Chaos in the iron age
After iron ore plunder in Bellary and Goa comes a Supreme Court order that adds confusion to chaos
Bellary district of Karnataka and Goa portray India’s very own gold rush. Today, they are the bywords for rampant violation of mining and environmental laws, unscientific depletion of resources and concentration of mining profits in the hands of a few. The plunder has also spread to other iron ore-rich states of the country.
It all started around 2003-04 with China going on a construction spree in the run up to the 2008 Olympics.
China is the principal importer of Indian iron ore and procures 91 per cent of what India exports, according to the Indian Bureau of Mines. (Interactive graphic: India's iron ore exports to various countries over the years)
Before 2003, it used to buy only high-grade iron ore, with at least 58 per cent iron content. But with the Olympics approaching, it started procuring even fines (ore in powder form) and ores with as low as 45 per cent of iron content. The Chinese developed technology that enabled them to mix this low-grade ore with very high-grade ore imported from Brazil and Australia. The Chinese demand also pushed up the international prices of iron ore.
This paved the way for chaos and scams that India’s iron ore-rich states witness today. Everyone hoped for a windfall from the sudden demand. Those who owned mines and those who did not mined without clearances, encroached upon forest and other’s lease areas; and excavated, transported and exported more than permitted. No one stuck to the approved mining plan. They even extracted minerals from waste dumps. It was a colossal plunder in connivance with the state governments, Union Ministry of Environment and Forests and IBM. The states lost revenue and the nation its rich resources. In the process of reckless mining, forests were cleared, hills were ravaged, farmlands were destroyed, streams and rivers were polluted, groundwater got contaminated, and the health of people and livestock was compromised.
Government-appointed committees entered the scene and unearthed shocking stories of illegalities and loot of iron ore. They also brought to the fore the intertwined interests of politicians and industry and the failure of the authorities to regulate mining.
Karnataka and Goa were the first ones to come under scanner. In Karnataka, the Lokayukta, the state’s ombudsman, estimated in its July 2011 report the total loss to the state exchequer at Rs 16,085 crore. The Supreme Court-appointed Central Empowered Committee’s (CEC) interim report on Bellary in April 2011 estimated that between 2003 and 2010, Rs 15,245 crore worth of iron ore was illegally exported from the region. It recommended a ban on mining in the region.
But in its February 2012 report, CEC backtracked and recommended resuming iron ore mining in Bellary and two other districts subject to conditions. It prescribed a model on the basis of which legality of mines can be categorised and they can be allowed to operate. It also suggested ways to restore the devastated ecology of the region (see ‘Bellary to bleed again’).
Mining companies in Goa are now going through the tests that Bellary was put through in the last two years. Surveys are under way, data is being compiled, accounts are being audited. Justice M B Shah Commission, constituted by the Centre in 2010 to probe illegal mining of iron and manganese ore in the country, has submitted its report, following which the Goan government has imposed a ban on mining of iron ore in the state. One of the key findings of the Shah Commission is that the state is incurring losses to the tune of Rs 35,000 crore due to illegal iron ore mining. The Supreme Court is also hearing the matter. As CEC is estimating losses from illegal mining in Goa, the mining industry in the state is under constant fear that CEC might recommend the Bellary model for Goa’s mines (see ‘Goa next’).
The next in line is Odisha. The 2010-11 report of IBM shows Odisha produces the maximum 37 per cent of iron ore in the country, followed by Karnataka and Goa (see graph). The Shah Commission has already heard mining companies and is preparing its report on the extent of illegalities in the state.
The Supreme Court’s Bellary judgement is the first of its kind in a mining case involving illegalities, irregularities, criminalities and corruption of unbelievable magnitude, and sets a precedent for all cases related to illegal mining, be it in Goa, Odisha, Chhattisgarh or Jharkhand.
M Suchitra from Bellary and Sugandh Juneja from Goa analyse whether it is possible to safeguard the environment while keeping the industry happy and if the Supreme Court order for Karnataka can be a one-size-fits-all policy.
It’s sleepless nights again for the residents of Kamtur village. Located on the fringes of the Kumaraswamy forest range, one of the six iron ore-bearing mountaintops in Karnataka’s Bellary district, Kamtur is surrounded by seven mines. On April 18, the Supreme Court eased ban on mining in Bellary, which used to be the nerve-centre of India’s illegal iron ore mining till two years ago.
Kamtur residents say they have lost almost everything to the frenzied mining—their fields, crops, grazing land, streams and even a large portion of their common burial ground. “Mines were encroaching upon us from all sides,” says N H Malleswaram, a member of the gram sabha. Most people sold their land to mine owners under threat. Those who managed to retain their land could not grow anything as piles of red iron dust rendered their fields barren. “We want to live without iron dust in our lungs,” says 70-year-old Thimmappa. Like many others in the village, he also suffers from breathing difficulty. The primary health centre in the village is a small, unfinished building where cattle take refuge from searing heat.
The Supreme Court ban in July 2011 had offered them some relief. During the ban, only the National Mineral Development Corporation (NMDC), India’s largest public sector mining company, was operating in their neighbourhood.
On April 18, the court lifted the ban on 90 iron mines with certain conditions. With this, 108 of the 166 mines in Bellary, Chitradurga and Tumkur may soon be back in business. Eight of the 18 mines that received the court’s approval in September last year, are operating.
The court’s judgement is based on the recommendation of its forest advisory wing, the Central Empowered Committee (CEC), which probed illegal mining in Bellary and the two other districts. The court had ordered the investigation after Samaj Parivartana Samudaya (SPS), a non-profit in Dharwad, filed a public interest petition in 2009 against the state government for not curbing illegal mining in the region.
While Kamtur and several other villages in the hinterlands of the three iron ore mining districts are worried, mine owners and ore-starved steel industries rejoice over the judgement.
“Since the ban we have been operating at 60-70 per cent capacity due to ore crunch,” says P K Murugan, vice-president of JSW Steel. JSW, one of the largest integrated steel companies in India, requires 60,000 tonnes a day for its plant at Toranagallu in the heart of high-grade iron ore belt of Bellary-Hospet. “We want mining to come back in full swing,” hesays. Srinivasa Rao of Karnataka Sponge Iron Manufacturers Association, says the ban has rendered half of the 70 sponge iron plants sick.
Byword for plunder
What attracts these mining and steel companies to Bellary is its rich deposit of reddish-brown haematite iron ore, a high-quality ore with iron content up to 65 per cent. A 2005 estimate by the Indian Bureau of Mines (IBM) puts the reserves in Bellary at 1,148 million tonnes. Before the ban, Karnataka produced about 40 million tonnes per annum (MTPA), one-fifth of the country’s annual iron ore production. Eighty per cent of this came from Bellary.
But this was just the official figure. The actual production of iron ore through illegal mining was much more and so was illegal export (see ‘Illegal export...’). The sudden spurt in iron ore and steel prices in the international market following China’s demand was showing its impact. Bellary had become the byword for plunder.
“The government took no corrective measures even after the Lokayukta, the state’s Ombudsman, filed a detailed report in 2008 on illegal mining,” says S R Hiremath, president of SPS.
The report brought to light chilling stories of illegalities, irregularities and crimes by the mining mafia in connivance with politicians and bureaucrats. Bellary was transformed into a republic of lawlessness by mining baron Gali Janardhan Reddy, his brothers Karunakara Reddy, Somasekhara Reddy, and their close associate B Sriramulu. In 2008, they became part of the BJP-led state government. Janardhan Reddy became tourism minister and miniter in-charge of Bellary, Karunakara Reddy the revenue minister, B Sriramulu the health minister and Somasekhara Reddy headed the state milk development corporation.
Expenses of implementing R&R will vary from plan to plan and will be between Rs 5 crore and Rs 20 crore. Besides implementing R&R plan, the court asked category B and C leaseholders to pay penalties: Rs 5 crore for each ha encroached by way of mine pits and Rs 1 crore for each ha encroached for dumping overburden initially. Kamath says it is paltry compared to the 500-600 per cent profit margin in the business (see ‘Economy of mining...’).
The court has asked the monitoring committee to retain 10 per cent of the sales proceeds of old stock of A and B leaseholders and the entire sales proceeds of the old stock of C leaseholders. The sales proceeds, together with the penalties and the amount received through auctioning category C mines, will go to a special purpose vehicle (SPV), called Karnataka Mineral Rich Region Development Corporation (KMRDC). It will implement an environment management plan of Rs 30,000 crore for 30 years for mining-affected zones. The projects include health, education, water supply, employment and biodiversity conservation “for ensuring inclusive growth of the area surrounding the mining leases”. Ironically, the fund will also be spent on setting up facilities like conveyor belts, railway sidings and widening of roads, which can be used for transporting iron ore.
“We have apprehensions about SPV,” says Hiremath. “It seems its special purpose is to take mining forward rather than compensating for the environmental devastation.”
Besides, at a production rate of 25 MTPA, the iron ore deposits of Bellary will be exhausted within 40 to 50 years. The nation will not be able to pass on its rich resources to the next generation. “This is against the principle of intergenerational equity,” says Hiremath. In fact, In 2010, while illegal mining was at its peak, the state government was signing MoUs with steel companies, including Tata Metaliks, Arcelor Mittal India, JSW Steel, Posco India. The industries have promised to invest Rs 1.2 lakh crore.
Sagar Dhara, director of Hyderabad non-profit Cerena Foundation, says ICFRE and CEC should have quantified the environmental damage in monetary terms before recommending resumption of mining. Cerena Foundation did a study in Sandur taluk of Bellary on behalf of the petitioners and estimated a loss of Rs 200 crore a year in agriculture alone. A moratorium on mining should have been declared for a few years till the physical and biological reclamation got completed, he says.
A Bellary without mining
Amlan Aditya Biswas, deputy commissioner of Bellary, says the ban did not affect the district’s economy much. Bellary has been an agrarian economy. At the time of the ban, some 10,300 people were employed in 70 active mines in the district. After companies retrenched workers, local residents who had joined the mining force returned to their traditional livelihoods (see ‘Onion v ore’).
The state also did not incur any revenue loss during the ban. “Instead, revenue increased even when production came down,” says H R Srinivas, director of the states mines department in Bengaluru. Before the ban, IBM decided the price of iron ore and it used be around Rs 1,300 a tonne, he says. Since the ban, sale is done through e-auction by the monitoring committee and the rate was fixed by NMDC. “Average price rose to Rs 2,500 a tonne,” explains Srinivasa, who is also the convener of the committee. Transport was the sector severely hit by the ban. Many had bought tipper trucks on credit during the boom to transport ore to ports in other states. “Every tipper truck employed at least three people,” says B Badewali, president of Hospet Truckers Association. With the ban about 3,000 tipper trucks are now lying idle. Repaying has become difficult the owners and banks have started loan recovery procedures.
In the last 20 months, in the absence of reckless mining, forests and streams have started showing healthy signs. “We have spotted a few sloth bears and a rare species of snake that was seen in India only once before,” says S Manikandan, deputy conservator of forests.
Despite the court’s approval, it will not be easy for many companies to resume mining since they are fighting criminal cases in lower courts among themselves. The CBI is also investigating a few cases related to illegal mining. The court has clearly said its judgement will not affect the ongoing investigations. The petitioners also plan to approach the court again to review the judgement. They had asked for legal actions against all those involved in illegal mining, including those named in Laokayukta’s reports, and had prayed for two independent committees, one with powers to prosecute and the other with expertise to monitor R&R plan and SPV. “The judgment has not addressed many of our concerns,” says Kamath.
The Codli mines in South Goa resemble large amphitheatres flanked by flights of steps. Till a few months ago, excavators and earthmovers could be seen here tearing into the crust to scoop out red earth that contained high concentrations of iron ore. Tipper trucks would then transport it to Murmugao and Panaji ports from where ships ferried the ore to destinations like China. Today the whir of turning wheels is missing in Codli. The mines, owned by one of the country’s biggest mining firms Sesa Goa, are waiting like 138 others for the Supreme Court order to resume mining.
The ban is not only on mining. Companies cannot even sell their iron ore stocks. “We have three million tonnes of iron ore lying but cannot sell it until the court allows,” says Joseph Coelho, manager of the Codli mines.
Mining activities had come to a halt in Goa much before the Supreme Court ban. The state government dealt the first blow. In September 2012, days after a commission headed by Justice M B Shah submitted its report to Parliament citing illegalities in all mines in Goa, the government temporarily suspended mining activities in the state. That month, the Union Ministry of Environment and Forests (MoEF) issued a direction under Section 5 of the Environment Protection Act, 1986, to suspend environmental clearances of all 139 mines in Goa.
The Supreme Court order came in October 2012, following a petition by Goa Foundation, a non-profit working on ecological issues. It ordered that the mine leases, found violating the norms by the Shah Commission, should be suspended and asked its Central Empowered Committee (CEC) to investigate the illegalities.
Goa has also set up its own inquiry committee under retired judge R M S Khandeparkar to investigate the Shah Commission report.
Justifying the new committee, Goa’s deputy chief minister Francis Dsouza says, “The question is whether the apex court should have stopped all the mines. Legal mines should not have been shut as the livelihood of a large number of people is at stake.” Goa today finds itself caught between livelihood concerns and sustainable use of resources. With no solution in sight, the state could be handed down a model recently introduced 400 kilometres away in Karnataka.
There is a constant fear that the model pronounced in the Supreme Court judgement for reopening mines in Bellary could be used in Goa.
R K Verma, principal secretary of Goa’s mines department, says Bellary lost two years trying to take a decision on ways to resume mining. A similar term could be disastrous for Goa. Verma offers an alternative way: “We will book all illegal people, but legal operations should be allowed to resume as soon as possible.”
Atul Jhadav, president of Goa Barge Owners’ Association, explains: If the Bellary model is applied to Goa, most mines would fall in category C. The Supreme Court has cancelled leases of category C mines in Bellary because of highest number of illegalities, including dumping of overburden (soil removed to extract the minerals) outside the mine lease areas. Most mines in Goa dump their overburden outside the lease area, Jhadav says.
Besides, mining is the backbone of Goan economy, says Nilesh Cabral, MLA from Curchorem in South Goa.
Dharamaduda village is a few kilometres from Codli mines. About 80 per cent of the 12,000-odd population in this village earned their livelihood from these mines. Apart from direct employment, several residents in Dharamaduda own tipper trucks that ferried iron ore from the mines. Some worked as drivers and helpers in the trucks, while the others opened shops and eateries around the mines. Guru B Gaonkar, sarpanch of Dharamdauda, says a petrol pump set up in the village to fuel trucks used to pay tax to the village panchayat, depending on its business. It hardly contributes now. “We understand that mining creates pollution and traffic problems, but it is a trade off we are ready to accept,” says Gaonkar. He wants mines to be reopened as people from his village are migrating to distant places in search of work.
State government figures show in 2009-10, revenue from mining contributed 13.5 per cent to the state’s GDP. This is on a par with the hotel and the tourism industry. This apart, the industry claims that mining provides direct and indirect employment to nearly 300,000 people, or half of the state’s workforce.
Those who have lost their livelihoods now question why they are being punished when the fault lies elsewhere. “We were never involved in any illegal activity,” says William D’costa of Barge Owners’ Association. Most barges have loans of Rs 5 crore to Rs 6 crore attached to them. “Without mining we are unable to pay installments to the banks that are now sending us notices,” he adds. The association has written to the Reserve Bank of India and the state government to grant relief in loan repayment.
The ban has impacted almost every household in Goa because the breadwinners are associated either with mining or the Murmugao Port Trust, says P M Pandiyan, chairperson of the trust. Since iron ore exports comprised 80 per cent of the port’s operation, commercial activity has come to a standstill. Last year, this profit-making venture accrued a loss of Rs 108 crore. It was its first loss in history. The trust has asked the state to step in, Pandiyan informs.
The stakeholders of Goa’s iron ore mining sector do not want to give up easily. They have united to form the Goa Mining People’s Front (GMPF).
Christopher Fonseca of GMPF says 30 per cent of the state’s population has been jobless for eight months. “Environment is important but the government should think about our livelihoods too.” The state government has offered a year-long monetary compensation scheme for those who lost their livelihood because of the ban (see ‘Cushion for ban’).
Down To Earth analysed a few environmental clearances granted by MoEF. None of the clearances mentioned whether the overburden should be stored within the mine lease area. All it says is “overburden shall be stacked at earmarked dump site(s) only and shall not be kept active for long periods”.
| Whose buffer is it anyway?
Even if one goes by Verma’s definition, there is ambiguity over who is the competent authority to approve projects in buffer zones. MoEF in May 2011, wrote to Goa’s Chief Wildlife Warden (CWW), clarifying that NBWL is the only authority to approve mining in the buffer zone. Approvals for mining within buffer without placing them before NBWL also violate the 2006 Supreme Court order. But more than 100 iron ore mining leases, including Sesa Goa’s Codli mines, have clearance only from CWW, though they fall in the buffer zone. “Our interpretation of the order in terms of competent authority was CWW. So we approached it for approval. Now with MoEF saying 10 km, this is clearly a grey area. This needs to be resolved urgently so that we know where we stand,” says Ambar Timblo of Fomento Resources.
Will it help sound mining or mining companies?
The Bellary case—and perhaps now the Goa case—is setting a precedent for mining regulations in the country. It will define how the offenders are judged, how serious is their crime and how they should be penalised. In other words, it is developing the mining penal code for the country. It is setting the framework for future environmental management, including the limits on how much mineral extraction is “sustainable”. In addition, the judgements set the framework for how local people will “benefit” from mining. Therefore, in many ways these decisions are overarching and are definitely needed as the current regulatory system has been decimated. The question that needs to be discussed is whether the judgements go far enough in deciding the sustainable framework for mining in the country. Or, indeed, if these are in the right direction.
Mining Penal Code
The Central Empowered Committee (CEC) of the Supreme Court has classified mining into three categories—A, B and C—taking encroachment as the basis of the nature of offence committed. To judge the quantum of offence, CEC has taken the ratio of the lease area of each mine to respective encroachment.
Category A: No major encroachment outside the lease area. This does not mean this category is “clean” on other accounts. The mine operations are allowed after the reclamation and rehabilitation (R&R) plan is started.
Category B: Encroachment up to 10 per cent of the mine lease area for mining pit and dumping of waste in area up to 15 per cent of the lease area. They have to complete R&R and pay some fines before resuming operations.
Category C: Encroachment more than 10 per cent of the lease area and dumping of waste in area, which is more than 15 per cent of the lease area. Their lease will be cancelled and then auctioned for captive use.
The bottom line, after all the rigmarole and more than two years of judicial scrutiny, is that all mines, big and small, big offenders or small offenders, will continue in some form or another. The problem with this manner of categorising penalties is threefold. One, that CEC has defined the “nature” of offence in a very limited manner, which does not take into account the environmental fallout or the cumulative impact of the mines in the region. In this way, when mining reopens—first A, then B and then C—it could well be business as usual. The best that is being offered is that there will be an R&R plan, which will take into account “afforestation, check dams, stablisation of waste dumps, soil conservation, rainwater harvesting and use of modern mining technologies”. There is nothing to suggest that these methods will add up to sustainable mining, even if a cap is put on the total mining that will be allowed.
Two, this rulebook could well end up incentivising large mines to commit large offence. The simple fact is that the Bellary formula will work against small mines, as it is based on quantifying the extent of violation as a percentage of the mine lease area. This will end up “legalising” non-compliance of large mines. Mines with large lease areas, for instance of 1,000 hectares, could have encroached 100 ha and still be in legal B category.
Three, the issue of illegal iron ore extraction and sales has been ignored by CEC in defining illegality. In 2012, the Supreme Court directed CEC to assess within three months the actual quantity of illegal iron ore that was sold, so that companies could be fined. But this has not happened. So mines have opened and many more will open soon, and all the talk of recovering ill-gotten funds may well be brushed under the carpet. Small wonder the mining barons are once again in power in Bellary.
C for captive
Allowing C category mines in the future once they are auctioned for captive use presumes illegal mining will thus remain in check. But the fact is captive mines discount natural resource, allow transfer pricing and promote poor mining practices, as is evident from cases across the country. Worse, it will distort the market by creating certain companies who will have access to cheap iron ore through captive mines, while others will have to buy ore from the market at higher costs. It is also clear that companies with cheap raw material are not driven to innovate or to be frugal and efficient in their use.
For instance, the recent rating of Indian steel companies done by Delhi non-profit Centre for Science and Environment found that the three top-rated companies did not have captive mines for iron ore—their cost of raw material was high and they invested in efficiency, which in turn brought down emissions. Companies with captive mines—Tata Steel, Jamshedpur; Jindal Steel and Power Limited, Raigarh; and SAIL, Rourkela—were rated low in environmental performance.
The Dehradun-based Indian Council of Forestry Research and Education (ICFRE) has recommended in its environmental impact assessment (EIA) done at the behest of the Supreme Court that there should be a “cap” on the quantum of iron ore mined in the Bellary region. The Supreme Court has endorsed the recommended “cap” of 30 million tonnes per annum (MTPA)—25 MTPA in Bellary and 5 MTPA in neighbouring Chitradurga and Tumkur districts. The “cap” is not based on environmental or socio-economic factors. Instead, the ICFRE report mentions that it is suggesting this limit “since the annual iron ore requirement of Karnataka is around 30 MTPA and majority of its demand is met from Bellary”.
This sets a bad precedence for environmental governance and has huge implications for inter-state matters. The limit is unscientific and is not based on cumulative impact assessment, taking into account the carrying capacity of this eco-sensitive forested region. It would also signal that states should “mine” for their own captive consumption—mine and only mine.
SPV for community
The Supreme Court has directed that a special purpose vehicle (SPV)—the Karnataka Mineral Rich Region Development Corporation—be set up under the chairmanship of the state chief secretary. The SPV will collect the fines, penalties, money raised from the auction of C category mines and 10 per cent of the sale price of all iron ore sold from Bellary, and will implement projects for socio-economic development and mining infrastructure. In other words, a parallel government is being proposed to the district administration. It is not clear how this recommendation is in consonance with what is being discussed currently in Parliament. The Mines and Minerals (Development and Regulation) Bill, 2011, presently with Parliament, includes provisions for benefit sharing and local area development. Will the SPV model be in contravention of the Bill or will it set a precedent?
There are four key departments that can be held most accountable for the extent of illegal mining in Bellary (and Goa). One, the forest department as it turned a blind eye to the takeover of its land. Two, the state mining department, which gave leases and clearances with total indifference. Three, Nagpur-based Indian Bureau of Mines, which gave permissions to increase mining from 20 MTPA to 80 MTPA without any care or scrutiny for impacts. And four, the Ministry of Environment and Forests (MoEF), which gave environmental and forest clearances to anyone and everyone without any assessment.
The fact is government officers who “connived”, “consented” or simply did nothing to stop the rot have not been held accountable. The worst part is that today these departments—represented in the Supreme Court monitoring committee—have become all-powerful and are back in the business to decide the fate of Bellary without any institutional reform.
The Bellary model does not provide the design of an effective institutional framework for environmentally sound and regulated mining in the country. The model, instead, once again depends on committees of the court to oversee management, which is at best a short-term solution. In this way, the Bellary case does not mean the end of illegal mining or a new dawn for sustainable mining in the country.
Activists demand assessment of impact of mining on state's environment and communities
Shah Commission report shows how authorities, mine owners stripped Goa of iron
Conditions for restoring clearances not spelt out
Leases of 51 mines cancelled; embargo on new leases lifted
At more than Rs 65,000 crore, the mining scam in Odisha has surpassed that in Goa and Karnataka. The penalties, however, came too late
Karnataka’s Lokayukta Santosh Hegde’s report is a sordid story on the rise of India’s mining poster boy, Bellary. The protagonists of the script, the Reddy brothers, used muscle and money to grease their way through government departments. Initially, it was all gold. But Hegde’s report exposed the dingy substrate of Bellary’s mining operations. Heads have rolled, and the political establishment of Karnataka has been shaken up. BJP leader B S Yeddyurappa was made to quit the chief minister’s post. The Supreme Court has stepped in to ban mining on the basis of a report by the Central Empowered Committee (CEC). The biggest losers have been the environment and the people living in the area. M Suchitra reports from Bellary and Kumar Sambhav Shrivastava analyses the CEC report
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