The amendment in two clauses could open up over 500 iron ore mines, something that the steel industry is pushing for. Miners are lobbying against it
A war of words has ensued between steel companies and commercial iron ore miners, just a day before the deadline for feedback on a proposed amendment in the Mines and Minerals Development Regulation (MMDR) Act.
The amendment could possibly lead to the miners losing control of over 500 iron ore mines, which will then be auctioned. The last day for feedback is September 3.
Both the sides have for the last few days traded charges. "While on the one hand these miners generate up to 80 percent margins, state government get nominal revenue from them. The amendment will ensure that the governments auction the mines, helping them generate high revenues," said a senior official from a private steelmaker.
On the other hand, a senior official from the mining sector said miners have already spent money on acquiring rights for these mines. "They have done so according to the law. Now why should their rights be taken away?" he asked.
The conflict underlines the importance of mines as steel companies, especially JSW Steel and AM/NS - formerly Essar Steel - look to ensure self-sufficiency in the critical raw material used in steelmaking. The miners though want to make the most of their ownership, as prices for the raw material has inched up in recent months. India is the second-largest steelmaker in the world.
The clauses and the conflict
The proposed amendment is on clauses 10A2(b) and 10 A2(c) of the MMDR Act, 1957.
The first clause allowed an entity to acquire a mining lease and own it without a sunset clause. The second clause, 10A2 (c), allowed the lease owner to get the environment and forest clearances within two years, thus expediting the development of the mines.
A government notice on May 16, inviting suggestions, cites Section 7 of MMDR Act that provides for a maximum five years for completing the prospecting operations, a process that is done before clearances are given. That five year-period got over on January 12, 2020.
But with many of these mines under litigation, these can't be auctioned by the states. The amendment, which will lead to the removal of the clauses, will get the mines on the auction table, something that the steelmakers are pushing for.
Indian Steel Association Secretary-General Bhaskar Chatterjee, while advocating for the amendment said this will generate up to $250 billion in revenues.
The miners though have another take on the issue. "It is not that the miners have not applied for the permissions. But the states have been slow in giving the approvals," RS Sharma, Secretary-General, Federation of Indian Mineral Industries, told Moneycontrol.
Steelmakers don't agree to that. "The miners have internationally gone slow, to limit the supply of iron ore in the market and keep prices high," said a senior executive, on conditions of anonymity.
Miners contend this. An official from a mining company said that iron ore has been piling up in Odisha and Jharkhand. "Steelmakers are not buying from us, and nor are we being allowed to export," he said. The steel industry official quoted above, disagreed, saying, "These iron ore are of low grade, which we don't use."
Even as the debate goes on, eyes are now on the government.
If the amendments go through, the mines will be put to auction. If the recent auctions are any sign, the competition will continue to be high for the new leases too. JSW Steel, which has been the most aggressive bidder, won some of the leases at 110 percent premium.
"It is clear that the smaller miners won't be able to match these kinds of bids," said an industry official.