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Resumption of mining The countdown begins

Last month, the Union Ministry for Environment and Forests finally revoked its 2012 order that kept in abeyance environment clearances granted to all mining leases in the state. The announcement came two months after the state government had revoked its previous order on suspension of mining operations. Although, these developments, including the renewal of around 89 mining leases, have given hope to the beleaguered mining industry in Goa, many aspects like obtaining necessary approvals, earmarking the waste dumping area, removal of old inventory, etc still need to be addressed before operations can actually restart

By P K Mukherjee

Readers may recollect an article of the author on the similar subject published in this newspaper in November last year wherein an attempt was made to see what were the different enablers to resume mining in Goa. It’s high time after five months to take stock where we stand now. No doubt, a lot of water has flown since then through Mandovi and Zuari. The MMRD Act has also been amended. Let’s briefly recapitulate the enablers and where we stand.

 

Enabler No 1

Valid Lease Document – Done.

Enabler No 2

Approved mining scheme – Not done yet. It will take some time since the biggest issue being waste dumping area – please see Enabler No 4 below. Moreover, the necessary approvals from Goa State Pollution Control Board (GSPCB) also need to be in place but it appears that the mining scheme can be approved subject to these approvals.

Enabler No 3

Valid EC – Apparently done. However, approvals under Air and Water Acts are required from GSPCB. These may take some time after the leaseholders satisfy the authorities as to continuing compliances.

Enabler No 4

Earmarking the waste dumping area – Supreme Court (SC) order says “dumping of minerals outside the leased area of the mining leases is not permissible under the MMDR Act and the Rules made thereunder”. Therefore, unless this direction is changed or Act/Rules amended, waste dumping has to be done inside leases which is not practicable in most of the cases, both from mineral conservation angle as well as cost effectiveness. This is a big hurdle on the way to resume sustainable mining. New dumping area outside the lease will also have the associated issues of land acquisition/surface rights/change of use.

Enabler No 5

Capacity for individual Leases – Apparently done.

All the above enablers involve administrative machineries consisting of politicians and bureaucracy. One should also not forget the role that can be played by NGOs and Judiciary.

Now let’s see other ground realities.

Enabler No 6

Removal of old inventory – Nothing much has happened since November, ’14 except that some auctioned out inventory have been removed by the successful bidders but still a lot needs to be removed. But the biggest challenge is about 10 million tonnes of inventory which is yet to be auctioned by the state government, and more importantly, the same needs to move out. In fact the expectation of international price increase and removal of export duty have boomeranged on the authorities with price sliding down continuously and duty remaining firm. So long these inventories are lying in mines, plants, jetties, etc., how new material can be mined and stockpiled? The mix up of old inventory under the custody of the state government and freshly mined inventory, will get mixed up since so much of vacant space to separately stock pile is simply not there. And God forbids, if there is any such mix up, hell will break loose with all sorts of allegations and disputes.

Enabler No 7

Road/barge transport rates – As expected, the transporters are asking state government to hike the rate from present Rs 14 per tonne/km to Rs 22 per tonne/km. There is some reported stoppage of transport of auctioned ore because of this demand. Apparently because of some guidelines, the transport is being done through contractors (who are aggregating individual trucks), instead of directly by individual truck owners, thus leading to additional cost usually associated with any middleman. With the current price level of Goa’s average grade of 56 per cent Fe at around 30 dollar per dry metric tonne (dmt) or about 27 dollar per wet metric tonne (wmt) or natural tonne, these transport rates are just not sustainable. We need to ensure that the truckers earn their livelihood by increasing their daily trip numbers to 3 or 4 by reducing the number of trucks, while increasing the capacity of trucks from current 10 tonnes to say 16 tonnes, where the axle loads do not increase, so as to avoid the concerns as to health of existing roads due to extra load. Similarly for barges also, adequate number of trips would only ensure sustainable rates with good health of the barge industry. Many of the barges, as seen from the shore, are lying in a very bad condition and one wonders whether those barges can ever be converted to working condition.

Enabler No 8

Safety on Resumption – All machineries/plants/trucks/barges must be cleared by responsible authorities before resumption of mining, to ensure that they do not pose any safety issues. This will require investments, but should not be compromised. Once everybody is clear as to timeline of resumption and continuity of mining thereafter, particularly considering the economics, then only these repair/maintenance activities would start, but doable within 2/3 months.

Enabler No 9

Economics of mining – We have seen above that the present international price of average grade of Goan iron ore is 27 dollar, which works out to Rs 1674/t, if converted @Rs 62 per dollar. Please remember the prices are continuously coming down and experts believe that it would further considering increasing supply from Australia and sluggish demand from China. Rupee is also expected to strengthen further. But those are global phenomenon on which we don’t have any control. What we can do is to remain cost competitive. The biggest cost is export duty of 30 per cent or Rs. 502/t. Then 10 per cent has been prescribed by SC towards Goan Iron Ore Permanent Fund (GIOPF) or Rs 167/t. However, many people are expecting that this levy may go off since in MMDR Act Amendment, a contribution to District Mineral Foundation (DMF) has been prescribed. But until that happens, GIOPF is a reality. Then there is DMF which can be 100 per cent of Royalty (but the rate is to be notified by Central Government). Royalty at 15 per cent is calculated on pit mouth value. So Royalty and DMF contribution is 30% of pit mouth value. With lower grade not being saleable, the mining cost is also bound to rise. Hence at current price, and cost structure including Regulatory costs, mining in Goa is not viable economic proposition. All the above regulatory costs have become unproductive and needs pragmatic relook.

Then What? All stakeholders, if seriously interested in resumption of mining in Goa, need to pull up their socks. Be it central government, state government, regulatory authorities, transporters, miners, et al.

(The author is a Chartered and Cost Accountant; ex-MD of erstwhile Sesa Goa and retired as Executive Director (iron Ore Business) of Sesa Sterlite Ltd)

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