Thakurani Mines Closure Order to Hit Iron Ore Supplies

The mines’ closure cut off iron ore supplies to Jindal Steel and Power, which sources all the iron ore the mines produce

April 10--NEW DELHI -- The Odisha's Directorate of Mines has ordered the closure of Sarda Mines Pvt. Ltd-owned Thakurani mines owing to the expiry of environmental clearance on 1 April, effectively cutting off iron ore supplies to the Naveen Jindal-owned Jindal Steel and Power Ltd (JSPL), which sources all the iron ore produced from these mines, according to a mines department official who spoke on condition of anonymity.

The Thakurani mines are being investigated by a Supreme Court-appointed committee over other alleged irregularities, and were cited by the M.B. Shah Commission that looked into the issue of illegal mining as an example of how changes made in mining leases allowed some miners to increase their production manifold.

JSPL was sourcing iron ore fines produced from the mines for its five million tonne per annum (mtpa) pellet plant at Barbil in Odisha and lumpy ore for its 3 mtpa steel unit in Raigad, Chhattisgarh.

The Odisha's mines department official said his department did not receive a formal communication from the Union environment ministry on the extension of the environmental clearance and therefore ordered the mine's closure. "With the model code of conduct now in force, it looks unlikely the matter will be resolved till the end of the elections," the official said.

The code ensures that governments do not take significant policy decisions once elections have been announced. The parliamentary elections started on Monday and will go on over the next month and half till 12 May.

Arjun Saraswat, director and nominated owner at Sarda, confirmed that the mine has been shut. "We are disappointed by the decision to shut the mines as we should have got a deemed approval of extension of the environmental clearance," he said. A JSPL spokesperson declined comment. A JSPL executive who spoke on the condition of anonymity said the company expects to temporarily meet its iron ore requirements from its inventory.

"Sarda's Thakurani mines are a major source of iron ore for JSPL's pellet plant in Barbil as well as its steel plant in Raigad. Over the short-term we expect no major impact on JSPL resulting from the closing of the Sarda mines as JSPL has already built up a sizeable amount of iron ore inventory to the tune of 15 mt at these mines," said Prasad Baji, senior vice-president at Edelweiss Securities, a brokerage.

A central empowered committee appointed by the Supreme Court is probing an alleged illegal tie-up between JSPL and Sarda Mines in the operations of the Thakurani mines. Sarda had been accused of selling the entire production of its mines to JSPL without any written agreement at a price lower than the prevailing market rate, resulting in lower tax revenue for the exchequer. The CEC was appointed following a public interest litigation filed by Odisha-based journalist Rabi Das alleging that irregularities led to losses to the tune of Rs.8,000 crore to the exchequer

The Shah Commission's report too came down heavily on the mines in question and said Sarda was effectively controlled by JSPL.

"In some of the mining leases, modifications have been done at small interval and production has increased manifold. One of such example is M/s. Sarda Mine Pvt. Ltd. mainly controlled by the M/s. JSPL. In this lease, the production limit has been modified and increased total six times ...from 1.5 million tons to 15 million tons," it said.

Sarda's Saraswat explained that in September 2013 the expert appraisal committee of the environment ministry approved an extension of the environmental clearance, but failed to communicate this to the Odisha's Directorate of Mines. He cited Indian law to claim that if the environment ministry doesn't communicate with the company in question within 45 days of the approval, then it is considered a "deemed approval".

Officials of the environment ministry did not respond to phone calls.

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