Licence to loot

Published : Jul 29, 2011 00:00 IST

A host of steel-manufacturing units are keen to set up plants in Karnataka, and all want captive mines.

SOUTH KOREA'S Posco is not the only steel-maker keen to do business in Karnataka. The State's estimated 9,000 million tonnes of good-quality iron ore reserves, which is the second largest in India, the State government's assurances on a smooth land acquisition process, the availability of water and the promise of speedy regulatory clearances (30-35 steps under various Acts) have attracted a number of mega projects for the manufacture/beneficiation of carbon steels, sponge iron, and iron ore pelletisation, along with the setting up of captive power plants.

The list of companies include ArcelorMittal (investment of Rs.30,000 crore for a 6 million tonne per annum plant in Bellary district, with 4,000 acres of land required); Bramhani Industries (Rs.36,000 crore, 6 mtpa plant in Bellary district, 5,000 acres); Bhushan Steel (Rs.27,928 crore, 6 mtpa plant in Bellary district, 4,000 acres); Surya Vijayanagar (Rs.24,000 crore 5 mtpa plant in Bagalkot district, 4,000 acres); Hazira Steel (Rs.17,700 crore 6 mtpa integrated steel plant in Bagalkot district, 2,100 acres); JSW Steels (Rs.15,131.7 crore for the enhancement of capacity from 10 mtpa to 16 mtpa in Bellary district, 1,150 acres); Tata Metaliks (Rs.15,000 crore for a 3 mtpa plant in Haveri taluk, 2,500 acres); state-owned NMDC (Rs.9,280 crore for a 5 mtpa plant in Bellary district, 5,000 acres); Adhunik Metaliks (Rs.5,508.4 crore 2.2 mtpa plant in Raichur district, 2,000 acres); Surana Industries (Rs.4,000 crore 1 mtpa plant in Bellary district, 280 acres); Shree Renuka Energy (Rs.3,292.8 crore iron ore pelletisation and 1.2 mtpa steel plant at Bagalkot/Bellary district, 2,000 acres); Ravindra Trading (Rs.3,292 crore for a 2 mtpa plant in Bellary district, 650 acres); Mahalakshmi Profiles (Rs.3,000 crore 1 mtpa steel plant at Bagalkot district, 1,000 acres); and Kalawati Ispat and Power (Rs.2,883.38 crore beneficiation plant at Gadag district, 580 acres). There are also a number of smaller players who hope to cash in on the State's iron ore reserves.

Iron ore mining is certainly very lucrative. It is common knowledge that the cost (including lease fees, extraction, loading, transport, and labour charges; cess) of mining a tonne of medium to good grade ore, which lies not too deep in the earth as in Karnataka, is around Rs.1,000. In addition, another Rs.1,000 is allocated for what bureaucrats politely call the keep quiet allowance. The ore is sold at Rs.5,000 to 6,000 a tonne. Each ore truck is loaded way beyond its capacity of 10 or 20 tonnes. Today, there are even double or treble axle trucks that can carry up to 30 tonnes. Every day, hundreds of these trucks trundle from the pits to the steel plants, rail heads or docks. Each truck fetches the mine owner a profit of at least Rs.80,000.

An official employed by a steel manufacturer said: Additionally, the government's policies are toothless and the system is flexible to the ways of the mine owners, the only criterion being money.

According to Karnataka's Minister for Large and Medium Industries Murugesh N. Nirani, the government has sanctioned steel manufacturing projects with a capacity of well over 40 mtpa, spread across the districts of Bagalkot, Gadag, Haveri and, of course, ore-rich Bellary. Every one of these projects has insisted that the project needs a captive mine, since that would yield higher margins. The government has agreed, and the projects will be allotted a captive mine each in the Bellary-Hospet belt. However, in a bid to protect the interests of other private mine owners, the government has mandated that these units can use/mine ore from their captive mines up to only 50 per cent of their installed capacity (not sanctioned capacity). The remaining ore will have to be bought from the open market.

Going by the general rule of thumb that 1.5 tonnes of iron ore is required to produce a tonne of steel, these newly sanctioned plants will require at least 60 million tonnes of ore annually. This demand will be in addition to the around 40 million tonnes that Karnataka exported last year. But this huge demand for ore does not perturb Nirani, who says that Karnataka will be comfortable for the next 80 years.

Not many are comfortable with this, however, and the iron ore mining in Karnataka has been described as a rape of Mother Earth.

Some of these projects, including the ones of Posco and the Tatas, have already provoked protests by farmers who are refusing to give up their lands. The Tatas plan to take around 300 farmers from the villages of Agadi and Budagatti in Haveri district, who stand to lose their lands if the Tata Metaliks project fructifies, to their Jamshedpur steel plant. There these farmers will be convinced that a steel plant will not destroy their lives but bring prosperity in the form of jobs and education for their children and welfare schemes that will enhance their lives.

While it is true that these projects will bring in massive investments and employment opportunities, they will come with a host of associated issues. Most of the promoters have asked for land far in excess of what they need. Apparently, they are prepared to scale back their requirements to realistic levels once meaningful negotiations with the government start. Posco, in fact, asked for 5,000 acres (one acre is 0.4 hectare) before settling for 3,382 acres. The projects' promoters also want the government to acquire the lands for them.

In Karnataka, land for industrial projects is acquired by the Karnataka Industrial Areas Development Board (KIADB), under sections of the Karnataka Land Revenue Act (KLRA), 1964, and the KIADB Act, 1966. A preliminary notification for land acquisition under Section 4(1) of the KLRA and Section 28(1) of the KIADB Act is issued at first. The notification provides information on the nature of acquisition and the extent of land to be acquired, besides giving a time limit for the public to file objections. Next, under Section 28(2), notices are sent out to the owners of the lands to be acquired and thereafter, under Section 28(3), objections, if any, are heard. Once this process is over, a final notification under Section 6(1) of the KLR Act and 28(4) of the KIADB Act is issued.

The compensation is fixed by a price fixation committee, which is headed by the district's Deputy Commissioner and includes the special land acquisition officer and representatives of farmers' associations. Before a decision is taken, the current market value and the guidance value of the land, whether it is fertile or dry, and the crops that are grown on it and whether it has buildings are all taken into account.

The State government, much to the chagrin of the opposition parties and farmers' organisations, has set up a land bank in a bid to facilitate land acquisition for establishing industries. So far it has identified 121,000 acres of land, of which 86,000 acres have been notified. According to Nirani, if West Bengal had a land bank the State would not have lost the Tata Nano project to Gujarat. In Gadag district, apart from the land for the Posco project, the KIADB is also acquiring 1,680 acres from 280 farmers for the proposed S.R. Steel plant and 732 acres (from 215 farmers) for a land bank set up by the State government to facilitate land acquisition for industries.

The Karnataka government's land acquisition policy has raised several questions. The foremost is whether the State should acquire land for privately owned industry from farmers. Every time the State tries to acquire land, a piece of colonial legislation is cited, wherein the state can acquire private property with due monetary compensation but without the owner's consent for use either by the government or by delegation to third parties who will then devote it to public or civic use or, in some cases, economic development. The Supreme Court has ruled that the acquisition of land by a State government for the development of a project to serve the larger public good is legal and valid and that if a project taken as a whole is an attempt in the direction of bringing foreign exchange, generating employment opportunities and securing economic benefits to the State and the public at large, it will serve public purpose (with the State deciding what was public good). But it is not an argument that people (most notably farmers) are prepared to accept easily.

We are acquiring for industrial purposes only dry or single crop lands, not fertile lands, Nirani contends. And we are acquiring just 0.24 per cent of Karnataka's total landmass.

The matter is complicated further by the fact that different sections of the B.S. Yeddyurappa government talk in different voices, with Ministries not in tandem with each other's programmes/projects. For instance, most of the land in the land bank, particularly in the Krishna basin, is said to be barren. But Irrigation Department experts aver that these lands are part of irrigation command areas and will become irrigated once lift irrigation projects, sanctioned and cleared after a long process, are implemented.

Take also the power projects in Bijapur district. Part of the land allotted for the National Thermal Power Corporation's 4,000 MW project comes under the command area of the Upper Krishna Project's (UKP) Mulwad lift irrigation project (third stage). So just when these barren lands are about to be irrigated they are being turned over to industry.

Similarly, sugar factories have been sanctioned in the UKP basin, where irrigation canals are designed for semi dry crops and not wet crops like paddy or sugarcane. The presence of sugarcane factories encourages farmers to violate cropping patterns, which have been formulated after consultations among various departments such as Irrigation, Water and Agriculture.


Ironically, while the government bends over backwards to woo private steel producers, the public-sector KIOCL (formerly the Kudremukh Iron Ore Company Limited) has been waiting since 2006 for a captive mine.

According to a KIOCL official, mining leases are not being released to state-owned companies, and allocations are meagre even if they are sometimes made. State governments prefer to release leases to private parties since there is fluid money, while this is not the case with a public sector company, he said. There are around 35 regulatory steps under various acts such as the Mines Act, 1952, which have to be complied with before mining can commence, and the steps will take at least two years to complete. Private companies can bypass these by buying' time, something that we as a governmental organisation cannot do, he said.

Changes needed

At present, iron ore is an open market commodity and the State governments hand out leases under the Mineral Concessions Rules, 1960. Some experts feel that the rules should be modified and the extraction of ore auctioned, rationed or even nationalised. Today the basic laws governing mining in India are the Mines and Minerals (Development and Regulation) Act, 1957, and the Mines Act, 1952, together with the relevant rules and regulations like the Mineral Concession Rules, 1960, and the Mineral Conservation and Development Rules, 1988.

During a recent visit to Bangalore, members of a Parliamentary Standing Committee told Frontline that the time had come to consider seriously the nationalisation of iron ore mines.

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