Date | Dec 05, 2016:

Sanjay Pattnaik, Executive Director of Tata Sponge Iron (TSIL), has been elected the national president of Federation of Indian Mineral Industries (FIMI) at its annual general meeting recently. FIMI is a national body representing the interest of mines and mineral-based industries, and has over 400 members from across the country. In an interaction with DH’s Umesh M Avvannavar, Pattnaik shares thoughts about what ails the industry, and its growth story. Some excerpts:

What is the current status of iron ore mining in Karnataka?

At present, there is a huge gap in demand and supply of iron ore in Karnataka. Owing to the cap imposed by the Supreme Court in major iron ore producing districts, the steel industry has been struggling to secure the essential raw material. Due to an acute shortage of iron ore in the state, end-users are relying mostly on imports from abroad.

The high railway freight for domestic iron ore transport makes it economical to import from abroad than transport the ore from India’s eastern region, which is something serious and needs to be looked into. At present, 32 mines are operating in the districts of Ballari and Chitradurga after implementing the R&R (reclamation and rehabilitation) measures.

What is the size and growth of the industry in the state?

The industry has been ailing for the past few years and reporting negligible growth. With the amended MMDR Act, 1957, and other measures by the government and industry, the sector is once again opening up and slowly progressing. As on date, 32 mines have been allowed to operate in Ballari and Chitradurga, with an annual production capacity of 29.198 million tonnes (MT) of iron ore and 0.2614 MT of manganese.

The e-auction process for selling iron ore in the state should be stopped now, as it was introduced by the Supreme Court’s order as a temporary measure to tackle the situation prevailing in 2013. Now with the amendment of the MMDR Act in 2015, the mining regime has significantly changed the situation and thus the system of e-auction needs to end, as it acts as an impediment to long-term contracts and mineral resource development in the state.

What are the challenges before the industry?

Mining involves numerous stakeholders, and hence, its revival depends on strong coordination not only between miners and the government, but also among the state and central governments.

Foremost of all, the annual cap of 30 MT imposed by the Supreme Court needs to be removed to allow the industry to grow. The three-pronged criteria set for limiting production in iron ore and manganese mines also needs to be revised in view of the current situation. Mines have now implemented reclamation and rehabilitation plans and mining administration has also been strengthened in the state. Free trade and removal of restriction on imports will go a long way in reviving the ailing mining industry of Karnataka.

India has the highest tax rates on minerals in the world. Effective tax-rate, the ratio of value of all amounts paid to the government to value of profits before taxes, is approximately 69% for operating mines in India compared to resource-rich nations like Canada (34%), Australia (40%), and South Africa (40%).

In addition to royalty, miners have to make several other payments such as DMF (30% on royalty for existing mines and 10% on royalty for auctioned mines), NMET-National Mineral Exploration Trust (2% on royalty), service tax (15% on royalty), sales tax, environment and forest levies, other cess/taxes by local institutions, panchayats, etc.

These taxes make the domestic raw materials costly and unviable for manufacturing, leading to imports and reduced GDP from mining.

How will technology play a role in supporting industry growth?

Technology is no doubt a game-changer as it results in improved productivity, safety, and efficient processes. The industry, as well as the government, has adopted many innovative processes. The mining industry has been deploying advanced technologies in mine-operations, exploration, automated sampling systems, real-time monitoring of its environmental footprint, as well as implementing sustainability.

On the other hand, the government has introduced online Environment and Forest Clearance system, Star Rating scheme for sustainability at mine-level, system for payment of taxes and royalties, tracking of trucks transporting ore, satellite monitoring system to detect illegal mining, etc.

What measures should the government take to help the ailing industry?

To meet the high demand from steel and sponge-iron manufacturers, it is necessary to evacuate the huge stockpiles lying in the mines, which mostly consist of less than 62% Fe and are not desired by sponge, pig-iron, or pellet units in the country. Therefore, removing the export duty on iron ore for up to 62% Fe will assist in increased export earnings as well as make space for more production of iron ore, without compromising domestic requirements. The government is yet to take a call on it.

How about granting of new leases?

Only 17 mines located in Karnataka (7), Jharkhand (3), Chhattisgarh (3), Rajasthan (1), Andhra Pradesh (1), Odisha (1) and Madhya Pradesh (1) have been auctioned under the amended MMDR {Mines and Minerals (Development and Regulation)} Act, 1957.

Is there any attempt to remove the cap on mining in Karnataka? Interlocutory Applications (IAs) have been filed in the Supreme Court by industry body KISMA (Karnataka Iron and Steel Manufacturers’ Association) and state government to remove the cap on mining.

(Source: http://www.deccanherald.com/)