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Indian Iron Ore Mining Mess - 208 Million Tonne of Odisha Ore Untapped

Financial Express reported that if mining scams and the consequent court decisions have hit the iron ore production in Karnataka and Goa hard, in another state, a central PSU with estimated reserves of 208 million tonne of this key input for steel-making and unfettered by any such row is smugly sitting on them. The top management of Orissa Minerals Development Company and the state government are blaming each other for the delay in renewing the PSU’s mining leases that had begun to expire roughly a decade ago.

Amid the bickering, OMDC’s ore production is now almost negligible while in its heydays a decade ago it was the country’s third largest ore producer with an output of roughly 3.2 million tonne. Only public sector NMDC and private miner Sesa Goa used to produce more than OMDC, which is a step down subsidiary of RINL, India’s second largest steel PSU. Apart from the inability of OMDC top brass and the state government to resolve their differences, OMDC, by its own admission, is also constrained by lack of professional expertise in diverse areas.

The impasse is despite the fact that renewal of the leases would give OMDC access to mineral rich areas aggregating 4365.262 hectares, located at Barbil in Keonjhar district of Orissa. If the PSU, which got listed on the BSE in August 2010, resumes its mining activity and regains its past glory, the country’s iron ore production and exports would receive a boost. India’s iron ore production plummeted from 219 million tonne in 2009 to 10 to 140 million tonne in FY13 owing to a ban following the illegal mining scam. Export earnings from ore have come down to a trickle from USD 6 billion in 2009 to 10.

OMDC’s mining activities have come to a standstill despite its huge cash reserves of INR 678 crore as of end March. The lease areas mentioned above are also estimated to hold manganese ore reserves of 44 million tonne.

Speaking to FE, a senior official at the Orissa mining department said that the OMDC management isn’t showing any interest in getting some statutory clearances necessary for renewal of leases. Mr AP Choudhary CMD of RINL who is also chairman of OMDC said that “Any lapse on the part of the company, the company was expecting the final nod from the state for quite some time now. It will take only a month for OMDC to resume mining once the approval is given. Since the PSU has recently got high court rulings in its favour on some pending issues, the approval processes could be expedited.”

The state mining department official said that “OMDC is lacking some statutory clearances without which mining operation cannot be resumed. These clearances are very small things some surface rights, some minor violations, etc, that OMDC has to address, but they are not taking interest in doing it. The state government is willing to support OMDC to realize its true potential. All the mines of OMDC have very good potency. The exploration carried out by OMDC is very negligible. The estimated ore reserve will be much higher if exploration efficiency is improved. If a proper management board with a mining background is constituted, OMDC will flourish like anything.”

According to OMDC’s latest annual report, 2 of its mines, the Kolha Roida iron ore mine and the Dalki manganese ore mine have got environmental and forest clearances and are awaiting the state government’s nod to start development and mining work.

However, fractious issues keeps propping up between the state government and the company, thwarting resumption of operations. The impasse, needless to say, is also hurting OMDC’s shareholders. In fact, OMDC too, albeit indirectly, indicates its professional inefficiencies in its FY13 annual report. It said that one of its main weaknesses is shortage of qualified professional manpower in almost all the departments of OMDC.

OMDC had seen its peak in FY04 when it produced over 3.18 million tonne of iron ore but since then production, revenue and profit, all started tumbling until FY10 when it registered a production of 0.56 million tonne. This was primarily because the leases on its mines started expiring. In fact, between FY07 and FY10 the company’s revenue slid by 72.54% from INR 300 crore to INR 82 crore. In FY13, the revenue OMDC earned was solely from investments in financial instruments due to its huge cash reserves.

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