India’s Top Court Ends Mining Ban in Goa With Output Limit

Apr 21, 2014 7:46 am ET

(Updates with comment from analyst in sixth paragraph.)

April 21 (Bloomberg) -- India’s top court today allowed iron ore miners to resume operations in Goa state after imposing a ban 18 months ago for environmental violations. Goa accounted for about half of the nation’s exports before the halt.

The western state can produce a maximum 20 million metric tons a year after miners renew their leases with the Goa government, a three-judge Supreme Court bench, headed by Justice A.K. Patnaik, said in its order. A court-appointed panel will submit an environmental impact report in six months and give its assessment on increasing the output limit.

The restart of mining may raise supplies of the steelmaking raw material in the world market, especially to China, which used to buy most of Goa’s ore before the ban. Miners including Sesa Sterlite Ltd., owned by billionaire Anil Agarwal, and Timblo Group will benefit from the resumption of ore extraction.

Shares of Sesa Sterlite, which owns the biggest mines in the province, surged 4.6 percent, the most in more than four months, to 201.65 rupees at the close in Mumbai today. India’s benchmark S&P BSE Sensex rose 0.6 percent.

All mining in the state after 2007 is deemed illegal, the court said in its order. Leases expired that year and mines had been operating pending renewal, C.U. Singh, a lawyer for the Goa miners’ association, said in New Delhi, explaining the court’s rationale for requiring miners to seek fresh permits.

‘First Hurdle’

“Despite lifting of the ban, mining may not start before October,” said Giriraj Daga, a Mumbai-based analyst at Nirmal Bang Equities Pvt. “The first hurdle that the miners need to cross is getting a valid mining lease from the state government.”

The court ordered that 10 percent of proceeds from ore sales be used for welfare programs and asked the Goa government to prepare a report on how it plans to use the fund. The order asks the local government to seize all ore lying at various locations in the state before the court-appointed panel suggests ways to utilize the commodity.

The Goa government, acting on the counsel of a panel set up by the mines ministry to probe mining violations, imposed the ban in September 2012. The following month, the top court upheld the ban and halted transportation of ore, similar to its sanction in southern Karnataka state the previous year.

The two adjoining states produced almost half of India’s output of iron ore as demand soared amid China’s economic boom. Goa lost an estimated 349.4 billion rupees ($5.8 billion) because of illegal mining, the mines ministry panel, headed by retired judge M.V. Shah, said in its report.

The Supreme Court-appointed panel last month recommended lifting the ban in Goa, albeit with conditions that included lowering production. In November, the court allowed miners in the western state, which exported almost all its ore before the ban, to sell unsold inventory.

The 20 million-ton limit will cut Goa’s output to the lowest since the year ended March 31, 2005, according to data from India’s steel ministry.