More than two years after it was first suspended, the Centre’s efforts to make NMDC restart iron-ore mining operation at Donimalai in Karnataka has come to a naught with the State government persisting with unacceptable conditions on lease renewal.

Late September 2020, the Centre, the Karnataka Government and the Ministry of Steel had reached an agreement to extend the lease of the mine in favour of NMDC even as they agreed to set up a high-level committee to fix the percentage of royalty to be paid.

Following this, the company started mining operation in December and shut it again in 10 days after it received a notice from the State government that the mine lease has been extended for four years from the date of lease expiry, with additional 22 per cent royalty, said sources close to the development.

Technically, it means two years of the lease is already over as the mine lease expired in 2018. NMDC now wants the lease to be extended for 20 years as it does not want the uncertainty on lease validity, the source added.

Supply shortage

The Central government is keen on restarting the mine since iron-ore prices have increased sharply in the past few months due to short ssupply.

However, sources said the high-level committee promised by the Central government itself has not been formed, and it looks like another long haul for NMDC.

Seshagiri Rao, Joint Managing Director, JSW Steel, said the shortage of iron-ore supply in Karnataka still persists as the production in Donimalai has not started.

NMDC claims it will incur huge expenditure in shutting and restarting mining every three-four years.

Moreover, the company cannot commit resources to the user industry with this kind of uncertainty, said Rao.

NMDC had shut operations at Donimalai in 2018 after the State government extended the lease for 20 years with a condition that the company pay a premium of 80 per cent on the sale value of the mineral.

Last July, the Karnataka High Court ruled in favour of NMDC and quashed the condition on premium. Subsequently, in August, the Karnataka government withdrew the approval for extension of the lease and decided to auction the iron-ore mine.

Last September, the Centre amended the Mines and Minerals (Development and Regulation) (MMDR) Act to make it mandatory for State governments to renew mining leases of public sector companies for 20 years on expiry of current leases.