Mines Tribunal Stays Karnataka’s Order To Withdraw Extension Of Donimalai Mining Lease

While the tribunal issued a stay order, it granted a week’s time to the state to prepare the statement of objections.

A dumper truck carries excavated iron ore from the iron ore pit at a mine. (Photographer: Waldo Swiegers/Bloomberg)

In a partial relief to NMDC Ltd., the mines tribunal under the central government stayed Karnataka’s decision to withdraw extension of lease of its mine in Donimalai until the next hearing.

The tribunal—headed by Anil Kumar Nayak, joint secretary and revisionary authority, Ministry of Mines—held the hearing after India’s largest iron ore miner filed a revision application against the state’s order.

A copy of the tribunal’s order has been reviewed by BloombergQuint.

“The impugned order is clearly in violation of the judgement of the Karnataka high court, which set aside the condition of levy of premium equivalent to 80 percent of the average sale value of the mineral,” NMDC argued during the hearing.

The impugned order, the company said, is a non-speaking order passed by the state government without notice and hearing. “In the wake of filing of the revision application by NMDC, the state government hastily issued a notification on Aug. 20 inviting tender for auction the said mining block.”

No representative from the Karnataka government was present at the hearing.

“The state has not received a copy of the revision application and couldn’t prepare their comments,” the tribunal, said citing a letter from the Karnataka government on Aug. 20. And while the tribunal issued a stay order, it granted a week’s time to the state to prepare the statement of objections.

Later, NMDC in a media statement said the stay order would prohibit the Karnataka government to take any further action regarding mining lease or initiate auction process of Donimalai mine.

The miner had sought relief from the central government after Karnataka withdrew the extension of lease of Donimalai iron ore mine, which it had earlier granted for a period of 20 years till November 2038, and auction it.

NMDC had suspended operations at the seven-million-tonne-per-annum mine in November last year following the Karnataka government’s decision to decision to claim a larger share of revenue from sale of the raw material for steelmaking. In July, the Karnataka High Court had dismissed the state’s decision.

Brokerages had expressed concerns over the Karanataka government’s decision to not extend the lease of Donimalai mine as it may create uncertainty for future renewal of leases for mines in Chhattisgarh. They also feared that NMDC may have to pay a hefty premium if it chooses to participate in the e-auction. Shares of the miner, too, had tumbled after the order.

On Thursday, NMDC shares fell 8.81 percent to Rs 78.65 apiece on the BSE while the benchmark Sensex shed 1.59 percent to end the day at 36,472.93 points.

Price Cuts For August

NMDC cut iron ore prices after two months in August as global rates of the key raw material for steelmaking fell. The state-run miner cut prices of lumps and fines by Rs 200 a tonne over the previous month to Rs 2,900 and Rs 2,660, respectively, according to an exchange filing. The new prices are effective Aug. 20.

Listen to the conversation with NMDC’s management here:

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