hearing. On August 17, Karnataka government had decided to cancel the lease and put the mine under auction.
NMDC had approached the rivisionary authority of the ministry with a revision application and had sought for an urgent hearing of the matter. During the hearing on Wednesday, the state government sought a week's time to prepare its response, alleging that it was yet to receive a copy of the rivision application. However, NMDC said it had submitted the application in both Commerce & Industries and Mining & Geology departments.
The company alleged that on November 2, 2018, the state government issued a letter for extension of the mining lease for 20 years and subsequently on November 15, 2018, a corrigendum to the letter was issued. The State government, through a letter on November 23, 2018, asked the company to executed the lease extension deed. The letter dated November 2, 2018 contained a condition of payment of premium of 80 per cent of the sale value of the mineral for extension of the lease.
NMDC challenged the condition before the high court of Karnataka. The company argued that the state government's order was in violation of the judgement of the court, which had earlier set aside the condition of levy of premium equivalent to 80 per cent of the average sale value of the mineral.
The company had requested for a stay on the order.
"Considering the order of Hon'ble High Court, which set aside the condition of levy of premium of 80 per cent for extension of lease and the submissions made by the Revisionists, this Authority comes to the conclusion that it would meet the ends of justice if the Impugned order dated August 17, 2019, and consequent action thereon are kept in abeyance. Accordingly, the impugned order dated August 17, 2019 and any consequent action thereon are stayed until the next date of hearing," said the order issued by Joint Secretary and Revisionary Authority, Anil Kumar Nayak.
Iron ore deposits in the Donimali mine are estimated at 143 million tonnes (MMT) and worth around Rs 40,000 crore. NMDC had leased the mine in 1968 for a period of 50 years. The lease expired on November 3, 2018.
"This event may completely change the profit dynamics of NMDC as it may have to compete with private producers and pay a huge premium to get its mines back" said an analyst.
He added, however, that uncertainty remains till clarity emerges on the renewal of Chhattisgarh mines. Even a loss of volume only from the Donimalai mine might hit NMDC's FY21 earnings and profits. However, it is difficult at present to put any target price to this uncertainty, said the analyst.