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LATEST NEWS UPDATES | Goa's Mining Logjam -Pamela D’Mello

Goa's Mining Logjam -Pamela D’Mello

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published Published on Feb 27, 2015   modified Modified on Feb 27, 2015
-Economic and Political Weekly

 

The stage is all set for the resumption of iron ore mining in Goa after it was suspended in the state in 2012, to curb its indiscriminate and illegal mining. The Goa government's decision to renew the mining leases comes at a time when the economics of iron ore mining have changed and environmental concerns have gained more prominence.

Pamela D'Mello (dmello.pamela@gmail.com) is a Goa-based journalist.

The state government of Goa announced in October 2014 that it would initially renew 50 iron ore mining leases, declared lapsed since 2007 and suspended since 2012 following an order from the Ministry of Environment and Forests (MoEF), suspending environmental clearances to 139 mining leases. This has been done in response to the Supreme Court's order in April 2014, permitting the conditional resumption of mining in Goa with a cap of 20 million tonnes. The court has also asked for a mechanism that will monitor the environmental impact of mining on Goa's ecology.

However, before 12 January 2015, when the ordinance amending the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) came into effect, the Goa government fast tracked renewals for 87 leases of the 90 mines that were working at the time of closure in 2012. These include leases run by mining majors, such as the publicly listed Vedanta-owned Sesa Sterlite as well as family-run mines such as Sociedade De Fomento, V M Salgaocar and Brothers, Chowgule and Company, Bandekar Brothers etc. Some of these 87 mines had been red-flagged by the Justice M B Shah Commission (set-up by the central government to look into illegal iron ore and manganese mining in Goa) and the Supreme Court's empowered committee. The 87 leases renewed before 12 January give the leaseholders a 20-year operational period before being auctioned according to the new government policy of auctioning mines. Those renewed after 12 January will be auctioned in five years as per the ordinance.

However, the repercussions of these renewals, which will have to get environmental clearance, are still to be evaluated. They come at a time when the economics of iron ore mining have changed, raising questions about viability. They also come at a time of continuing concern about the impact of mining on Goa's fragile environment.

Goa's fully export-oriented iron ore mining industry is responsible for 18% of the revenue of the state. Bringing it back to life with the partial lifting of the ban will not be easy. International ore prices are down from $120 per metric tonne in 2007 to $40 in December 2014. In addition, mining companies have to pay 30% export duty and 10% of the sale value to the Goa Iron Ore Permanent Fund. Two years of inactivity have also cost Goa's mines in terms of share of the market, as Australia and Brazil have filled the vacuum through increased production.

The state government and the mining industry have sought reduction of the export cess in the forthcoming Union Budget for 2015-16 and are hopeful this will come through. A monitoring and tracking mechanism for regulation has been set in place.

The state government is also facilitating and negotiating industry concerns about environment clearances with the MoEF by arguing that urgent resumption is needed to ease the financial strain on the state economy. The process, however, is not devoid of controversy. The Goa Foundation - the environmental non-governmental organisation whose petition before the Supreme Court halted mining - has dubbed the renewal process opaque. Its Right to Information (RTI) petition to examine lease orders, was turned down.

In April 2014, the Supreme Court, in response to the Goa Foundation's writ petition, had ruled that all mining leases had expired in 2007. It directed the state to take a decision on the leases in accordance with the MMRD Act. It also ordered the confiscation of 15 million tonnes of extracted ore lying at jetties. A quarter of this was e-auctioned under a Supreme Court appointed monitoring committee, fetching the state government Rs 600 crore in 2014. This process is now stalled because of low international demand.

Though the Goa Foundation pressed for public auctioning of leases or nationalisation by a state-owned corporation, the state government justified its current decision to renew pending applications, as articulated in the Goa Grant of Mining Lease Policy, 2014. This document cites the post-ban economic downturn, investments in labour/machinery by current leaseholders, the need to keep out out-of-state "mining mafia" and an August 2014 Bombay High Court (Goa bench) order directing processing of 28 lease-holdings that paid stamp duty during the ban period, as an "intervening factor" to pursue conditional second renewals.

The leases were slotted into three categories; those with minor offences like non-payment of dues, those with violations under Rule 37 and 38 of Mineral Concession Rules (MCR) 1960, but which could be penalised with fines (notices sent to 53 leases), and leases with major violations that were to be rejected.

There is some haggling over increased registration fees and transport cess dues, and after that gets resolved, the deeds will be executed. Leaseholders will seek reactivation of environment clearances and before resumption will get mining plans approved by the Indian Bureau of Mines (IBM). The state government has, however, taken the precaution of listing several conditions for each lease renewal, including subjecting them to Supreme Court conditions on upper limit production caps, the final outcome of the enquiries underway by a special investigative team (SIT) of Goa police examining the allegations of the Shah Commission, Public Accounts Committee (PAC) report etc, and a 17-member chartered accountant team looking at revenue leakages.

Tussle Between Centre and State

The miners and the Goa government, which is aligned with the politically, economically and socially powerful mineral exporters, have always found themselves in a tussle with central government authorities over mining exports and leases. Political and economic negotiations were easier when the same party ruled the centre and state, but became difficult when the parties were different.

The tussle goes back to the early post-Liberation (1961) period, when the central government, through the Indian Bureau of Mines (IBM), attempted to treat the 596 valid mining "concessions" granted in perpetuity by the former Portuguese rulers, as "mining leases" under the Mines and Minerals (Development & Regulation) Act, 1957 (MMDR Act) and collect dead rent on the same. Several IBM orders and MMDR amendments were successfully challenged by miners before the Bombay High Court, until the centre passed the Goa, Daman & Diu Mining Concession (Abolition and Declaration as Mining Lease) Act on 23 May 1987, cancelling all concessions and treating them as deemed leases just days before granting Goa statehood on 30 May 1987. The concessionaire's challenge of the Abolition Act is currently still pending before the Supreme Court.

By November 1988, 379 leaseholders filed first renewal applications before a cut off date, while an equal number filed second renewal applications in 2006 for leases that were to expire in 2007. The state government was unable to fix an acceptable level of stamp duty, the renewals remained pending, and functioned under a "deemed renewal" interim clause, until the Supreme Court adjudged them as illegal in 2014.

Export or Domestic Use?

This contradiction has always been the underlying issue in the tussle between Goa's ore exporters (with clout with the state government) and the central government and domestic steel industry. It was also reflected in the Shah Commission report. The report clearly stated that "the commercial objectives of a few leaseholders to earn profit at the cost of society and natural resources should not be encouraged" and suggested that the Ministry of Mines, Steel, Commerce and Industry should ban exports to preserve the country's resource base.

In contrast, the Goa Mineral Policy 2013, a document that largely reflects the thinking of the ore exporters, suggests this is a non-issue since, unlike high grade Odisha, Karnataka and Jharkhand ore, "Goan iron ore is not used in Indian steel industry due to its low Fe content (56-58 %)" and domestic value addition opportunities are minimal. The policy underscores the importance of Goa's export industry to its economy (contributed Rs 980 crores in 2010-11, or 18% of tax and non-tax revenues) and makes a further case to differentiate Goa's reserves from high grade ore of other states. It complains that policy decisions about Goa exports are "largely influenced" by the Union of India, disregarding this difference, and "discouraging exports" by "ad-hoc" increasing export duties (six times in a 15 month period) from 5% until 2011 to 20% and later to 30% in March 2013 and by the MoEF imposing bans on new mining areas in 2010-11. Besides, an estimated Rs 4,000 crores annually collected as duty "is not shared by the Union with the State of Goa". It notes that the National Mineral Policy 2009 "has made export a third priority after import substitution and value-addition in that order".

The Supreme Court ruled out banning exports, but imposed an interim annual cap of 20 million tonnes on extraction (other than from dumps), until its expert committee submits a macro Environment Impact Assessment (EIA) to determine sustainability and inter-generational equity. The state's suggestion of a 45 million tonne cap was rejected, but the industry itself is hopeful of an upward revision, if it can improve on ground infrastructure -essentially a dedicated mining corridor road that has already attracted flak for involving the diversion of still more forestland.

Environmentalists argue that exports to foreign nations like China (who preserve their own reserves) can hardly justify the massive destruction of forests, pollution of rivers, ponds and fields that open cast mining involves. Through the 1980s and 1990s, exports averaged 14 million tonnes annually, far less than the 54 million tonnes it peaked to after 2000 that triggered the environmental and social crisis.

Shah Commission

The Shah Commission, appointed to probe illegalities, went through the industry's operations with a very fine toothcomb and opened a can of worms. Its report revealed how the industry, including the state's mining barons and its political heavyweights, were indulging in questionable practices.

The dark side of Goa's mining industry had earlier sporadically manifested itself in strong-arm takeovers of private jetties and mines from previous sub-lessees, using bouncers and musclemen; forging of wills; creating inter-family feuds between heirs of concessionaires; manoeuvres to control mine managements and muscle out partners. The public remained largely clueless about the backroom business machinations of the upper echelons of its respected citizenry, until the Public Accounts Committee, the three Shah Commission reports and the Centrally Empowered Committee of the Supreme Court laid bare some of it, and sought further investigation.

Mining Dumps

The industry, lessees and its major association, the Goa Mineral and Ore Exporters' Association, repudiated the findings of the Shah Commission on most counts. They claimed they were not legally represented and baulked at its blacker than black projection of the industry.

They denied encroachments, pointing out that the areas used for rejects/overburden storage had been rented from private owners/government and were not directly owned by leaseholders. They said that these were necessary for optimal utilisation of lease land to "win minerals for the country". The Supreme Court, in its judgment on the Goa Foundation petition 435/12, however held that unauthorised dumping outside lease areas without environmental clearances was not permissible and required payment of royalty for its removal from the lease area. A report of its appointed expert committee to decide on how mining dumps (estimated at 764 million tonnes strewn outside leases, of which an estimated 20% or 150 million tonnes is projected as saleable) should be dealt with has been filed before the Supreme Court, awaiting its perusal.

Miners have their own plans to export and monetise some of their dumps as articulated in the Goa Mineral Policy 2013. Dumps were "worked" during the height of the "windfall" years (2007-2012), when even low grade erstwhile rejects of 45% Fe became saleable to China. That market has since been lost, but not indefinitely.

Dump handling had become controversial in the "windfall" years, with established miners blaming the former Digamber Kamat-led Congress government for permitting a laissez faire environment. Some 400 fly-by-night traders zoomed in on the rejects market to ship overseas, clogging roads and leading to a public outcry. Dump handling was banned in late 2011, but not before some 20 million of the 54 million tonnes exported at its peak, came from dumps. The new government threw out excess traders, trimming the list down to 40.

Eco-sensitive Zones

Though industry and the state government is now seeking reactivation of the MoEF granted environmental clearances, environmentalists are expected to closely monitor the process, since the environmental clearances had come in for much criticism. Following the criticism, the MoEF had appointed an expert appraisal committee to reassess the 137 clearances issued. The summary report had recommended revocation of 41 clearances to leases within one km of protected areas, a further 29 leases for giving misleading information, besides identifying leases that operated without fulfilling conditions laid down.

From being a completely unregulated industry in the 1960s that paid no rent and used primitive technology, the mining industry today protests against the plethora of environmental laws it now comes under. However, the devastating footprint of indiscriminate mining finds it few sympathisers in the state. Mining has impoverished and displaced tribal and interior villages by choking subsistence agriculture, plantations and daily living. The industry has legally resisted the steady shrinking of mining areas. But the Goa Foundation has successfully litigated and obtained apex court orders to implement mining bans within national parks and sanctuaries (in 2000); within one km of the same (in 2006); and mandatory National Board of Wild Life Standing Committee permits to operate within 10 km (in 2006). That green groups have managed to get the Netravali and Mhadei Wild Life sanctuaries notified during a brief period of President's rule in 1999, and are currently attempting to prove tiger presence in the Mhadei sanctuary area to have it upgraded to a reserve, is indicative of the ongoing tussle.

Over the past months, there have been several minister-to-minister consultations between centre and state. The MoEF's notification of a one km eco-sensitive zone around sanctuaries is being resisted by the state government, which wants a zero ecologically-sensitive Zone (ESZ) or provisions to phase out 32 mines in a one km ESZ over ten years.

The issue is further log-jammed with the state government objecting to both the Madhav Gadgil Western Ghats Environment Expert Panel (WGEEP) report and the High Level Working Group (HLWG) report under K Kasturirangan, since both would adversely affect mining in the Western Ghats region. Though the MoEF has been directed by the National Green Tribunal to expeditiously declare final notifications for ecologically sensitive areas (ESA) for six states, ground level surveys have yet to be carried out in Goa. The Save the Western Ghats Movement in Goa places its hopes in the judiciary to prevent whittling down of the ESA. It accuses the government of "honouring" environmental and mining violators with renewals, and confusing villagers that all industry and development will halt in the ESA, when only red category industries, including mining would be banned. Mining's contribution to the state revenue is overrated they assert. It generated Rs 980 crores in royalty only in two financial years from 2010-12. Prior to that, Rs 30 crore royalties were generated a year on average.

Truckers, Barge-Owners and Migrant Workers

While mining hit the agriculture/plantation economy hard, it had strategically built a support base of truckers, machine contractors and owners of river barges, creating a deep divide between anti and pro-mining villagers. In the downturn years, the industry was thus able to minimise its liabilities, having externalised major costs of transport and machinery. During the ban, the industry had virtually no liabilities, aside from office staff at headquarters (estimated at just 3,000 people across industry). It employed out-station mining engineers and workers on contract, who were laid off in the hundreds. Most returned to their home states while locals were reabsorbed in other sectors of the economy. The state government and the public exchequer were left to work out a package for truckers and barge-owners who were burdened with bank debts.

Resentment is mounting as a third season goes by without resumption of mining. The earliest projections for a staggered start are March 2015. Frenetic mining and transportation in the windfall years had galvanised downstream establishments catering to 20,000 trucks, machinery, barge building industries and an army of migrant/contract workers, creating a ripple effect on the economy of those areas, and indirectly providing employment to 1.5 lakhs according to government estimates. These people have since fallen back on an agrarian and government job economy, with all but the more hopeful waiting for a resumption that is unlikely to be the same.

When mining resumes, it is likely to be far more regulated and major companies have already indicated that operations would have to shift to larger trucks, making the current ones redundant.

References

Department of Mines, Directorate of Mines and Geology (2013): "Goa Mineral Policy, 2013", Panaji: Government of Goa, http://www.goadmg.gov.in/Uploads/71.pdf, accessed on 13 February 2015.

Megha Mandavia (2014): "Goa's Ghost Mines: Face of iron ore mining set to change forever", Economic Times, 24 December, http://articles.economictimes.indiatimes.com/2014-12-25/ne
ws/57395425_1_mining-trucks-mining-leases-mining-companies, accessed on 7 January 2015.

Principal Findings of the Vishwanath Anand Expert Appraisal Committee, http://www.goafoundation.org/mining/, accessed on 6 January 2015.

Report of the Justice M B Shah Commission of Inquiry, Parts I, II and III, http://www.goafoundation.org/mining/, accessed on 6 January 2015.

Report of the Supreme Court appointed Central Empowered Committee (CEC), http://www.goafoundation.org/mining/, accessed on 6 January 2015.

Supreme Court Judgement in Writ Petition 435 of 2012, Goa Mining Case, http://www.goafoundation.org/mining/, accessed on 6 January 2015

The Goa Grant of Mining Leases Policy, 2014, http://www.goadmg.gov.in/Uploads/303.pdf, accessed on 4 January 2015.

White Paper: Goa Mining: Sustainable Legal Operations- Not Suspension,the Solution. Goa Mineral Ore Exporter's Association; http://www.gmoea.com/uploads/file/White%20Paper.pdf, accessed on 4 January 2015.

Economic and Political Weekly, Vol-L, No. 7, February 14, 2015, http://www.epw.in/reports-states/goas-mining-logjam.html


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