Tata Steel, JSPL, SAIL May Take A Hit On Supreme Court Ruling On Odisha Illegal Mining

The Supreme Court's judgement on illegal mining activities in Odisha is likely to hit listed steel companies, such as Tata Steel Ltd., Steel Authority of India Ltd. (SAIL) and Jindal Steel and Power Ltd. (JSPL), which have their mines in the state.

The apex court on Wednesday directed that a 100 percent penalty be levied on companies which have illegally extracted iron and manganese ore in Odisha since 2000-01, newswire PTI said in a report. The penalty will be applicable on the total value of illegal mining extracts by each company over the years.

According to a report by brokerage firm Investsec on the Indian steel sector, while penalties based on the Central Executive Committee (CEC) report would imply a marginal impact on Tata Steel, the same cannot be ascertained for JSPL and SAIL. However, it listed the penalties levied by both CEC and Odisha government to that extent.

The report suggests that NMDC Ltd. could be a beneficiary to this order as certain merchant miners would opt to shut down based on CEC stated levies and merchant lease expiry timelines.

The verdict means: 1) central government to revisit the National Mineral Policy within December-end, 2) the lessees in violation of environment conservation (EC) and forest conservation (FC) laws to pay 100 percent of cost of minerals as rationalised by CEC, 3) in case of violation of both EC and FC, maximum recovery to be 100 percent and more than that for the period of overlap, and 4) hearing of five firms, including JSPL to be held after two months, the Investsec report said. 

Any further hearing on the matter is unlikely, Goutam Chakraborty, analyst at brokerage firm Emkay Global told BloombergQuint over the phone.

Reacting to the order, JSPL slipped the most in two months to 7.2 percent, SAIL lost as much as 2.7 percent while Tata Steel dropped more than 2 in Thursday's trade on the National Stock Exchange.