Government Amends Mines & Minerals Act To Prevent Disruption Of Iron Ore Supplies

The government has amended the Mines & Minerals (Development & Regulation) Act to ensure smooth transition of the iron ore mining leases that are expiring this year without delay.

All statutory clearances, including those related to the environment, of the outgoing leaseholder will be deemed transferred to new leaseholders, which will be valid for a period of two years, according to the amended law.

“The government has amended MMDR Act, 2015, in consultation with all parties concerned and state governments to seamlessly transfer 20 statutory clearances to new successive bidders,” Coal Minister Pralhad Joshi said at a press conference in Delhi today. “Securing these clearances to resume production, in normal course, he said would have taken two years, but now the same mining plan and clearance would be transferred before their expiry (March 31).”

India was projected to face a shortfall of nearly 60 million tonnes of iron ore as it auctions 36 working iron ore mines across states, including the mainstays Odisha and Karnataka, before March 31. These mines contribute about 28 percent of the country’s total iron ore production, a key raw material used in steelmaking, according to a report by the Ministry of Mines.

The latest amendment is an important development and in line with bidders’ expectation given that securing fresh environmental and forest clearances would have only elongated the production period for the new bidders, leading to a sharp escalation of iron ore prices and affect the steel industry.

Shares of NMDC Ltd., India’s largest iron ore miner, declined nearly 5 percent today. Sajjan Jindal, chairman of JSW Steel Ltd., lauded the move and said it would make the steel industry more aggressive and competitive.

Some analysts, however, still expect iron prices to go up. Amit Dixit, assistant vice president of research at Edelweiss Securities, said that although a disruption in iron ore supplies may not happen, cost escalation cannot be ruled out as these mines would be leased out at premium in the upcoming auctions.

NMDC’s shares may remain under pressure, according to Sumangal Nevatia, senior analyst at Kotak Securities, as this development pretty much douses incremental fears of disruption on the back of a shortage of iron ore for a long period.

Coal Mining

The existing MMDR Act allows government to auction coal and lignite mining licences only to companies engaged in iron and steel, power and coal washing sectors.

But the recent amendment removes the end-use sector restriction, paving the way for auction of coal blocks for commercial mining purposes. Still, most brokerages see limited impact of this development on Coal India Ltd.