Illegal Mining in Karnataka State In India Could Create Iron Ore Shortage

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TC Malhotra contributes to MetalMiner from New Delhi.

Unfortunately, illegal mining occurs in many places throughout the world. Various ore-rich states within India participate in Illegal mining activities. The practices have already generated controversy, but the issue of illegal mining in the Bellary-Hospet region in the south Indian state of Karnataka has raised concerns for the domestic steel industry.

According to a report published in an Indian business daily, Business Standard, the Supreme Court-appointed panel called Central Empowered Committee (CEC) submitted its report on July 4, 2011. According to the newspaper report, the CEC has recommended the suspension of mining operations by 21 companies. Last month, the CEC had recommended the closure of mines by six other companies.

However, the CEC has yet to complete its survey of 60 other mines yet it has received an extension by the Supreme Court.

Citing unnamed sources, the newspaper report claims the closure of these mines may result in a shortage of about 5-10 million tons of iron ore for domestic steel mills in south India.

Illegal mining in Karnataka state represents an old problem. However, the issue has taken on new meaning as the matter reached the Supreme Court of India, following a petition by a Karnataka-based non-governmental organization (NGO). The Supreme Court had appointed Central Empowered Committee (CEC) to submit its report on all illegal mining activities in the Karnataka State. Back in April, the Court forbade 19 mines from carrying out mining operations and transportation of iron ore in the Bellary region of Karnataka.

The bench passed the order on the basis of the reports submitted by the CEC alleging large-scale illegal mining activity in the Bellary a mineral rich district, about 300 km from Bangalore bordering Andhra Pradesh state.

Karnataka produces approximately 65 million tons of iron ore each year. According to the The Business Standard article, mines in Karnataka supply iron ore to several large steel plants including JSW, Kirloskar Ferrous, Mukand Ltd and Kalyani Steels. The state also supplies raw material to units located in Maharashtra, Gujarat, Andhra Pradesh, Tamil Nadu state and many small and medium-sized sponge iron units.

Rising iron ore prices helped drive many illegal mining operations in Bellary district, known over the past 100 years for its iron ore reserves. The alleged illicit activity involved mining firms offering minuscule royalty payments to the government. A report by the LokAyukta (an anti-corruption body or ombudsman) has pointed out serious violations and systemic corruption in mining in Bellary, including encroachment of forest land and massive underpayment of royalties to the state.

Iron Ore Shortage

The domestic steel industry faces a 5 m ton annual shortage of iron ore, according to the Business Times. A leading business chamber, ASSOCHAM has asked the Karnataka government to undertake a detailed review of iron ore mining leases and highlight the needs of steel units before the CEC, while framing new rules. ASSOCHAM has advocated that mines and mining activities should shift from a somewhat cottage or unorganized industry to an organized, more professionally operated industry.

–TC Malhotra

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