Rich in resources

Print edition : September 01, 2001

ALTHOUGH P. Sampath Iyengar, a renowned geologist in the princely state of Mysore, discovered iron ore deposits in Kudremukh in 1913, full-scale mining operations began only in 1980.

In the 1960s, the National Mineral Development Corporation (NMDC) undertook preliminary prospecting and investigation. It acquired a lease to mine in an area of 5,218 hectares, which included parts of the Aroli and Nellibeedu hills. With an iron content of 33 to 38 per cent, the ore was of a low quality, and the extraction process involved huge investments. The NMDC (with a 51 per cent equity) entered into a joint venture with MARCONA of the United States (25 per cent equity) and the MON Group of Japan (24 per cent) in 1969. Although a pilot plant was set up at a cost of Rs.48 lakhs, the foreign collaborators pulled out owing to procedural delays, and the project was shelved.

Interest in the iron ore deposits was revived in 1974 when the Iranian government signed with the Government of India an agreement for a buy-back arrangement for the finished product from Kudremukh. Under the agreement, Iran would finance the project to the tune of $630 million on condition that there would be no cost and time overruns. As a result, the 100 per cent export-oriented Kudremukh Iron Ore Company Limited (KIOCL) was established as a public sector company under the Ministry of Steel and Mines in April 1976, in order to develop mines and plant facilities to produce 7.5 million tonnes of iron ore concentrate per annum from low-grade magnetite as a tailor-made product for the National Iranian Steel Mills. But Iranian funding stopped with the overthrow of the Shah in 1979 and the subsequent political crisis in that country. Although the Government of India stepped in to fund the project, Iran was not ready to fulfil its contractual obligations and lift the ore. And though KIOCL was ready to ship iron ore by September 1980, it had no buyers.

The company got a new lease of life when India entered into a barter deal with Romania. Under the deal, KIOCL would supply one million tonnes of ore concentrate in return for Romanian equipment to set up a pelletisation plant in Mangalore with a capacity of three million tonnes a year. Although KIOCL's installed capacity was derated to 6.8 million tonnes a year in the wake of the Iranian crisis and later to 5.7 million tonnes in an attempt to extend the life of the ore body, the company was able to break into the Japanese market after 1986 and the Chinese market a few years later.

KIOCL, which has 2,390 employees (another 10,000 persons are indirectly employed), had a turnover of Rs.538 crores in 2000-01 and earned $127 million in foreign exchange. It commissioned a Rs.450-crore pig iron and ductile iron spun pipe project in Mangalore in February, signed an agreement with Mineral Technologies of Australia to recover iron tailings from the Lakya dam; and has plans to invest up to Rs.600 crores in a coke oven plant in Karwar and an iron ore mining project in Ongole, Andhra Pradesh, during the Ninth Plan. The company is a major contributor of business at the New Mangalore Port but environmentalists say that the port earns only 10.5 per cent of its total revenue from KIOCL.

According to K. Gurumurthy, Director (Production and Projects), KIOCL, with its present capacity of 5.7 million tonnes a year it can continue to mine economically for another six years. Although it has got permission to mine for three more months, the company has put almost all its plans on hold. S. Murari, Chairman-cum-Managing Director, said: "The uncertainty over whether we will get a lease has meant that we have been unable to make capital investments."

Environmentalists say that KIOCL has only itself to blame for the crisis. Said a wildlife enthusiast: "The company failed to move with the times. After the strengthening of the forest conservation laws, mining in a reserved forest, which was to be notified as a national park, was bound to attract attention from Green groups."

In 1994, the State government asked KIOCL to look for ore elsewhere. In 1996, mining at Kudremukh came to a standstill for three days after the Supreme Court ruled that there could be no non-forestry activity in areas that had been declared national parks. However, mining resumed after the court issued a clarification, stating that the order would not affect those who had secured a lease before the implementation of the Forest (Conservation) Act, 1980. But it had also made it clear that in such cases the lease should not be renewed. KIOCL's lease expired in July 1999. Environmentalists point out that KIOCL went ahead with huge capital investments though it knew that it would be difficult to secure a new lease.

KUDREMUKH, which means in Kannada the face of a horse, derives its name from a 1,892-metre peak in the region. It has been identified as one of the 18 'hot spots' of global biodiversity, and is part of Global 200 identified by the World-Wide Fund for Nature (WWF) for concentrated conservation efforts. Kudremukh is a region with heavy rainfall - an annual average of 6,500 mm, most of which occurs in the monsoon months of June to September.

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