Revival of mining activity in Goa would bring great relief to people who are suffering now and also give impetus for export

It may be recalled that the Supreme Court imposed a mining ban on both Goa and Karnataka due to illegal activities; later on, in the last quarter of 2013, the ban on Karnataka iron ore mines were conditionally withdrawn, resulting in revival, in a small measure, as a start, of the iron and steel industry. The steel industry in the state is still not out of the woods, and this time, for a totally different reason, that of non-availability of iron ore due to exorbitant prices!

To understand what is happening in Goa, first, let us take a look at what has happened in Karnataka, after the ban was lifted! National Mineral Development Corp (NMDC), a Government of India undertaking, is the only one, which appears to be offering iron ore fines having 61% iron content, from April 2013 till date, with a price movement of Rs2,000 to Rs2,200 a tonne. As against this, private mine owners were pricing their supplies between Rs2,250 and Rs2,435 per tonne till September 2013. But the price has literally sky-rocketed to Rs5,000 per tonne, which was never heard of before, even when the international price touched $200 per tonne (now around Rs12,600).

So, on the base price of Rs5,000, if the buyer had to add the cost of royalty, transportation, local taxes etc are included, the 61% fine ore would cost Rs7,000 per tonne!

Steel makers, in Karnataka, allege that private mine owners have formed a cartel to intentionally jack up the prices! As a result, they have now moved the Supreme Court, alleging price distortions in e-auctions and seeking a regulator for fixing the base price of iron ore. The Court will hear the case on 17^th February, a few days from now. They further allege that only NMDC are playing fair and therefore seek the appointment of a retired High Court or Supreme Court judge as the Regulator for base price fixation till the iron ore short-supply situation ends.

In the meanwhile, due to inadequate supply of iron ore, and the artificially increased prices, as many as 40 out of the 70 sponge iron makers have shut shop, and the rest are operating at a 30%-40% of the installed capacity. NMDC, unfortunately, cannot increase its production and supplies, overnight!

With this not too happy situation in Karnataka, the conditions in Goa have actually worsened due to several factors. Mining ban continues with miners hoping for an early resumption, even if conditional, by the Supreme Court, so that mining work can commence. There are two immediate problems faced in the state. First are the mountains of top soil, estimated to be around 750 million tonnes or more, lying in heaps and mounts, all over the place, and becoming an environmental threat, unless these are disposed off. Regrettably, they cannot be put back in the mines, and have to be removed elsewhere. And the only country who would gladly consume is China, which wants to import iron-rich soil. As a first step, why not the Supreme Court make a ruling that the heaps of top soil lying all over the state be either auctioned or shipped out of the country, and the proceeds simply credited to the Government of Goa? Only those that have permanently identified the lots as their own, be credited, with the sale proceeds. Rest belongs to the State. Period.

Second, we refer to the Supreme Court clearance for shipments of some 11 million tonnes of iron ore fines that have been extracted and lying, literally, here and there. Ownership and legality of holdings of these lots are subject to claims and counterclaims, and cannot be easily ascertained overnight! On top of this, there are four million tonnes of illegal iron ore lying at various plots, confiscated by the Directorate of Mines and Geology that also need to be cleared. According to Harish Melwani, a mine owner, these can be authorised for export by the Supreme Court, and the proceeds kept in an escrow account, if need be; otherwise, the realisation simply belongs to the State!

Meantime, the Supreme Court has appointed U V Singh to head a Committee that will monitor the online e-auction sale of these materials in the next 10 days or so, for which more details are expected shortly.

With the mounting pressure of lack of mining activity, and the uncertainty associated with the Supreme Court ruling that may come anytime, in regard to relaxation of mining ban, Goa Chief Minister Manohar Parrikar is in a fix. In a recent interview with a leading newspaper, he is reported to have said that "governance is the government responsibility" and economic issues should not be decided by courts. "For the illegality part, the Court can issue directions to agencies to implement them, but the policy matters have to be with the government"

Parrikar's agony in Goa is understandable. More than 100,000 to 125,000 people were employed in the mining industry; 30,000 to 50,000 people were employed in the transportation area in addition to thousands of others in other machinery and equipment handling jobs. All these people have been affected due to the ban. The loss of revenue for the Goa exchequer has been estimated to be more than Rs2,500 crore, and mine owners who have outstanding loans (estimated to be over Rs1,800 crore) are unpaid, because they cannot "sell" anything!

Parrikar has been hoping that the Supreme Court would kindly review its decision and, relax, even if conditionally, so that work can commence and Goa can come out of its doldrums.

We need to revive our export of iron ore and let not our competitors take advantage of our internal situation and push us out of the market.

Revival of Goa mining activity would bring great relief to the people who are suffering now and also give impetus for export.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)