Mining cos fear iron ore supply may be hit after some leases expire in March
The fear is that production will not resume immediately, and it would affect the supply of almost 70 million tonnes of the mineral, which is the key input for making steel.
The law gives the existing lessees seven months to remove their plant and machinery after the expiry of the lease. For the new entrant, it takes nearly three years to get the environmental and forest clearances for mining, according to an industry body.
Both these factors can delay the resumption of mining. "These 31 mines make up 45% of the iron ore requirements of the steel industry and what we expect on March 31 is a mayhem that will affect particularly the steel sector," RK Sharma, secretary general of the Federation of Indian Mineral Industries, told ET.
To ensure smooth transition of these leases, the government had decided to begin auctioning from the end of August, extending into September. "Even if they start the auction process, it will be a theoretical exercise as effective transfer can take place only after the expiry of the lease," Sharma said.
User industries like steel and sponge iron, on the other hand, had written to the government in June against any further extension of the mining leases that the merchant miners had been batting for.
They argued that when the law was amended in 2015, the miners had got an extension of five years to "complete the necessary procedures to bring these mines to auction." Companies like JSW Steel, Kalyani Steels and Tata Long Products (formerly Tata Sponge Iron) stand to win mines under these auctions.
Hindustan Zinc chief executive Sunil Duggal has warned of direct job loss to around 500,000 if these mines fall non-operational for a long time. This will add to the almost 180,000 direct job losses caused by the closure of iron ore mines in Karnataka and Goa between 2011 and 2018.
Duggal said discussions are still on with the Niti Aayog and various ministries to relax the expiry of these mines till 2030 and find a solution in the meantime.