Protests Arise as Indian Supreme Court Cancels Iron Ore Mining Permits in Goa

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It seems all too familiar — one step ahead, two steps back.

The cancelation by India’s top court, the Supreme Court, of all iron ore mining permits in Goa, one of the country’s top producing provinces for this raw material, has led to concerns being raised in industry and and economic circles of the country (not to mention protests by miners like Vedanta).

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Mining in the state of Goa, which, along with tourism, is one of the major sources of revenue and people’s livelihood, will stop after March 15, 2018. The local government will then have to issue new licenses.

Under the new set of rules laid out by the order, ownership is back to the local government; now it will have to auction the leases, as required by the law.

Some agree with the court ruling that held the local government responsible for not following due process in renewing the 88 mining leases for 20 years with retrospective effect from 2007. The prime minister’s office has also sought a report from the government of Goa on the impact of the court ruling.

Incidentally, the Anil Agarwal-run Vedanta Resources is one of the biggest iron ore miners in the state.

Other than Vedanta, this latest Supreme Court ruling will affect other miners, too, many of them local.

It may be recalled that similar judicial action was initiated in 2012 when illegal mining in Goa was ordered shut down. In the year before the ban, Goa had exported about 50 million tons (MT) of iron ore, but the Supreme Court later limited production in the state to 20 MT a year (most of which gets exported to China).

Now comes a report by an international agency that India no longer featured among the “most attractive regions” for investment in the mining sector, probably as a possible fallout of the mining ban. The Vancouver-based Fraser Institute’s annual survey of mining companies ranked India in the bottom 10 countries, at 97 of 104, in the investment attractiveness index in 2016, but now had dropped it from the list of 91 countries in 2017.

A report in the Hindu BusinessLine said the mining ban in Goa would expectedly have a far-reaching impact, not only on the state, but also on India’s image as an investment destination, going by the report by the Canadian public policy think tank report.

Vedanta, for example, expected to produce around 5.5 MT of iron ore from Goa this fiscal year ending March 31. Next year is a question mark — for now.

Expectedly, Vedanta is not happy with the latest development. Agarwal told news agency PTI that the Supreme Court’s decision would “hamper India’s economic growth as raw material for making steel will have to be imported,  resulting in jobs being created outside the country rather than within.”

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Mining is a capital-intensive business — although it has potential, analysts in India are of the view that not many companies would want to put in money in lieu of such an uncertain business environment.

The restrictions put in time and again by the legislative and judiciary on the mining industry in the form of caps on iron mining in Goa and other states (such as Karnataka), and high export duties, were sending out “negative messages” to the world. While FY17 witnessed the highest inflow of Foreign Direct Investments (FDI) — amounting to U.S. $43,478 million — into India, the mining sector could attract only U.S. $56 million. What was also needed to boost the mining sector was not only the required permissions, but also high-end technology and equipment to increase extraction and productivity.

All of that requires FDI, but with so much uncertainty, the question is: who will want to invest in India’s mining story?

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