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Dark clouds loom over ore exporter

Environment concerns in the ecologically sensitive Western Ghats restrict mining activity

NO MORE MINING: KIOCL stopped mining activity at Kudremukh in Karnataka in compliance with the Supreme Court order.

KUDREMUKH IRON Ore Company Limited (KIOCL), a Central public sector enterprise, stopped mining activity at Kudremukh from the midnight of December 31 in compliance with a Supreme Court order to protect the environment in the ecologically sensitive Western Ghats region from the ravages brought about by years of mining iron ore.

KIOCL, the country's largest exporter of iron ore and pellets with shipments of 7 lakh tonnes of ore and 3.80 million tonnes of pellets worth around Rs. 1,850 crore, mostly to China in 2004-05, is now anxiously waiting for the apex court to take up for hearing in the last week of January two petitions filed by the company and its workers to determine whether any salvation is in store for them.

"We have adhered to the Supreme Court orders dated October 30, 2002 and September 30, 2005. KIOCL has stopped mining activity at Kudremukh and has removed equipment to different places. We are now waiting for the Court to consider our petitions and the report of the monitoring committee,'' a top company official said.

At the time of winding up its mining operations, the 100 per cent export oriented unit was sitting on cash reserves worth about Rs. 1,300 crore.

The company had paid a dividend of Rs 129 crore last fiscal to the Union Government that holds 99 per cent of its capital.

An adverse ruling by the Court at the next hearing will push the company to seek the Government's permission to implement a voluntary retirement scheme (VRS) for its roughly 1,950 workers (1,350 in mining operations and 600 at its pellet plant in Mangalore and other locations) under the Factories Act.

As per the VRS policy for PSU employees and in other government departments, every employee will be entitled to receive a maximum of 60 days' salary for each completed year of service.

Kudremukh earned a net profit of about Rs. 650 crore last fiscal on a turnover of Rs. 1,850 crore from iron ore and pellets. About 85 per cent of the ore is converted into pellets and exported, mainly to China, while the balance is sold in the Indian market. With the winding-up of mining operations, the company will have to rely solely on sale of pellets for its revenues. But its woes have been compounded by the fall in global pellet prices in the spot market from about $135 a tonne in February-March 2005 to about $70-75, mainly due to China's decision to regulate its import of iron ore and pellets. As a result, spot prices have been brought in line with long-term prices.

"KIOCL expects to make a profit of around Rs. 300 crore this fiscal. This is likely to drop to Rs. 100 crore next fiscal,'' the official said.

New ore sources

The company has made alternative arrangements to keep the pellet plant running. It has signed an agreement with the National Mineral Development Corporation to source nine lakh tonnes of ore up to March 31 this year (three lakh tonnes per month). It is also looking at other suppliers and developing mines elsewhere in Karnataka to feed its pellet plant.

The request for a mining lease in the Ramanadurg area with deposits estimated at 100 million tonnes in the State is expected to be taken up by the State Cabinet shortly. Though illegal mining goes on in Ramanadurg, officials said it would take three to four years for KIOCL to develop the mines and start mining. Officials reckon that KIOCL may have to import ore to bridge any shortfall in availability of ore from domestic sources to feed its pellet plant.

P. MANOJ

in Bangalore

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