Centre rejects Shah Commission recommendation to cap iron ore production in Odisha

Mining ministry opposes cap on iron ore production; environment ministry disregards recommendation to cancel licence of firms encroaching forestland

By Anupam Chakravartty
Published: Saturday 04 January 2014

The Commission headed by Justice M B Shah has recommended a cap on the production of iron ore, saying it is absolutely necessary so that future generations would not have to import ore (photo by Sayantan Bera)

The Central government has rejected a key recommendation of justice M B Shah Commission, that of putting a cap on iron ore production in Odisha. The commission has been probing illegal mining across the country. In its first report released recently, it had pegged the loss to the Odisha government from illegal extraction, sale and export of iron and manganese ore at Rs 59,203 crore. At a Cabinet meeting headed by Prime Minister Manmohan Singh on Thursday evening, the Shah Commission report was referred to a committee of secretaries for scrutiny. The report is presently with the Union Ministry of Environment and Forests (MoEF) and the Union Ministry of Mines, who are preparing draft action taken reports.   

Justice Shah had recommended a cap on the production of iron ore, saying it is absolutely necessary so that future generations would not have to import the ore. “The Commission recommends the production be capped between 50 and 55 million tonnes per annum (MTPA), with an increase of 7.5 per cent per annum or equivalent to the growth of steel and sponge iron industry's requirement,” the Commission report said. It further stated that it was disturbing to find that although most mines are located in tribal-dominated areas, the communities have remained a deprived lot despite various measures by Central and Odisha government to improve their lives.

The Odisha government responded to the recommendations by stating that it has decided to cap production of iron ore from Joda and Koira mining circles—where most of violations have happened, according to the Commission—to 40 MTPA and 12 MTPA respectively. But this cap is questionable since illegal mining was happening when the output from these two mining circles in Sundargarh and Keonjhar districts was much lower. This is borne out by the fact that in 2012 Odisha's department of steel and mines slapped a fine of Rs 67,900 crore on companies operating 103 mines in Joda and Koira on charges of mining excess ore and not paying royalty. Production in these two mining circles in 2011-12 was only 29.9 MTPA in Joda and 0.83 in Koira, well below the cap fixed by the Odisha government in response to the Commission's recommendations. The Commission had also found that 92 mining leases in Joda and Koira areas were being operated without any environmental clearance.

Industry first

The Union Ministry of Mines, meanwhile, has not agreed with the commission’s recommendations in its draft action taken report. “Fixing a cap on the production of iron ore, solely on the basis of reserves and resources identified at this point of time, will not be in the interests of the industry,” the ministry said. Mining ministry officials maintain that since reserves and resources of iron ore are not static, and with availability of modern methods of identifying resources, the reserves are likely to be augmented further.

The Shah Commission has also recommended doing away with imposition of penal compensatory afforestation (PCA) on mining companies that encroach upon forestland. Instead, actions should be initiated against violators as per the provisions of Section 3A and 3B (imprisonment) of Forest (Conservation) Act 1980 or else (mining) approval should be withdrawn, it stated. However, in its action taken report, MoEF said that while appropriate guidelines to deal with cases involving violations of Forest (Conservation) Act would be issued, it would implement polluter-pays principle for levy of penal net present value and cost of penal compensatory afforestation, while completely ignoring the recommendation to cancel mining lease approval.

Will there be a CBI probe?

The commission stated in its report that of the over 185 mining leases of iron and manganese ores in Odisha, 110 were functioning without any lawful authority by violating various mining and environmental laws. As in the case of mining in Goa, which was also probed by the Shah Commission, in Odisha also a large number of iron ore mines were found operating in violation of Environment Impact Assessment notifications. The Shah Commission stated that over 90 such mining leases were under deemed extensions. Among the other recommendations, the commission called for a CBI enquiry into illegal mining in Odisha, which it says involves bureaucrats, politicians and large mine owners.

On Thursday, the Cabinet said the committee of secretaries would finalise the action taken reports and submit it to Parliament. While activist groups have filed a petition before the Supreme Court, asking the government to extend the tenure of the Commission  so that it could visit other states such as Chhattisgarh, the Cabinet note reveals that the first report of Shah Commission on Odisha has been lying with the government for the past six months. The Central government refused to extend the tenure of the Commission, stating that it has taken too long to submit the report and measure the impact of illegal mining in various states.

Memorandum of Action Taken for consideration of the cabinet regarding illegal mining of iron and manganese ores in the state of Odisha

Odisha Minerals (Prevention of Theft, Smuggling and Illegal Mining and Regulation of Possession, Storage, Trading and Transportation) Amendment Rules, 2013

Iron and steal: the Posco-India story

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