Saving sovereign wealth

Last month, there was pandemonium in the Goa Assembly with the Opposition charging the government with losing royalty of over Rs 200 crore due to rampant illegal iron ore mining in the State.

The charges levelled included the Mining Department's failure to keep proper records of ore extracted and exported.

By correlating the difference between export figures and royalty paid, 53 lakh tonnes had been exported without royalty remittance, it was alleged. Recovery proceedings have been initiated against a political bigwig, who, of course, said the land was his but the mining done by his lessee.

Soaring prices

With prices of raw material being linked to international market, iron ore prices have been soaring due to huge imports by China and others. Iron ore spot prices are already touching Rs 7,500 per tonne free on board (f.o.b) while the pithead cost comes to about Rs 300 per tonne.

The case is no different in other states. Bellary (Karnataka) is said to have a well-oiled mechanism wherein the plunder is on despite the ban the Karnataka Government had imposed on ore export.

Mining licences given to the state-owned Mysore Minerals have reportedly been transferred to private parties. Mr Narendrakumar A Baldota, Chairman and Managing Director of Karnataka-based MSPL, recently said the company had run up a Rs 5,000 crore loss as “some political people of the State did not allow us to operate the mines.”

A conservative estimate has it that the 50-odd operating leaseholders of Bellary mines had earned a total profit of Rs 3,000 - Rs 3,500 crore in the last fiscal and the State a meagre Rs 80 crore.

Farce of a ban

Lokayukta Mr Justice Santhosh Hegde had submitted his report to the Karnataka Government in 2008 on an “illegal mining empire run by two state Ministers across the border in Andhra Pradesh.” His observations were in a way vindicated by the Supreme Court-appointed Central empowered Committee last month, which visited Bellary.

Justice Hegde has openly declared that the Karnataka ban on iron ore export was a farce. Orissa is also contemplating a ban on the ore export with rampant illegal mining being reported.

No to CBI probe

However, the State has rejected a probe by Central Bureau of Investigation (CBI) which half a dozen public interest litigations had sought, stating that it had the wherewithal to curb the violation and bring offenders to book.

While the official line appears to peg the royalty evasion at Rs 10,000 crore, the Opposition said it was above Rs 3 lakh crore.

About a month back in Rajasthan's Jhunjhunu district, the public protested the transfer of District Collector, Ms Mugdha Sinha, who was said to have tightened the screws on illegal mining. The Controller General of the Indian Bureau of Mines, Mr C. S. Gundewar, is on record stating that the bureau is helpless when it came to checking illegal mining in areas which are not leased out as it comes under the State Governments' purview.

Out of the 105 forest clearances for mining given in last five years, 84 forest clearances were for private miners and only a few were given to integrated steel producers who do value addition to the minerals. Also, presently miners are liable to pay only the royalty.

APEX COURT RULING

Meanwhile, the Supreme Court has given the Karnataka Government time till March 31 to notify the Karnataka Prevention of Illegal Mining, Storage and Transportation of Minerals Rules, 2010. It has also allowed the export of iron ore lying at major ports of Karnataka since the July 2010 ban.

India is the world's third-largest supplier of the steel-making raw material, with most of its exports landing in China that has the world's largest steel industry.

Mining Ministry data indicate that iron ore production for 2008-2009 was 215.43 million tonnes of which 31 per cent were mined by public sector companies and the balance by the private.

Almost the entire production of iron ore (95 per cent) was from Orissa, Karnataka, Chhattisgarh, Goa and Jharkhand.

The Federation of Indian Mining Industries claims that only 10 per cent is by the organised players and the rest is in the unorganised space.

Because of the Karnataka ban and related issues in other States, exports are likely to see a 30-per cent drop this year over the previous year's figure of 117 million tonnes.

Production for 2009-10 is pegged at 226 million tonnes of which half is said to be exports.

The free run to shore up ill-gotten wealth may soon end with the Mining Ministry seeking the help of Indian Space Research Organisation and remote sensing agencies to get satellite images of mining areas in Orissa, Chhattisgarh and Karnataka.

The images are correlated with the mining lease coordinates for violations by lease holders. Incidentally, action has been taken in Orissa's Keonjhar district using the satellite imagery.

Further, it is now compulsory for miners and exporters involved in trading, storage, end-use or export of minerals mined to register with the Indian Bureau of Mines.

The Mines and Minerals (Development and Regulation) Act, 1957, has also been amended to empower States to inspect mines, penalise transportation and storage of illegal mined minerals, confiscate illegally mined minerals, tools, equipment and vehicles.

It is worth considering replicating the New Exploration Licensing Policy for licensing of mines, NELP has introduced a level playing field for public as well as private sector players in hydrocarbon exploration.

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