Feb 25, 2013 03:46 PM IST | Source: CNBC-TV18

SC may allow Sesa Goa's K'taka mines to resume operations

The Supreme Court may soon allow Sesa Goa‘s 6-million-tonne Narrain mine in Chitradurga to resume operations.

The Supreme Court may soon allow Sesa Goa's 6-million-tonne Narrain mine in Chitradurga to resume operations, which had stopped mining iron ore after the apex court banned mining in Karnataka in August 2011.

Supreme Court is likely to accept Central Empowered Committee's recommendation, made in the last week, for allowing all mines in category A and B to resume operations. Sesa Goa's Narrain mine falls in to the category B. The apex court is going to hear the Karnataka as well as Goa mining case continuously for the next three days.

Mining ban in Goa has heavily impacted the state's economy, which gets almost 50 percent of its revenues from export of iron ore. In an interview with CNBC TV18, P K Mukherjee, Managing Director, Sesa Goa explains effects of ban on Goa and also discusses some solutions to improve the situation.

Below is a verbatim transcript of the interview:

Q: Can you tell us what was the outcome of the Supreme Court hearings that were lined up last week?

A: Last week nothing has happened as far as iron ore mining is concerned. At fag end of Friday, Karnataka matters have started which is supposed to be going on from tomorrow morning. Although, I think during that last half an hour of Friday amicus curiae had told that there is no problem in accepting the Central Empowered Committee (CEC) report which says to grant resumption of mining for all A and B categories. So that takes our mines which are in B category also into account. Tomorrow morning onwards Karnataka matter is supposed to be dealt with. Various other issues are also being brought in by other counsels. So let us see how it pans out tomorrow onwards.

Q: Are you getting a sense that perhaps from hereon things will be speeded up? Do you have some idea as to when at least in Goa things will come back into shape and you will be allowed to mine considering that now there is a serious Current Account Deficit (CAD) issue as well?

A: The matter is in Supreme Court and it was kind enough to understand the importance of the matter. That is why last week they have set three days continuously in the forest bench which was not the case before. This week also apparently they have given three days continuously, Tuesday, Wednesday and Thursday. So after the Karnataka matter is dealt, Goa is in line. No effective hearing has taken place on Goa, so I cannot take a guess.

As far as your other point is concerned regarding the impact - it is known from the very beginning that what impact of such a big lock on Goa mining would be. Goa mining is totally export oriented because there are no takers in India.

22 yrs on, closed Sesa Goa mining site turns a shade greener

Apart from huge CAD, fiscal deficit, effects on foreign exchange reserves, another important aspect to take in mind here is that this market has been developed over the decades with very painstaking efforts by Goan miners. As you know Goa is mining for last six-seven decades,  while Japan, South Korea, Europe, besides China has been mining in the last decade or so. This market has been developed very painstakingly and nobody is waiting for the supplier as to when they resume supply. That is a huge concern and I think all of the planners and administration people including the court understand that and that is where the urgency is.

Goa is a small state, but it is still a state and state's economy is hugely impacted. One-third of the population is reeling under uncertainty. 25 percent of the broad state domestic product has gone and one-third of the state’s revenue has gone, so this is a huge issue.

In case of Goan mining for your audience I must tell almost 50 percent of the revenue goes to the exchequer in the form of export duty, government royalty and in the form of income tax.

Q: Do you think as and when you are able to mine and start exporting will you find Indian iron ore selling at a discount because of the risk premium?

A: It is more likely than not.

Q: You indicated that the Supreme Court will be hearing the Karnataka mining ban case till Thursday. Are we likely to get a resolution on Thursday itself or the resolution on category B mines is not going to come so quickly?

A: I am optimistic from the very beginning. It is a matter of time only. As far as our mines’ resumption is concerned, we must tell everybody one thing that Supreme Court is allowing the resumption of mining, but there are various other approvals including the Ministry of Environment and Forests (MoEF) approvals which are all lapsed, also needs to be in place. We are also requesting Supreme Court to give an appropriate directive to those ministries to give a temporary permit or something like that so that we can resume the operations fast.

Q: How long will these other approvals take, the likes from an MoEF? While the approvals are still coming through how high is the likelihood of you all getting a temporary license to go ahead and start mining?

A: As per the laid down laws of the land on expiry of any licenses you are supposed to apply for renewal one year in advance which in our case we have applied 16 months in advance. It is unfortunate that the concerned authorities have not processed those applications because they were under the impression that Supreme Court has banned it, so we have got nothing to do right now, but the matter has started being processed.

After Supreme Court has intervened and told that we have never told that no processing of applications should be done. However, it takes its own time. Being an Indian we know, in India these government approvals do not get done overnight. At state government level our forest clearance has been processed. Now it has to be moved to the central government MoEF and then it has to ultimately clear.

So that is why there is something called Temporary Work Permit (TWP). That is to be given by the MoEF for a defined timeframe, maybe six months or so or three months of so and for which we are requesting Supreme Court to issue an appropriate directive to MoEF to give us the TWP for that.

Q: Do you think that you will get some inventory liquidation permission from the court in Goa at least?

A: I am optimistic and we are hopeful. As I have spelt in brief that impact in Goa is huge and some economic activity on the mining front has to start very fast.

Q: Are you looking at starting your pig iron operations through imported iron ore?

A: This is always an option for us to evaluate. This is pure economics. We are running our pig iron operations in a very constrained way because of the iron ore availability issue as well as high cost. So this is an economic consideration which we are continuously evaluating.

However, currently as you know the iron ore price in the world market has also gone up in last couple of months and that is why at the moment in spite the domestic price is very high, economically it does not make much sense, particularly considering when you have to import you have to import a shipload of ore which is a big quantity as far as our pig iron plant is concerned.

Follow us on
Available On