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Mining Leases Won’t Be Extended, Odisha, Karnataka Ready To Call Bids, Says Government

A delay in auction may disrupt supply of raw materials like iron ore.



A worker holds a handful of iron ore pellets at the Yeristovo and Poltava iron ore mine, operated by Ferrexpo Poltava Mining PJSC, in Poltava, Ukraine. (Photographer: Vincent Mundy/Bloomberg)
A worker holds a handful of iron ore pellets at the Yeristovo and Poltava iron ore mine, operated by Ferrexpo Poltava Mining PJSC, in Poltava, Ukraine. (Photographer: Vincent Mundy/Bloomberg)

India will not extend mining leases expiring next year and will soon invite bids amid worries that a delay may disrupt supply of raw materials like iron ore.

Mineral-rich Odisha and Karnataka will soon invite bids to auction mines—most of which supply iron ore, Anil Mukim, secretary of Ministry of Mines told BloombergQuint. The government won’t extend the lease period of the mines which are going to expire by 2020, he said. “MMDR [Mines and Minerals Development and Regulation] Act does not permit it.”

“We are in talks with the Environment Ministry to fast-track clearances for these,” Mukim said. “Auction process will be completed before March 2020.”

Leases of 329 mines are set to expire on March 31, 2020, according to Ministry of Mines’ website. Of these, 48 are working and 281 are non-working. Miners had asked the government to extend the lease period as a delay could disrupt a third of India’s iron ore supply.

The closure of mines will hit production of about 50-60 million tonnes of raw material, mainly iron ore, according to BK Bhatia, joint secretary general at Federation of Indian Mineral Industries. Manganese and chrome ore will also get affected, he said.

According to India Ratings and Research, licences of about 288 mines will expire by March 2020—lower than the government’s estimate. Of these 59 are under operations, a majority are iron ore mines in Odisha and Karnataka with around 85 million tonnes of approved annual capacity. A delay in initiating the auction until the latter half of 2019 country could affect timely completion of the bidding process as it on an average takes three to six months, it said in May.

Auctions have not been delayed and everything is on schedule, countered Mukim. “In the last four years, 65 auctions have been done and four mines are already operational,” he said. “This is big because earlier clearances used to take a lot of years for a mine to be operational.”

Steel Sector Impact

While India’s Ministry of Steel has set a target to ramp up the country’s steelmaking capacity to 300 million tonnes by 2030-31, import of iron ore rose to 15.89 MT in 2018-19 compared to 5.4 MT in 2017-18, according to the Ministry of Commerce data.

There would be an adverse impact on the steel sector subsequent to expiry of leases due to crunch of the raw material availability, Bhatia said.

Steel plants which are dependent on supplies from non-captive mines will have to resort to imports leading to rise in production cost, he said, adding that such mines are not likely to resume production before two-three years even after their successful auctions. Companies like Jindal Steel and Power Ltd. and JSW Steel. Ltd. will be affected if the supply is disrupted.