Mining: A decade-long pause, with no end in sight

Ten years after mining operations in Goa were summarily stopped from September 11, 2012 , except for a brief interlude of operations, only to be stopped again from April 2018, the scenario for the sector is still enveloped in the dusty cloud of uncertainty
Government's moves to restart mining have only succeeded in it being sucked deeper into the pit.
Government's moves to restart mining have only succeeded in it being sucked deeper into the pit.

The silence in the mining pits of Goa has taken a portentous character. A decade after mining operations were summarily brought to a halt by the then government via an order dated September 10, 2012, Goa struggles to restart operations, but its efforts have only succeeded in it being sucked deeper into the pit.

The second renewal of mining leases being found illegal and mining operations stopped again, this time by the Supreme Court in 2018, is one such instance.

For the mining sector in Goa, it’s been a decade-long struggle, a period during which not only did most mines fall silent, but there were other economic repercussions too, a fact admitted by the government.

The closure hampered state's economic growth.
The closure hampered state's economic growth.

Speaking at the Mines Ministers' conference at Hyderabad on the weekend, Minister Subhash Phal Desai representing Goa, was clear that the closure has dealt a blow to the State’s economy. “Due to the closure of mining activity for nearly a decade, the State of Goa has suffered both socially and economically. Mining being the backbone of the Goan economy, this closure has created a multiplier impact across the social and economic strata of the state,” Phal Desai said.

This is also borne out by industry bodies. “The last decade has seen immense destruction of value and creation of grave economic stress in Goa. The stoppage of mining has resulted in huge loss of revenue to the government and we have gone from a prosperous state to one that is continuously borrowing.

Export of iron ore was a valuable source of foreign exchange.
Export of iron ore was a valuable source of foreign exchange.

Export of iron ore was a valuable source of foreign exchange, which has dried up. Goan firms enjoyed a reputation in the international market which has been destroyed due to the start-stop nature of operations over the last few years, which will be extremely difficult to regain,” CII-Goa chairperson Swati Salgaocar said.

She gave the example of how Fortescue Metals Group (Australia) ore used to trade at a discount with Goan ore, but that it now has gone the other way round. “Due to the stoppage, the Goan iron ore industry has not been able to take any advantage of the price peaks of the last few years. Unemployment has risen and several mining-dependents are in a bad way. Mining companies which contributed greatly to the education, healthcare and sports sectors through CSR have had to scale back their spending, given the lack of income.

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Unfortunately, there has been no new industry or significant investment in Goa in the last decade that has come anywhere close to contributing to Goa in line with mining,” added Salgaocar.

Adding to this, Goa Mineral Ore Exporters Association (GMOEA) Secretary Glenn Kalavampara said, “The industry suffered, the State suffered, the stakeholders suffered and lastly the country suffered too, with the intensity highest in the sector that took more risks.”

He made this statement this based on the assumption of prevailing prices for saleable ores. “On an average Rs 6000 crore is being lost per annum on foreign exchange. The historical aspects of putting the industry on track was strongly influenced by the mining companies over years of toil. If the industry were to be allowed to produce and sell 20 million tonnes per annum and on assumption price, as prices keep fluctuating, roughly Rs 6000 crore per annum would be the gain in foreign exchange per year. Almost 40% of this would have gone to the State government by taxes etc and an additionally sizeable contribution would have gone towards the logistics cost, ancillary businesses, ports and local markets too,” Kalavampara said.

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He added that today, ten years later, everything is lying in a state of disrepair. Barges, trucks, shipyards have been affected, machinery corroded and employment hit.

Perhaps nobody expected the hasty decision of ten years ago would have such long-lasting impact. It was supposed to be a temporary measure, that took a course of its own and the economic impact is noticeable. Just last week the State again notified the sale of Rs 100 crore government stock that is essentially a loan as it has to be paid back with interest at the end of the term. The sale of such stock has turned out to be a regular feature.

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What went wrong for a State that once took pride in mining?

Goa Chamber of Commerce and Industry president, Ralph de Souza explains that in 1994 when the MMTC lost its all-India monopoly for exports of iron ore, the Centre permitted mine owners and commodity traders to directly export to foreign countries.

“This led to a paradigm change in Goa’s mining fortunes. Mining operators as well as traders from across the borders of the State made a beeline to Goa and threw their hats into the mining arena. These new players in the game were joined by some local small-time mining contractors, who went into big-time production and overnight made a negative impact on the mining operations in Goa. This led to almost all the traditional mining families being overshadowed. While the extraction and exports of minerals increased in leaps and bounds, many of the pioneers played second fiddle to the new comers,” de Souza said.

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It was the start of the over-exploitation of minerals with little regards to the environment. De Souza added, “When the commodity prices peaked around 2006, driven by Chinese demand, traders from other Indian states descended upon Goa, established a flourishing business of acquisition and exports of iron ore, a lot of which was illegally extracted.”

The mining boom led to several irregularities as exports touched 50 million tonnes. “A lot of things happened that shouldn’t have happened, and as a result, anyone who was ever involved in the mining business, including its pioneers, were painted with the same brush. Even those who had scripted the early economic growth of Goa were labelled as ‘exploiters’,” de Souza said.

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The auction route has little favour from mining firms

Attempts to restart mining operations has only led to Goa digging itself deeper into a mining pit with no solution emerging from the depths. The only option now appears to be auctioning of mining leases, which the government is clutching at desperately with the hope that this will bestow the mining sector with a new lease of life.

“The government is ready with tender documents for issue of first notice vide tender of auctioning mining leases in the State,” Phal Desai said at the Mines Ministers Conference, but he didn’t appear to be very convinced that it was the best option for the State, for he also said, “We fear also that the auctioning will not yield the desired revenue to the government due to the high export duty that is existing as of today.”

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That a decade after the then Goa government stopped mining operations, the sector has been unable to get back on track and is unsure of the path to take, indicates just how knotted the issue has turned.

A study undertaken by Goa Mineral Ore Exporters Association (GMOEA) and released in December 2020 suggested the early resumption of mining and changes in the Mining Acts & Rules should be a stimulus to undertake sustainable mining operations , practices and must be progressive and not lead to a situation of unease. Neither of this happened, instead the industry in Goa has seen just the opposite occurring.

In May this year, the State government initiated the process to take possession of 88 iron ore leases by granting the lease holders one month to vacate the leasehold areas. In July, the Chief Minister announced that the process of auctioning leases would start soon and be completed within four months. It had been revealed that the Mineral Exploration Corporation Ltd (MECL) had identified and proposed five mining blocks for auction, apart from the 88 leases, which would be also auctioned in cluster form.

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But, auction is not what the Goan mining firms are looking for. Salgaocar said, “In other states where auctions have been conducted, there have been several issues resulting in unnecessary delays and reduced revenues for the government. In cases where a very high premium was paid, several bidders have even surrendered the leases due to unviability. The auction process will not lead to an immediate resumption of mining as there are several statutory approvals and compliances that are required before operations can start. It may also result in lower employment for locals if non-Goan firms win the auctions. In addition, the current export duty on iron ore has made Goa leases unattractive to bidders which will result in lower revenue for the State through the auction process. The Goa government has been issuing statements about conducting auctions and restarting mining for over a year now, but the results are yet to be seen on the ground.”

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The hurdles for the local players

Mining firms in Goa see two distinct disincentives for them – the increased export duty and the beneficiation clause. “Towards the path of revival, the mining industry notes two distinct disincentives for them – the increased export duty and the beneficiation clause. Export Duty of 50 per cent rules out viability of commercial sales through exports. It may be noted that Goan ore, owing to its low grade but geographical location, ensured exports where such ore could at best be blended with ores from other regions,” Kalavampara said.

Added to this is the clause that the ore has to be beneficiated to 62% Fe by the miner before selling the ore. The industry argues that all ores cannot be beneficiated to 62% Fe content. Kalavampara added, “The viability of upgradation is limited to a few units only – three units using beneficiation. Incentivising value addition is welcome but one needs to factor technical and commercial viability too. Even beneficiating to upgrade by 2 or 3 units generates approximately 20 to 25% as tailings for grades of 55/56 Fe. And Goa’s iron ore ranges from 45% to 57% Fe content of Haematitic natures.”

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The rainbow of hope for the sector comes from the State government. At the same Mines Ministers Conference, Phal Desai sought restoration of the 0% export duty for low grade iron ore and exemption of Goa from beneficiation of ore to 62% Fe content. “Until recently export duty on low grade iron was 0%, which made export of iron ore very economical, now export duty has been raised to 50% on all types of fe grades. Goan ore neither has domestic market, nor can it participate in exports. Iron ore industry is facing a very severe threat of survival in Goa,” the minister said.

He also said that beneficiation to 62% Fe content is not possible in Goa as the average ore in Goa ranges from 52 to 56 percent, and that this would badly affect the industry in the State.

For a sector that has been in pause mode for so long, the resumption of mining activities can only come with the assurances that there will be no further stoppages. As bureaucratic gears shift towards a restart, the industry, led by GMOEA hopes that techno-commercial concerns are adequately addressed by the government, apart from the legal matters in regards to tenure.

Government's moves to restart mining have only succeeded in it being sucked deeper into the pit.
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