Donimalai: Karnataka Readies Fight Strategy as NMDC Earns Relief in First Round

Kolkata: The result of the first round of fight for Donimalai has gone in favour of iron ore miner National Mineral Development Corporation Ltd (NMDC), a PSU under the administrative control of the Ministry of Steel.

The Karnataka government is now readying its strategy to mount a fight back for asserting its authority to award lease on its terms for Donimalai.

The mine is located in the iron ore-rich Bellari district, where the Reddy brothers, who have had the blessings of some senior BJP leaders, have had a dominating presence for a long time.

Interestingly, the fight involved two regimes – first, the Congress-JD(S) ministry during whose time the reasons for Donimalai becoming a contentious issue had surfaced and second, the BJP-led ministry, now in office and whose responsibility it is to fight back. This has political significance in the sense that there is no move to reverse a Congress-JD(S) ministry decision.

NMDC has been the leaseholder for Donimalai since 1968. On November 2, 2018, the Karnataka government issued a letter for extension of the lease for 20 years. On November 23, 2018, it asked NMDC to execute the lease extension deed. In the first letter of November 2, the state included a condition that for the lease extension, NMDC has to pay 80% premium on the sale value of the mineral, as determined by the Indian Bureau of Mines.

NMDC challenged the premium demand in the Karnataka High Court through a writ petition. The High Court, in its order passed on July 10, 2019, allowed the writ petition and set aside the condition for 80% premium. NewsClick has had access to this court order.

On August 17, 2019, Karnataka withdrew the approval for extension of the lease and decided to auction the mine block. NMDC moved the Revisionary Authority in the Union Ministry of Mines, which heard the plea on August 21 and concluded that “it would meet the ends of justice” if Karnataka’s order of August 17 “and consequent action thereon” are kept in abeyance. Accordingly, these were stayed until the next date of hearing. At the August 21 hearing, no Karnataka government representative was present. A copy of this order is available with NewsClick.

Thus, NMDC fought two issues – Karnataka’s demand for premium, which, for it, was a new demand and second, withdrawal of lease extension and in its place, an auction for Donimalai, where the company had already extracted iron ore for 50 years.

Now, about Karnataka’s strategy for a fight-back. Inquiries from officials dealing with minerals suggested that the state government would challenge the High Court order in the Supreme Court and prefer an appeal before the Revisionary Officer in the Union Ministry of Mines, where its contention would be to lift the stay on execution of the August 17 decision to auction the block.

Asked whether the Centre would intervene in the Donimalai issue, Union Mines secretary Anil Gopishankar Mukim told this correspondent that the two sides were seeking redress under the law of the land, which also provides for appeals.

The thrust of the arguments put forward by NMDC’s lawyers is: In demanding premium, the Karnataka government has made use of its discretion, “which is not permissible in law”. Therefore, it is without jurisdiction. The Mines and Minerals (Development and Regulation) Act, 1957 classifies mining leases for government companies differently.

Rules were cited by the lawyers in support of their contention that payment of any sum as premium was not contemplated. Also, rules were cited to contend that the intention was to facilitate continuation of merchant mining or non-captive mining by government companies. Moreover, the levies that can be collected have been clearly mentioned. These are: royalty, dead rent, District Mineral Foundation, National Mineral Environmental Trust and payment under Section 17A (2C).

NMDC’s lawyers also pointed out that if the premium demand was accepted, NMDC would suffer an estimated loss of Rs 1,348 per tonne, which would add up to Rs 944 crore per annum.

Finally, relevant sections of Orissa Cess act, 1962 and the Orissa Cement case were cited to conclude that only the Union government had the authority to enhance royalty “directly or indirectly”. The condition to pay premium, as set by Karnataka, is not sustainable for want of statutory power. Premium cannot be imposed by an executive order.

The emphasis of Karnataka lawyers’ arguments was: NMDC had earlier accepted the state government’s stipulation that the extracted ore should not be exported and that it was bound to add value to the ore locally. The company had thereby conceded that the state had the right to set conditions. Moreover, as the company had not accepted the premium condition, “no right accrues in its favour” and therefore, no petition seeking writ of mandamus is maintainable.

The iron ore at Donimalai was of high grade and 80% premium was reasonable. It would enable the state to collect Rs 1,500 crore a year or Rs 30,000 crore during the 20 year-lease period.

While NMDC was opposing the 80% premium demand in this case, it had offered premium of 95% and 105%while bidding for two leases in the nearby areas. This was not denied by NMDC’s lawyers.

The Fourth Schedule, as it obtains now after the 2015 amendment to the MMDR Act which took effect from January 12, 2015, includes iron ore. Therefore, mining lease of iron ore can be granted only through auction to any private person or enterprise.

The trade union active at Donimalai is affiliated to All-India Trade Union Congress whose president is the veteran CPI leader Gurudas Dasgupta and general secretary is Baligar Somasekhara. The general secretary said that Donimalai has a workforce of around 1,000 including officers.

According to NMDC sources, except the maintenance staff, all other Donimalai workers and officers had been deployed in the large Kumaraswamy mine nearby and Donimalai’s customers were being supplied Kumaraswamy iron ore.