NMDC’s Trajectory: From Ore Miner to Steel-maker

Kolkata: The Union Steel Ministry, which is the administrative ministry for National Mineral Development Corporation Ltd (NMDC), the country’s largest merchant iron ore producer, has now veered round to the view that the 15 months old Donimalai impasse warrants a political resolution. In the opinion of the ministry, according to a senior official, political initiative is a must as both the Centre and Karnataka have Bharatiya Janata Party-led governments.

This amounts to an admission that efforts at the level of officers in New Delhi and Bengaluru have not helped. But what is interesting at the moment is that while looking for a resolution at the political level, the steel minister, Dharmendra Pradhan, has very recently brought Karnataka’s chief secretary Vijay Bhaskar into the picture and apprised him of the consequences of the Donimalai impasse further prolonging for the key stakeholders – NMDC, the Centre and Karnataka.

Raising of iron ore from the seven million tonnes annual capacity Donimalai in the Bellary district, known for the clout of Reddy brothers, remains suspended with effect from November 3, 2018. The company has been servicing the requirements of Donimalai-linked customers from its Kumaraswamy mine, which is not far off.

Prahlad Joshi, whose charge as Union coal and mines minister [including iron ore], is from Karnataka. The expectation in the steel ministry is that chief secretary Vijay Bhaskar will seek to involve Joshi, Karanataka’s mines minister C Chandrakant Patil and, of course, Pradhan to work out a formula.

When asked why the BJP-led Centre—where the mines minister happens to be from Karnataka—and the BJP-led state government were not able to work out a solution, Patil told NewsClick: “I get your point. We have to try seriously. Our chief secretary has been involved with the exercise. For us, it’s a question of getting extra revenue. We are prepared for some sacrifice vis-a-vis our premium demand. I hope we will be able to sort it out”.

Asked by NewsClick as to what was the latest position, Karnataka’s principal secretary for mines, Maheswar Rao, said that the issue had been referred to the Revisionary Officer (RO) in the central mines ministry by NMDC through its administrative ministry. NMDC took this step after the state government withdrew on August 17, 2019 the approval for extension of the lease and decided to auction the mine block to a private sector party.

Further enquiries from the dealing offices revealed that RO had passed an order asking the state government to keep its August 17, 2019 order and the proposed auction to keep “in abeyance”. At the next hearing before RO on August 21, 2019, no state government official was present. There is no further movement as the state government had not filed counter affidavit before the RO.

Before this phase of Karnataka-vs-NMDC fight, the company had gone to the High Court challenging the state’s decision to demand premium (equivalent to 80% of the average sale price of iron ore as published by the Indian Bureau of Mines (IBM). The state’s orders were set aside by the High Court.

Thus, as developments that have taken place will show, it all started after the state government initially decided to extend the lease for 20 years without any “premium” condition. Subsequently, it decided to ask NMDC to pay premium and upon its refusal to fall in line, the state government withdrew the extension and decided to auction the mine block. At the moment, legally, NMDC will appear to be on a strong wicket. Significantly, the state government has also not moved a special leave petition before the Supreme Court.

For the latest round of efforts to break the deadlock to succeed, Karnataka has to climb down, give up its intention to put the mine block under the hammer and allot it to a private sector party. This simply means it should not expect to earn hefty extra revenue for the lease period. Much will depend on the ground prepared by the chief secretary for political intervention by Pradhan, Joshi and Patil and whether NMDC is persuaded to be “somewhat generous” under the existing provisions for levies. During the interaction with NewsClick, the state mines minster did mention royalty.

Even as Donimalai remains a negative, NMDC is headed for a positive development, which will change its decades-old identity of a merchant miner. In the course of next six months to one year, it will emerge as a miner-cum-steelmaker, as the management embarks upon phased commissioning of its three million tonnes capacity integrated steel plant (ISP) at Nagarnar in Chhattisgarh. Because of its location in area under conspicuous Naxal influence, the project has had its share of time and cost overruns. The final cost will be over Rs 20,000 crore, showing an escalation of Rs 5,000 crore or so at this point of time.

In the context of Naxal influence, it may be mentioned that the company’s two major iron ore complexes – Bacheli and Kirandul – are in the Bailadila area of the Dantewada district, which is often in news for Naxal attacks and encounters. Among the identified threats, this one finds mention in official reports. Official sources pointed out that the management was proceeding on the premise that eventually the steel township will be proveed instrumental for socio-economic development of the area and freeing it of disturbed conditions that pose a challenge to the civil administration.

The Nagarnar ISP will produce value-added flat products – hot rolled coils/sheets/plates – and will include LPG cylinder and automotive grades as also silicon steel. The key production facilities have come up with plant and equipment from Ukraine, Czech Republic, Austria, Netherlands, Italy and Germany. It will generate direct employment for 4,000 people and priority has been accorded to land losers. Indirect employment for a much larger number of people will be possible in ancillary units, downstream units and outfits providing a host of services.

The foray into steel making will eventually see NMDC enter coal mining. In December, the Union Coal Ministry allotted two coal blocks to the company under Section 5 (1) of Coal Mines (Special Provisions) Act 2015. The two blocks – Rohne and Tokisud North – are located in the Hazaribagh district of Jharkhand. Rohne is for coking coal required for steel making. As a follow-up, the company will consider setting up of a coal washery. Tokisud North will produce non-coking coal.

The company executed deed on January 10 for four of its iron ore mining leases – Deposit 5, 10, 14 and 14 NMZ – for 20 years from 2015 to 2035. The deeds were registered on January 13. Deed execution and registration involved payment of stamp duty and fees totalling Rs 387 crore to the Chhattisgarh government. In the third week of December, the Chhattisgarh government extended leases of four Bailadila region mines, which were due for extension in March next. It has, in all five mines. Lease for one mine was extended in 2017.

The company has received approval of IBM for expansion of Kumaraswamy iron ore mines in Karnataka to 10 million tonnes per annum from the existing seven million tonnes.

Also read: Bailadila Iron Ore Mining: Why Adivasis Prefer NMDC Over Adani

Kolkata: The Union Steel Ministry, which is the administrative ministry for National Mineral Development Corporation Ltd (NMDC), the country’s largest merchant iron ore producer, has now veered round to the view that the 15 months old Donimalai impasse warrants a political resolution. In the opinion of the ministry, according to a senior official, political initiative is a must as both the Centre and Karnataka have Bharatiya Janata Party-led governments.

This amounts to an admission that efforts at the level of officers in New Delhi and Bengaluru have not helped. But what is interesting at the moment is that while looking for a resolution at the political level, the steel minister, Dharmendra Pradhan, has very recently brought Karnataka’s chief secretary Vijay Bhaskar into the picture and apprised him of the consequences of the Donimalai impasse further prolonging for the key stakeholders – NMDC, the Centre and Karnataka.

Raising of iron ore from the seven million tonnes annual capacity Donimalai in the Bellary district, known for the clout of Reddy brothers, remains suspended with effect from November 3, 2018. The company has been servicing the requirements of Donimalai-linked customers from its Kumaraswamy mine, which is not far off.

Prahlad Joshi, whose charge as Union coal and mines minister [including iron ore], is from Karnataka. The expectation in the steel ministry is that chief secretary Vijay Bhaskar will seek to involve Joshi, Karanataka’s mines minister C Chandrakant Patil and, of course, Pradhan to work out a formula.

When asked why the BJP-led Centre—where the mines minister happens to be from Karnataka—and the BJP-led state government were not able to work out a solution, Patil told NewsClick: “I get your point. We have to try seriously. Our chief secretary has been involved with the exercise. For us, it’s a question of getting extra revenue. We are prepared for some sacrifice vis-a-vis our premium demand. I hope we will be able to sort it out”.

Asked by NewsClick as to what was the latest position, Karnataka’s principal secretary for mines, Maheswar Rao, said that the issue had been referred to the Revisionary Officer (RO) in the central mines ministry by NMDC through its administrative ministry. NMDC took this step after the state government withdrew on August 17, 2019 the approval for extension of the lease and decided to auction the mine block to a private sector party.

Further enquiries from the dealing offices revealed that RO had passed an order asking the state government to keep its August 17, 2019 order and the proposed auction to keep “in abeyance”. At the next hearing before RO on August 21, 2019, no state government official was present. There is no further movement as the state government had not filed counter affidavit before the RO.

Before this phase of Karnataka-vs-NMDC fight, the company had gone to the High Court challenging the state’s decision to demand premium (equivalent to 80% of the average sale price of iron ore as published by the Indian Bureau of Mines (IBM). The state’s orders were set aside by the High Court.

Thus, as developments that have taken place will show, it all started after the state government initially decided to extend the lease for 20 years without any “premium” condition. Subsequently, it decided to ask NMDC to pay premium and upon its refusal to fall in line, the state government withdrew the extension and decided to auction the mine block. At the moment, legally, NMDC will appear to be on a strong wicket. Significantly, the state government has also not moved a special leave petition before the Supreme Court.

For the latest round of efforts to break the deadlock to succeed, Karnataka has to climb down, give up its intention to put the mine block under the hammer and allot it to a private sector party. This simply means it should not expect to earn hefty extra revenue for the lease period. Much will depend on the ground prepared by the chief secretary for political intervention by Pradhan, Joshi and Patil and whether NMDC is persuaded to be “somewhat generous” under the existing provisions for levies. During the interaction with NewsClick, the state mines minster did mention royalty.

Even as Donimalai remains a negative, NMDC is headed for a positive development, which will change its decades-old identity of a merchant miner. In the course of next six months to one year, it will emerge as a miner-cum-steelmaker, as the management embarks upon phased commissioning of its three million tonnes capacity integrated steel plant (ISP) at Nagarnar in Chhattisgarh. Because of its location in area under conspicuous Naxal influence, the project has had its share of time and cost overruns. The final cost will be over Rs 20,000 crore, showing an escalation of Rs 5,000 crore or so at this point of time.

In the context of Naxal influence, it may be mentioned that the company’s two major iron ore complexes – Bacheli and Kirandul – are in the Bailadila area of the Dantewada district, which is often in news for Naxal attacks and encounters. Among the identified threats, this one finds mention in official reports. Official sources pointed out that the management was proceeding on the premise that eventually the steel township will be proveed instrumental for socio-economic development of the area and freeing it of disturbed conditions that pose a challenge to the civil administration.

The Nagarnar ISP will produce value-added flat products – hot rolled coils/sheets/plates – and will include LPG cylinder and automotive grades as also silicon steel. The key production facilities have come up with plant and equipment from Ukraine, Czech Republic, Austria, Netherlands, Italy and Germany. It will generate direct employment for 4,000 people and priority has been accorded to land losers. Indirect employment for a much larger number of people will be possible in ancillary units, downstream units and outfits providing a host of services.

The foray into steel making will eventually see NMDC enter coal mining. In December, the Union Coal Ministry allotted two coal blocks to the company under Section 5 (1) of Coal Mines (Special Provisions) Act 2015. The two blocks – Rohne and Tokisud North – are located in the Hazaribagh district of Jharkhand. Rohne is for coking coal required for steel making. As a follow-up, the company will consider setting up of a coal washery. Tokisud North will produce non-coking coal.

The company executed deed on January 10 for four of its iron ore mining leases – Deposit 5, 10, 14 and 14 NMZ – for 20 years from 2015 to 2035. The deeds were registered on January 13. Deed execution and registration involved payment of stamp duty and fees totalling Rs 387 crore to the Chhattisgarh government. In the third week of December, the Chhattisgarh government extended leases of four Bailadila region mines, which were due for extension in March next. It has, in all five mines. Lease for one mine was extended in 2017.

The company has received approval of IBM for expansion of Kumaraswamy iron ore mines in Karnataka to 10 million tonnes per annum from the existing seven million tonnes.

Also read: Bailadila Iron Ore Mining: Why Adivasis Prefer NMDC Over Adani