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Rumble in the mines

Dillip Satapathy/ 11 Nov 12 | 12:58 AM

Two orders of the Odisha government over the last two weeks have shaken up the state’s Rs 40,000-crore mining industry. The first was a government resolution asking mine owners waiting for their lease to be renewed to restrict production to the extent of captive requirement. This meant that the stand-alone mines without any captive use of mineral could not raise any mineral till the renewal of their leases.

But the second one was a bigger shocker. On November 1, the state mines department of the state issued notices to 27 iron ore and manganese ore lessees imposing a penalty of Rs 58,000 crore for excavating ore in excess of the limit approved by the Indian Bureau of Mines (IBM) over the last ten years. Soon more notices followed and the number of miners sounded out to pay fines increased to 60 under the Joda and Koira mining circles in the Keonjhar and Sundergarh districts, with a combined claim of Rs 70,000 crore. These figures may swell to Rs 75,000 crore as the government intends to send notices to all the 104 miners on its hit list.

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The sheer size of the penalty, involving some of the top names in the business like Tata Steel, the Aditya Birla-owned Essel Mining, KJS Ahluwalia, Rungta Mines and Sirajuddin Mines, makes it one of the biggest clampdowns on the mining industry anywhere. The hefty Rs 75,000-crore fine amounts to one-and-a-half times of the state’s annual budget and, if collected, can take care of the state’s revenue concerns for the next five years. But the question is whether the fines can at all be collected or will this move end up as yet another government action losing its way in the legal labyrinth and begetting nothing for the state.

Mining Lessee Penalty imposed 
Tata Steel Rs 32,815 crore
Essel Mining  Rs 4,308 crore
R P Sao Rs 3,877 crore
Odisha Mining
Rs 2,142 crore
Mesco  Rs 2,221 crore
KJS Ahluwalia  Rs 2,022 crore
Sirajuddin Mines  Rs 1,983 crore
Rungta Mines  Rs 883 crore
Indrani Patnaik  Rs 604 crore
SAIL  Rs 133 crore

The debate is on. The mine owners, fuming over the move, have gone into a huddle with their legal advisors to draft a strong reply to the notice and prepare the ground for a legal battle if the government still insists on the penalty after getting their replies. The aggrieved parties, particularly, draw courage from the fact that similar attempts by the state government have not stood in the face of law in the past. The government had in November 2010 slapped a fine of Rs 1,132 crore on Indrani Patnaik, a topnotch mine owner, on the charges of excess production and despatch of iron ore between May 2008 and September 2009 from the Unchabali iron ore and manganese mines spread over 106.12 hectares in the Keonjhar district. The government had then invoked the same Section 21 (5) of the Mines and Minerals Development and Regulation Act (MMDR) 1957 as it has done now.

But the Revision Authority (Tribunal) of the Union Mines Ministry had in January 2012 set aside the state government’s notice on the ground that it had not given any basis for calculating the iron ore price while imposing the fine. It also chastised the government for following a “hit-and-run" approach without adhering to the “principles of natural justice and established law and procedures". Section 21 (5) of MMDR Act says that whenever any person raises, without any lawful authority, any mineral from any land, the state government may recover the mineral so raised, or, where such mineral has already been disposed of, the price thereof. It says that the government may also recover from the person, the rent, royalty or tax, as the case may be, for the period during which the land was occupied by him without any lawful authority.

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The lawful authority is further explained by the recently amended provisions of the Mineral Concession Rules (MCR) which say that any area granted under a reconnaissance permit, or a prospecting licence, or a mining lease, as the case may be, shall be considered as an area held with lawful authority by the holder of such permit, licence or lease, while determining the extension of illegal mining. Besides, under the provisions of Rule (6) of the amended MCR and Rules 9 (2) and 10 (1) of Mineral Conservation and Development Rule (MCDR) 1988, the mining plan can be modified from time to time. Hence, says a mine owner who does not wish to be named, excess production of ore, over and above the approved quantity, cannot be construed as illegal as long as the mineral has been raised within the lawful authority of the lease area. “So the demand raised on the lessees to pay the cost of ore raised in excess of quantity approved in the mining plan retrospectively is totally unjustified. More so, when the state government has given the transit permit for dispatch of such ore and collected royalty on the material," he points out.

This mine owner’s views are echoed by Pinaki Mishra, corporate lawyer and an MP of the ruling Biju Janata Dal: “Notwithstanding the hype created over the imposition of the penalty, the state government does not stand to get even a single paisa from the miners as the notice is not legally tenable in the backdrop of the amended MCR and the recent clarification of the Union mines ministry on what constitutes irregular and illegal mining." The recent statement of the regional controller of mines (IBM), M Biswas, that excess raising of minerals beyond the prescribed limit can only be termed as “irregular" and not as “illegal" is expected to further pep up the spirits of the anxious mine owners who feel that the irregularities can be regularised under the law and should not attract such fines.

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But the state government is in no mood to buckle down. “We have sent notices according to the provisions of MMDR Act and everything is in the ambit of law. If they (miners) want to challenge it in the court of law, we will fight it to the end," says the minister for steel and mines, Rajani Kant Singh. The state’s belligerent stand is asserted by its mines director, Deepak Mohanty, the chief architect of the government action, “Whether it is illegal or irregular (mining) is not the question; the question is whether the recovery of penalty is justified or not." He says the penalty has also been imposed as the miners have violated the mining plan as well as the Air and Water Act.

Sceptics, however, feel that if invoking Section 21 (5) for imposing the fine does not pass the test of law, then booking the errant miners only on the basis of some deviation in the mining plan or violation of the Environment (Protection) Act and Air and Water Act will significantly reduce the magnitude of the penalty, rendering it almost inconsequential. They also question the timing of the action. The state government issued the notices to coincide with the visit of the Shah Commission of inquiry which is investigating cases of illegal mining across the country. The government, they say, could have acted much earlier as illegal mining was going on for the last ten years. The timing, they say, just shows that the government is trying to prove to the Shah Commission that it is acting against illegal miners.

Mohanty, in defence, says that the delay was because of IBM’s inaction despite several reminders to it to act on the issue. Given the precedence in such cases and the preparedness of the mining lobby, if the government does not build a fullproof case, it may not get too far.

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Company Price Gain (%)
O N G C175.354.59
Tata Steel567.203.43
Yes Bank339.452.71
Adani Ports379.902.34
IndusInd Bank1,914.752.33


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