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Supreme Court panel seeks huge cap on Goa iron ore production

Thursday, 27 March 2014 - 8:00am IST | Agency: dna

The Supreme Court appointed panel's recommendation of capping iron ore production in Goa to 20-27.5 million tonne (mt) per year, almost half of Goa's peak iron ore output of 56 mt, is much lower than industry's expectations.

Top miners including Sesa Sterlite are likely to be hit if the apex court goes ahead with the panel's recommendations.

The expert committee set up for macro-environmental impact assessment study on Wednesday submitted its interim report to the SC, in which it observed that "Mining at the rate of 20 to 27.5 mt per annum appears sustainable," adding "In fact, our data shows that mining is sustainable to the tune of 27.5 mt."

"Goa miners were expecting the production cap to come around at 40-50 mt, the cap suggest by court panel is much lesser than the expectation," U R Acharya, vice chairman of Federation of Indian Mineral Industries, said.

Goa Mineral Ore Exporters' Association executive director S Sridhar said several ore miners from the state had made suggestion for 40-50 mt.

"This is just a recommendation, everything depends on what figure the SC finally comes up with. There are various other reports which have recommended slightly higher output limit. The apex court is likely to consider all the other reports before the verdict," he said.

Indian School of Mines, Goa government and some other agencies have also submitted their reports to the Supreme Court. Indian School of Mines's report which undertook studies over past 2-3 years had suggested the cap of 25 mt.

Goa, which was once the largest iron ore producer, was slapped a ban in October 2012 following rampant illegal mining in the state. Huge demand from China had led to boom in ore mining in the state after 2006. Sridhar said before this period Goa on average used to produce 30-35 mt ore annually.

He expects the apex court to lift the ban from the state by first week of April, though mining operations may restart only by September.

"Actual mining may start by September-October only as the environment clearances and other approvals would take time. Monsoon may also impact," he said.

Any mining activity in Goa should be "strictly monitored and regulated" by the state until a scientific study is completed, the six-member panel said, which is likely to take 12 months.

It is yet unclear on how the production capacity of ore miners in Goa would be cut.

In Karnataka, the SC appointed panel had divided the mines in three categories based on the extent of illegal mining.

"Although no categorisation has been done, same criteria is likely to be followed in case of Goa with some miners likely to see drastic cut in production," Giriraj Daga, senior analyst with Nirmal Bang Securities said.

Sesa Sterlite, erstwhile Sesa Goa, is likely to be hit the most as the before the ban the company had annual production of 14 mt. "I expect Sesa to produce 8 mt in fiscal 2016 post the ban in lifted, this may result in more lay-offs at the company," Daga said.

When contacted, P K Mukherjee, executive director of Sesa Sterlite, declined to comment.

Following the mining ban, ore exports from the state have dropped to zero from 43.27 mt in 2011. Goa used to export 70.08% of India's iron ore. Due to the ban, India which was once the third-largest exporter of ore has dropped to tenth position. This fiscal's ore exports are expected to come down by over 20% to about 13.5-14 mt over last fiscal.

Analysts are hoping that eventually the SC will allow resumption of ore export unlike the current practice of selling ore through e-auctions. Goa has so far seen two rounds of e-auction of its stockpiles of 15 mt. "The auction route if continued after resumption of mining may not see much of international buyers, especially Chinese customers due to current oversupply situation," Daga said.

Due to the lower quality of ore domestic steel makers have not actively participated in these auctions. Goa mainly producer lower quality iron ore having Fe content 54-56%, which currently fetches around $75-80 per tonne.

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