India’s Goa Bans Mining as Panel Pegs Loss at $6.3 Billion
India’s Goa state, which exports more than half the nation’s iron ore, banned all mining after a panel said the province’s government lost an estimated 349.4 billion rupees ($6.3 billion) because of illegal mining.
The ban will be effective today, R.K. Verma, principal secretary in the Goa government, said in a statement on the state website, without specifying the duration. About 127 million metric tons of iron ore was mined illegally between 2006 and 2011, the government-appointed panel, headed by former Judge M.B. Shah, said in its Sept. 7 report to lawmakers.
The Shah Commission, as the panel is called, is probing cases of illegal mining in the mineral-rich regions of India. The ban in Goa comes a year after a similar ruling by the nation’s top court on iron ore mining in the southern state of Karnataka. India is the third-largest exporter of the steelmaking raw material.
“The rising cases of mining bans may risk the future of steel industry in India,” Sajjan Jindal, chairman of JSW Steel Ltd. (JSTL), said today in New Delhi. “Instead of painting both legal and illegal miners by the same brush, we should try to find a balance between environment and growth.”
Billionaire Anil Agarwal-controlled Sesa Goa Ltd. (SESA), India’s biggest iron-ore exporter, fell the most in more than six months. The stock fell 6.2 percent to 159.30 rupees at the end of trading in Mumbai. Sterlite Industries (India) Ltd. (STLT), which is set to be combined with Sesa Goa, fell 4.6 percent to 94 rupees. Both companies are units of London-based Vedanta Resources Plc.
Trading and transportation of minerals that have already been mined will be allowed after scrutiny, according to the Goa government’s statement. The ban could have an impact on global supplies and prices of iron ore should it continue for some time, said R.K. Sharma, secretary general at the Federation of Indian Mineral Industries.
“We’ll have to cut our forecast if the ban continues,” Sharma said today in a phone interview. “Goa has some inventory, so there may not be an immediate impact.”
“The ban may not cause a knee-jerk reaction in the global iron ore market as Chinese demand is waning and mining in Goa is weak during the monsoon season,” said Manish Pande, regional director at CRU, a London-based commodity research and consulting firm.
Mining in Goa may take six months to a year to resume, given the time taken in Karnataka, Giriraj Daga, an analyst at Nirmal Bang Equities Pvt. in Mumbai, said today in a note to clients. While Sesa will be most affected by the ban, the state’s decision to permit trading and transportation will allow Sesa to sell about 3.8 million tons of its stock, he said.
Sesa Goa mined 12.7 million tons of iron ore from Goa in the year ended March 31, from a total output of 13.8 million tons, according to the company’s website.
“As per the orders, the company has suspended extraction of iron ore from all its mines in the state from today,” Sesa Goa spokesman R. Krishnagopal said today in a phone interview.
The Shah Commission will probe mining in seven states, including Goa, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha and Karnataka. Its next report will be on iron ore mining in the eastern state of Jharkhand, Mines Secretary Vishwapati Trivedi said today at a steel industry conference in New Delhi.
“A comprehensive audit of mining across the country is necessary to assess the impact on environment, lives and also the extent of illegality,” Trivedi said. “The government and judicial interventions may look detrimental in the short-term, but will appear to be in the industry’s interest in the longer run.”
The Shah Commission in its report said air and water pollution in the mining areas in Goa were not being controlled and had exceeded tolerance limits.
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