MAC: Mines and Communities


Published by MAC on 2006-07-15


The story from ferrous country

Financial Express (online)

15th July 2006

The Orissa government has signed as many as 43 memoranda of understanding in the steel sector lining up a total investment of over Rs 137,156 crore (nearly $3 billion) of projects with a capacity topping 58 million tonnes. Of the 5.43 billion iron ore reserves in the state, about 3.11 billion tonnes are under lease-hold of various mining companies. Mines with reserves of nearly 800 million tonnes have been earmarked for Steel Authority of India Ltd (SAIL), state-run miner Orissa Mining Corporation, Mid-East Steel Corporation, and Orissa Sponge Iron Ltd.

Thus mines with reserve of 1.52 billion tonnes are available with the state government to distribute to the MoU companies as captive mines. As against this, the 43 MoU companies require some 2.78 billion tonnes of iron ore to feed their projects over a 30-year period. There is a shortfall of over 1.25 billion tonnes of iron ore.

However, the state steel and mines minister, Padmanav Behera, says the problem will be sorted out when new iron ore reserves are found in the state. Moreover, he adds, Bhubaneswar will look at mining leases - covering about 1.5 billion tonnes of iron ore reserves- that have come up for renewal.

These include mining leases of Tata Steel, SAIL, Essel Mining, OMC Ltd, among others. Out of the 43 new MoUs, six projects are in the large league: Posco, Tata Steel, Hy-Grade Pellets Ltd (Essar Group), Bhusan Steel and Strips Ltd, Jindal Steel & Power Ltd and Sterlite Iron and Steel Company Ltd. The six are proposing to build up a total capacity of 36.10 million tonnes with a total investment of over Rs 108,500 crore.

Orissa wants to be sure that only serious investors come into the state. Mines will be recommended only after 25% of the capital cost in invested and lease will be granted once 50% is invested with financial closure for small and medium projects. For mega projects, the mines will be recommended after placement of the 20% of the farm order and 80% of civil construction. The mining lease will again be granted after financial closure and 50% of investments.

In Jharkhand, the state government has received 450-odd applications for iron ore leases. These include applications from large steel-making plants that account for 51 million tonnes capacity including a 12 million tonne plant by Tata Steel, Jindal South-West's 10 million tonne project, six-million factories by Essar Steel and Jindal Steel & Power. Smaller projects tote up to another 42 milliion tonnes steel capacity.

According to the Jharkhand mines & geology minister Madhu Koda, rough estimates indicate iron reserves available in the state at 3.6 billion tonne and a survey is on to estimate potential new reserves. Says a central steel ministry official: "The Indian Bureau of Mines is also involved in a survey of total iron ore reserves in the country and it is expected that the estimate of reserves will go up 20-25%. Most of this could be in Orissa and Jharkhand."

Experts say that while Jharkhand has several smaller iron ore reserves, it is only the Chiria mines (sub judice, as the state is fighting a legal battle with Iisco and SAIL) which can provide 500-600 million tonne iron ore, as would be needed by a major steel project. It doesn't help steel projects that most of Chiria is under forest cover.

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