Captive mining to fuel steel cos' expansion plans
The move will provide raw material guarantee for over Rs 1,00,000 crore investment proposed by steel majors SAIL and Tata Seel to add 35 million tonnes of additional steel capacity over the next few years.
By Subhash Narayan, TNN |
NEW DELHI: This may come as good news to steel majors, especially Tata Steel and SAIL. Steel companies will not be required to take new iron ore mines for expanding plant capacities as the new policy has allowed additional mining of captive mines. The move will provide raw material guarantee for over Rs 1,00,000 crore investment proposed by the two companies to add 35 million tonnes of additional steel capacity over the next few years.
The existing captive iron ore mines of the two companies have been offered based on their current steel-making capacity. Both Tata Steel and SAIL have now announced huge capacity expansion. Even though their existing captive mine could support some portion of this expansion, it was feared that states may not permit extension of captive lease for expanded capacity when it comes up for renewal. The existing regulations on this are also unclear.
"The new national mineral policy cleared by the Cabinet last week has proposed that renewal of captive mining lease of companies would not be restricted only to their existing steel making capacity but would also include planned capacities. The rule will be applied only when steel firms with captive iron ore mine comply with the condition of lease in terms of proper utilisation of mining resources and adherence to milestones," an official source said.
At present, a mining lease is renewed automatically, subject to it fulfilling all the lease conditions. The mineral-rich states, however, wanted renewal of applications to be linked to existing steel capacity of companies based on their plant life. This would have freed some proven mines for use by other applicants.
However, the policy has favoured long-term linkage to companies to support their expansion. The decision would primarily benefit Tata Steel and SAIL. These are the only steel companies, apart from a couple of minor ones, having captive iron ore mines. There were fears that expansion plans of these companies would be hit if long-term iron ore linkage is not assured.
A government official said mines ministry is considering constitution of an independent committee to do fair assessment of the mine development activities of original allottees, before deciding the fate of renewal applications. This would ensure that state governments do not exert undue pressure on companies to deny renewal of mining lease.
The existing captive iron ore mines of the two companies have been offered based on their current steel-making capacity. Both Tata Steel and SAIL have now announced huge capacity expansion. Even though their existing captive mine could support some portion of this expansion, it was feared that states may not permit extension of captive lease for expanded capacity when it comes up for renewal. The existing regulations on this are also unclear.
"The new national mineral policy cleared by the Cabinet last week has proposed that renewal of captive mining lease of companies would not be restricted only to their existing steel making capacity but would also include planned capacities. The rule will be applied only when steel firms with captive iron ore mine comply with the condition of lease in terms of proper utilisation of mining resources and adherence to milestones," an official source said.
At present, a mining lease is renewed automatically, subject to it fulfilling all the lease conditions. The mineral-rich states, however, wanted renewal of applications to be linked to existing steel capacity of companies based on their plant life. This would have freed some proven mines for use by other applicants.
However, the policy has favoured long-term linkage to companies to support their expansion. The decision would primarily benefit Tata Steel and SAIL. These are the only steel companies, apart from a couple of minor ones, having captive iron ore mines. There were fears that expansion plans of these companies would be hit if long-term iron ore linkage is not assured.
A government official said mines ministry is considering constitution of an independent committee to do fair assessment of the mine development activities of original allottees, before deciding the fate of renewal applications. This would ensure that state governments do not exert undue pressure on companies to deny renewal of mining lease.
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