Mines ministry proposes policy changes to spur iron ore production

As the steel industry is complaining about a shortage of raw material, the ministry of mines has proposed to adopt a carrot and stick policy, to spur iron ore production.

Through the proposed Minerals (other than atomic and hydrocarbons energy minerals) Concession (Amendment) Rules, 2021, the ministry has proposed that the mining lessee will still have to pay statutory dues equal to the minimum dispatch stipulated in a quarter even if dispatch falls short. In case, the lessee fails to maintain the minimum dispatch criteria for three consecutive quarters, “the state government may terminate such lease after giving a reasonable opportunity of being heard.”

The mines ministry has also planned to incentivise a lessee for higher production. “For fully explored blocks, there would be a 50% rebate in the quoted revenue share, for the quantity of mineral produced and dispatched earlier than the scheduled date of production as provided in the tender document,” the mines ministry has proposed the Mineral (Auction) Amendment Rules, 2021.

The move comes in the backdrop of production and dispatch shortfall of important minerals such as iron ore in recent times which not only led to their price hike but also affected manufacturing of iron and steel in the country.

Keeping in mind the fact that leases granted for around 334 merchant mines including 46 operating mines will stand cancelled on March 2020, the mines ministry had allowed auction of such leases even before their lease period got over and granted the new owners permission to operate such leases without acquiring the required approvals and clearances for two years.

Still, several successful bidders of those working mines failed to start production even after the lapse of 7-8 months of auction and execution of mining leases in their favour. Further, many of the successful bidders who have started production, have not maintained the production and dispatch quantity up to the stipulated level.

“Non-operationalisation of these mines has created an acute shortage of iron ore in the country. During the year 2019-20, the production of iron ore in the country as on September 2019 was 110.95 million tonnes (MT), whereas, during the current financial year (2020-21), the cumulative production of iron ore up to September 2020 was only 76.01 MT thereby registering a decline in production by 31.5%,” the mines ministry said, justifying for adopting the stick approach.

The mines ministry is of the view that the incentive will encourage the lessee of the fully-explored blocks to operationalise the mine and start production at an early date thereby increasing the mineral production in the country.

“The objective of the amendment is to make minerals available in the market at the earliest considering that minerals are input to several industries,” it said, adding that the amendment proposals have been proposed following recommendations of a high-level committee, headed by Niti Aayog vice-chairman.