Karnataka to NMDC: Pay the premium or lose lease

Ballari: In a first of its kind move in the mining sector in Karnataka, the state government has reportedly warned the Union steel ministry controlled National Mineral Development Corporation (NMDC) to go by its norms or face the consequences that include cancellation of the iron ore mining lease allotted to NMDC in the ore rich district of Ballari.

The state's warning to cancel the lease stems from a dispute between NDMC, the country's biggest iron ore miner, and the state government over its decision to impose an 80% premium on ore sales from NMDC operated Donimalai mines in Sandur.

Highly placed sources said that at a meeting held on  November 14 at Bengaluru, chaired by Chief Minister H.D. Kumaraswamy in which Ballari district in-charge minister Mr D.K. Shivakumar and state mining secretary Mr Rajendra Kumar Kataria participated, it was conveyed to the top brass of NMDC that the state government will cancel the lease of its Donimalai iron ore mine if the PSU refuses to pay an additional levy on the sale of its ore.

The state government had levied the premium when it renewed NDMC’s license for Donimalai. In a release, NMDC said the lease deed of Donimalai iron ore mine has expired on November 3. The Karnataka government extended it from November 4 for two decades. 

However, according to insiders, ore production has been halted at Donimalai as the renewal of lease entails an added condition of payment of 80% of sale value as lease rental, which would make the operations unviable.Though the NMDC has moved the court against the move, if the closure of operations continues, it will be a blow to NMDC’s growth plans.

“This mine roughly produces 6 million tonnes per annum and so every year, the loss to the state government would be Rs 2000 crore,” state government sources said, The company said in its letter to the state government that NMDC will lose as much as Rs 1000 crore, or almost 10% of its annual revenue, if the government does not reverse its decision to charge the premium.

But the state government appears to be  firm on its decision, "We can't differentiate between private and public sector mining firms as they both make profits from the state's natural resources" said an official. When contacted a top NMDC officer on condition of anonymity said, " The Karnataka government had said they will reconsider the whole thing but as of now we have not received any communication". The Donimalai mine primarily supplies ore to India’s biggest domestic steelmaker JSW Steel Ltd at Toranagallu here. 


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