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One Word In Mining Laws Can Increase JSW Steel Margin By 300 Crores

| Published on October 10, 2019

It was a very recent story, how a battle was brewing between state miner NMDC and the Karnataka Government. The debate was about the renewal of the mining lease for the miner with respect to the Donimalai mines. You might be wondering, what is so special about these mines that a state miner went up against the government?

One Word In Mining Laws Can Increase JSW Steel Margin By 300 Crores

Well, the mine produces 6 million tons of iron every year, solely responsible for 17 percent of NMDC’s total capacity.

So, how did things unfold?

Well, the Karnataka Government agreed to renew the lease but with a certain condition. NMDC had to pay an 80% premium on the sale value of the mineral procured from the mine. So, NMDC didn’t accept this, deciding to go to High court to vouch for the lease. Then again, the Karnataka Government in return took away the entire decision to approve the lease in the first place.

JSW Steel

How could the Government do so?

There is this one particular law that governs such cases. The law states that ‘if a public sector undertaking has requested a state government to renew a mining lease, the government ‘may’ do so. This is under the The Mines and Minerals Development and Regulations Act (MMDRA).’

Hence the use of the word ‘may’ allowed the Karnataka Government to change their decision.

Have things changed now?

The law was recently changed where the word ‘may’ was replaced by ‘shall’. Hence, the Karnataka Government had to allow NMDC to start mining. So, on one hand, NMDC benefitted and the state of Karnataka did too since its ore shortage reduced. Moreover, another major benefiter was the big steel company, JSW steel, which has a plant in Bellary, very close to Donimalai.

One Word In Mining Laws Can Increase JSW Steel Margin By 300 Crores

How did JSW Steel benefit?

JSW steel purchased ore from NMDC for its Bellary plant. It was buying around 5 million tonnes of iron ore before NMDC stopped mining in that area. After this, JSW steel had to purchase raw material from other sources which drastically increased its costs by Rs 600 a ton.

One Word In Mining Laws Can Increase JSW Steel Margin By 300 Crores

However, all thanks to the current changes made and the renewal of the lease, JSW steel would save around Rs 300 crores if it starts sourcing again from NMDC in Donimalai. After all, all is well that ends well.

Also Read: How Brand Factory Makes Profit Even After Offering High Discounts

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