Samaj Parivartana Samudaya vs State Of Karnataka .

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION

IA. No. 205/2014, IA No. 206/2014, IA No. 24335/2018, IA No. 98216/2020, IA No. 98219/2020, , IA No.152631/2018, IA No.64798/2019 in IA No.152631, IA No. 61304/2019, IA No.97376/2019 in IA No. 24335/2018 and 152631/2018, IA No.61452/2020, IA No.17007/2021, IA No. 37678/2022 IN WRIT PETITION (CIVIL) NO. 562 OF 2009

SAMAJ PARIVARTANA SAMUDAYA AND ORS. .....PETITIONERS

VERSUS

STATE OF KARNATAKA AND ORS. ..... RESPONDENTS

ORDER

1. The present writ petition was filed under Article 132 of the

Constitution of India over two decades ago, seeking directions to the

respondent No. 1/State of Karnataka, respondent No. 2/State of Andhra

Pradesh and respondent No.3/Union of India to stop all mining and Signature Not Verified Digitally signed by

related activities in the forest areas of Karnataka and Andhra Pradesh Rajni Mukhi Date: 2022.05.20 18:28:10 IST Reason:

being carried out and in violation of the order dated 12.12.1996, passed

Page 1 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

by this Court in T.N. Godavarman Tirumulpad v. Union of India 1 and

the Forest (Conservation) Act, 1980.

2. Directions were also sought to be issued to the respondents/States

and the Union of India to declare all mining contracts/sub-leases issued

in violation of the Mines and Minerals (Development and Regulation) Act,

1957 as illegal and take penal actions against the violators. The third

prayer made was for directing stoppage of all mining activities along side

the border and within the forest areas in the Bellary Reserve Forest.

Lastly, directions were sought to declare Notification dated 15.03.2003

and other related Notifications dereserving lands for mining operations,

as null and void.

3. The writ petitioner had approached this Court against the

indiscriminate and rampant mining activity that was being carried out

under the nose of the Authorities, in particular in the District of Bellary.

The reports submitted by the Central Empowered Committee 2 bore out

the submissions made by the petitioner regarding large scale illegal

mining in the area resulting in complete degradation of the environment.

As a result, vide order dated 29.07.2011, all mining activity was

prohibited in the District of Bellary, followed by the Districts of Tumkur

and Chitradurga. Taking note of the rampant encroachment in forest land

by lease-holders and illegal mining operations taking place in the same

(1997) 2 SCC 267 1 For short the “CEC” 2 Page 2 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

area, a joint team was constituted vide order dated 06.05.2011 to

conduct a survey of the area which revealed how illegal mining had

ravaged the forest area of the aforesaid districts.

4. The CEC submitted a report, termed as the “Final Report” dated

03.02.2012, making several recommendations one of which was to

categorise the mines into three categories based on the extent of

encroachment in respect of the mining pits and overburden dumps,

determined in terms of percentage qua the total lease area. Three

categories of the mines were suggested as ‘A’, ‘B’ and ‘C’. Another

recommendation made by the CEC was relating to the conditions

proposed for reopening of mining and resumption of the mining

operation for this Court to consider as part of the Reclamation and

Rehabilitation Plans.

5. The recommendation made by the CEC vide its report dated 13 th

March, 2012, relating to the prescription of a ceiling limit for the total

production of iron ore for mining leases in the Districts of Bellary,

Chitradurga and Tumkur, prohibition of export of iron ore outside the

country using the mode of e-auction to be conducted by a Monitoring

Committee for the sale of iron ore, deposit of 10% of the sale price

received during the e-auction with the Monitoring Committee along with

the other charges and constitution of and assigning various

responsibilities to the Monitoring Committee, were duly considered and

Page 3 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

accepted by this Court in its order dated 13 th April, 2012. On 3rd

September, 2012 permission was granted by this Court to re-open all

eighteen categories of ‘A’ and ‘B’ mines subject to certain conditions. A

similar recommendation was made by the CEC for reopening of the

remaining categories of ‘A’ and ‘B’ mines in its report dated 15 th

February, 2013.

6. Coming to the directions issued by this Court regarding the sale of

existing stock of iron ore extracted through illegal mining, vide order

dated 23rd September, 2011, this Court had directed disposal of the

accumulated iron ore through the process of e-auction conducted by the

Monitoring Committee and had further constituted a ‘Special Purpose

Vehicle’3 in terms of the order dated 29 th October, 2012, for taking

ameliorating and mitigating measures as per the “Comprehensive

Environment Plans for the mining Impact Zone” 4 around the mining

leases in three Districts of the State of Karnataka with directions issued

to the Monitoring Committee to provide the payment received by it to the

SPV in that regard.

7. In the year 2015, an application was moved by the Federation of

Indian Mineral Industries, Southern Region, FIMI South (IA 248 of 2015)

for permission to sell the iron ore and manganese ore within the State of

Karnataka, without taking recourse to e-auction to be conducted by the

3 For short ‘SPV’ 4 For short ‘CEPMIZ’ Page 4 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

Monitoring Committee, as set up by this Court. The said prayer was

opposed by the petitioner and the other stake holders. However, the

CEC vide its report dated 28th April, 2016, had agreed to the prayer

made by FIMI South on the ground that in view of the several orders

passed by this Court, the basic objective behind sale of iron ore through

the Monitoring Committee had been achieved and an alternate system

needed to be put in place. The State of Karnataka had also agreed to

the suggestions made by the CEC and submitted a model to the Court

for monitoring sale of iron ore through the e-platform on the basis of a

long-term agreement.

8. Highlighting the reason behind constituting the Monitoring

Committee and the role attributed to it for the sale of iron ore through e-

auction and further, observing that the connected aspect of lifting of the

cap or enhancing the cap on production and launching of the CEPMIZ

scheme, was still under consideration, this Court had rejected the

aforesaid application filed by FIMI South vide order dated 28 th August,

20175, opining that time had not yet come to dispense with the existing

policy of sale and purchase of iron ore in the State of Karnataka through

the Court appointed Monitoring Committee by e-auction and for grant of

permission to sell the iron ore on a direct sale basis through long term

contracts or through spot sale and that restoration of ‘Normalcy’ in the

sale and purchase of iron ore must be deferred till significant headway is 5 Reported as (2018) 11 SCC 433 Page 5 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

made in respect of the other connected aspects noticed in the Final

Order dated 18th April, 2013.

9. Another order that needs to be noted was one passed in the

present petition on 14th December, 20176. The said order was passed on

applications moved by M/s. Karnataka Iron and Steel Manufacturers

Association (IA No. 273/2017), FIMI South (IA 56562/2017) and

Chitradurga Sustainable Mining Forum (IA No. 76163 and 76167/2017)

seeking removal of the annual cap of mining fixed by this Court and for

permission to extract iron ore as per the approved R & R Plans,

reclamation and rehabilitation plan. A similar request was made by the

Ministry of Mines, Union of India in IA No. 103342/2017, stating that the

annual mineral policy was under revision and the discretion of fixing a

cap upon extraction of mineral ought best to be left to the Ministry. On its

part, the State of Karnataka had highlighted the significant improvement

made in the infrastructure and suggested a gradual increase in the

annual cap based on iron ore extraction from 30 MMT that had been

fixed in respect of all the three Districts, to 50 MMT.

10. After examining the recommendations made by the CEC in its

report dated 14th July, 2017 and taking into account the submissions

made by Mr. M.K. Jiwragka, former Member Secretary of CEC as also

Mr. Prashant Bhushan, learned counsel for the petitioner, this Court had

6 Reported as (2018) 13 SCC 501 Page 6 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

passed an order on 14th December, 2017, accepting the

recommendations made by the CEC for enhancement of the cap for

category ‘A’ and ‘B’ mines subject to imposition of conditions relating to

category ‘C’ mines in the three Districts of Bellary, Tumkur and

Chitradurga.

11. We have taken the pains to extract the chronology of events before

proceeding to deal with the applications that have been moved by

several parties pressing for modification of the Court’s order dated 23 rd

September, 2011 and seeking permission for discontinuation of

compulsory sale of iron ore through e-auction and for permission to

export the pellets manufacturers from the iron ore extracted from the

mines in the State of Karnataka.

12. The reliefs sought by various/interveners through independent

applications are as follows:

i. IA. No. 205/2014 and IA No. 206/2014 moved by KIOCL

Ltd., a government of India enterprise (for intervention and

modification of the order dated 23rd September, 2011.)

ii. IA No. 24335/2018, IA No. 61304/2019 and IA No.

17007/2021 filed by FIMI South (for permission to export

pellets manufactured from iron ore in State of Karnataka,

permission to export unsold iron ore despite being put on e-

auction for more than three occasion and freedom to enter Page 7 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

into contract of iron ore from lessees in the State of

Karnataka.)

iii. IA No. 98216/2020 and IA No. 98219/2020 filed by M/s. SLR

Metaliks (for impleadment and for permission to enter into

contracts directly for purchase of iron ore from lessees in

Karnataka without resorting to e-auction.)

iv. IA No.152631/2018 moved by M/s. Vedanta Ltd. (for

permission to export/sell iron ore without recourse to e-

auction in the State of Karnataka.)

v. IA No. 64798/2019 in IA No. 152631/2018 filed by State of

Karnataka Gani Avalambhithara Vedike (for intervention and

permission to export/sell iron ore which steel plants and

other industries are unwilling to purchase in the e-auction

process, by selling it directly on or above the prevailing

market price.)

vi. IA No. 97376/2019 in IA No. 24335/2018 and 152631/2018

filed by Karnataka Sponge Iron Manufacturer Associations

(for intervention and permission to export pellets in the State

of Karnataka.)

Page 8 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

vii. IA No. 61452/2020 filed by Mineral Enterprises Limited (for

permission as one time measure to sell/export unsold iron

ore without resorting to the e-auction framework.)

viii. IA No. 37678/2022 filed by NMDC Limited, a Central PSU

(for permission to offer iron ore extracted by it on direct sale

basis without resorting to e-auction and for export purposes.)

13. A reply affidavit dated 1st April, 2022 has been filed by the

petitioner opposing the request of the mining companies and pellets

manufacturing companies for permission to export iron ore and pellets

and stating that if the production of iron ore is in excess of the demand

of the domestic steel industries as alleged, then the Court may consider

reducing the cap of iron ore extraction instead of permitting export

thereof. Mr. Prashant Bhushan, learned counsel appearing for the

petitioner contended that if it is claimed by the applicants that the

domestic steel industry has created a cartel due to which they are not

purchasing the iron ore, then the problem of cartelization needs to be

addressed. Similarly, permission for exporting pellets has also been

opposed by the petitioner and it has been submitted that the order dated

23rd September, 2011 passed by this Court does not deserve

modification.

14. The Monitoring Committee has filed a status report dated 30 th

March, 2022, stating inter alia that as on 31 st March, 2022, the closing Page 9 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

balance of the iron ore is 8.29 MMT (approx.). During the year 2021,

33.156 MMT of iron ore was sold through e-auction. As on 01.04.2021,

the opening stock of iron ore in respect of running mines (Category ‘A’

and ‘B’) is 6.65 MMTs (approx.). The report also furnishes the list of iron

ore mining leases operating outside the Districts of Bellary, Chitradurga

and Tumkur, in a tabulated form prescribing the approved capacity and

the actual production achieved by them. Another tabulated statement

contains the list of iron ore mining leases in the aforesaid three districts

for category ‘A’ ‘B’ and ‘C’ auctioned mines in separate categories

showing approved Maximum Permissible Annual Production 7 and actual

production and despatches.

List of iron ore mining leases operating in Bellary, Chitradurga and Tumkur for A and B auctioned mines showing approved MPAP, actual production and Closing Balance.

S. Name of Lessee and Year Opening MPAP for Production Dispatch Closing No. Lease No. Balance the year in against the during the Balance in Mts Mts MPAP in Mts year in Mts in Mts. 1 JSW Ltd. (Narayana) ML 2021-22 306478.0 1110000 1007885.0 966213.95 348149.1 No. 0012 2. JSW Ltd. (Dharma) ML 2021-22 6182.0 180000 179928.0 168700.8 17409.2 No. 0013 3. JSW Ltd. (Bhomman) ML 2021-22 781482.0 1000000 1598559.3 463400.168 1916641.1 No. 0014 4. MSPL (ANS) ML No. 0015 2021-22 70348.0 120000 50720.0 72000 49068.0 Total 1164490.0 2410000 2837092.3 1670314.918 2331267.3

15. The CEC has submitted Report No. 3 of 2022 dated 10 th April,

2022 in response to the directions issued by this Court on 30 th March,

2022. After referring to the earlier reports submitted by it from time to

time, it has been stated that only a temporary ban on exports was

imposed by this Court at a critical time when mining operations were

restricted in the State of Karnataka and that it was never the intention of

7 For short “MPAP” Page 10 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

this Court to restrict the mining operations for all times to come; that sale

through e-auction conducted through the Monitoring Committee had

achieved its objective and it was no longer necessary to continue with

the same dispensation in view of the improvement in the situation. Citing

the information furnished by the Monitoring Committee relating to the

closing balance of stock available in category ‘A’ ‘B’ and ‘C’ as on 31 st

March, 2022, that adds up to 1,19,47,839.3 MT, the CEC has

recommended vacation of the orders passed by this Court directing sale

of iron ore through e-auction to be conducted by the Monitoring

Committee with a rider that the said procedure continue to be adopted

for the sale of balance of old stock of iron ore including sub grade iron

ore available on the date of imposition of the ban. It has been suggested

that all the balance old stock be sold through e-auction before the end of

July, 2022 and if any stock is left unsold, only then should the lessee be

permitted to dispose it of without adopting the e-auction process.

16. The second suggestion made by the CEC is to discontinue

collection of 10% of the sale value from all the lessees except for NMDC

Limited and 20% of the sale value from NMDC Limited toward their

contribution to the SPV. Thirdly, it has been suggested that the total ban

imposed on export of iron ore and pellets from the districts of Bellary,

Chitradurga and Tumkur, be lifted. Lastly, CEC has sought vacation of

the orders fixing district level caps on production of iron ore in respect of

Page 11 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

category ‘A’ and ‘B’ mines from the Financial Year 2022-23 onwards. The

report concludes by requesting that the system of determination of

MPAP being fixed through the R & R Plans and Supplementary

Environment Plans, as approved by this Court by the orders dated

13.04.2012 and 18.04.2013, may be continued.

17. The Ministry of Steel, Union of India has filed an affidavit dated 16 th

April, 2022, stating inter alia that keeping in mind the fact that against a

requirement of 192 MT of iron ore for producing 120 MT of steel

annually, this Court may consider vacating the order for district level

caps on iron ore mines imposed in the three districts of the State of

Karnataka, by treating the mines in the said State at par with the mines

in the rest of the country.

18. The Ministry of Mines, Union of India has filed a separate affidavit

dated 9th April, 2022, stating inter alia that over the years, the scenario

has changed which would be apparent from the reports submitted by the

CEC from time to time. Further, the Mines and Mineral (Development

and Regulation) (Amendment) Act, 2015 has been put into place and all

the said steps taken together, necessitate a relook at the restriction

imposed earlier and therefore operation of mines in the State of

Karnataka may be aligned with the rest of the country. The Ministry has

said that it has no objection to export of iron ore mined in the State of

Karnataka, just as it is being done in the rest of the country.

Page 12 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

19. KISMA has filed two affidavits dated 08.04.2022 and 18.04.2022,

opposing the applications mentioned above for permission to export iron

ore pellets as prayed for by FIMI South, KIOCL Limited, Vedanta Limited

and others and stated that the process of e-auction through the

Monitoring Committee should not be discarded as the said process is fair

and transparent. Opposing the request for permission to export iron ore,

it has been averred that any such permission may result in the miners

fixing the base price so high as to oust the domestic steel industries that

may result in manipulation by the miners.

20. A similar objection has been raised with respect to the request for

export of iron ore pellets. The stand of KISMA is that export of iron ore

ought not be permitted since it will result in starving the domestic steel

and allied industries and permitting the mining industries to earn quick

profits in the international markets due to the surge in the prices of iron

ore in the recent past. In its subsequent affidavit, KISMA had added that

if this Court is inclined to permit export of iron ore from the State of

Karnataka, the same may be permitted subject to additional safeguards

and guidelines as recommended by the CEC in its Report No. 19/2019,

reiterated later in Report No. 16/2020 and Report No. 20/2020.

21. The State of Karnataka had filed an affidavit dated 17 th May, 2021

in reply to IA No. 152631/2018 that was moved by Vedanta Limited,

followed by an additional reply to the said application filed on 19 th April,

Page 13 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

2022. In both the said affidavits State of Karnataka has submitted that no

export ought to be permitted of iron ore which was excavated from mines

situated within the State. Disagreeing with Report No. 3/2022 submitted

by the CEC recommending grant of permission for exporting iron ore

mined within the State, it has been averred that such a recommendation

is not backed by any cogent material.

22. We have considered the argument advanced by learned counsel

for the parties, perused the latest report of the CEC and the Monitoring

Committee, examined the stand of the Ministry of Steel and Ministry of

Mines, Union of India as also of the State of Karnataka. The data placed

before us by the respective parties in their applications under

consideration has also been scanned. For the present, we propose to

confine the scope of this order to examining the twin prayers made by

learned counsel for the applicants namely, permission to sell the unsold

stock of iron ore already excavated without resorting to the process of e-

auction conducted through the Monitoring Committee and for lifting the

ban on export of iron ore/pellets from the districts of Bellary, Chitradurga

and Tumkur situated in the State of Karnataka. Although certain

submissions were made by the parties regarding lifting of the ceiling limit

for total production of iron ore, at this juncture we are not inclined to

decide the said issue.

Page 14 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

23. Records reveals that repeated attempts to resort to the e-auction

process for the sale of already excavated iron ore mined in the three

districts of Bellary, Chitradurga and Tumkur in the State of Karnataka,

have not borne any fruitful results. As a consequence thereof, large

stock of iron ore, including sub-grade iron ore, is lying unused. As on

31.03.2022, the stocks available in category ‘A’ and ‘B’ mines is stated to

be 82,98,130.5 MT. The stocks available in the auctioned category ‘C’

mines as on the above date is 12,25,100.5 MTs. The stock in respect of

e-auction category ‘A’ and category ‘B’ expired leases is 2,33,126.73

MTs and in mining leases outside the districts of Bellary, Chitradurga and

Tumkur, is 93,181 MT. The closing balance of iron ore available in all the

mines across the State of Karnataka as on 31 st March, 2022, adds up to

11,94,783.93 MT.

24. On glancing over the earlier orders passed by this Court, evidently

it was on account of the rampant illegal mining that had been taking

place in the State of Karnataka and had severely impacted the ecology

of the region that the Court was compelled to impose a blanket ban on

mining operations in three specific districts. Post imposition of the ban,

the Court was confronted with a situation where a huge stock-pile of iron

ore had accumulated in the mines and stock yards that needed to be

disposed of. Accordingly, a transparent process of e-auction was

adopted on the recommendations of the CEC with a further direction that

Page 15 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

the sale proceeds would be placed in a separate account pending

settlement of ownership rights over such stock of iron ore. This mode

has been consistently adopted for sale of the stock of excavated iron ore

under the aegis of the Monitoring Committee that was called upon to

deduct 10% of the sale value in respect of all the category ‘A’ and ‘B’

mines and 20% of the sale value in respect of two mines owned by

NMDC Limited, for being deposited in the SPV accounts towards

implementation of the CEPMIZ. Report 3 of 2022 submitted by the CEC

records that the collection in the SPV maintained by the Monitoring

Committee as on 31st March, 2022, has crossed ₹20,000 crores which

amount would be adequate to meet the expenses connected with the

activities proposed to be undertaken under the CEPMIZ.

25. It is also pertinent to note that in the earlier orders dated 13 th April,

2012 and 11th August, 2014 passed by this Court in IA No. 205 – 206 of

2014, it had been clarified that the “system of sale through the

Monitoring Committee may be reviewed after two years”. It is after the

passage of eight years that this Court is revisiting the system that was

put in place.

26. Report No. 19/2019 dated 18th July, 2019 filed by the CEC is also

relevant in the above context and is extracted below:

“21. It is seen that the State of Karnataka during the year 2018-19 has produced about 30.33 MMT of iron ore. Out of this the unsold Page 16 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

stock of iron ore is 15.86 MMT break up being 10.43 MMT of old stock and 5.43 MMT of fresh stock of ore.

22. Since the steel manufacturers have been importing iron ore from the other States or from foreign countries, the Monitoring Committee has in their Report dated 3.5.2019 acknowledged that the import of iron ore from outside the country has impacted the demand for iron ore and pricing in e-auction sale. This further supported by the low off take in e-auction sale as can be seen from the sale data for the period 1.1.2018 to 30.6.2018 and 1.7.2018 to 31.3.2019. During the period 1.1.2018 to 31.3.2019 a total of 229 e-

auctions of iron ore have been conducted by the Monitoring Committee. It will be seen that on 72 days, out f 229 days, 50% or more than 50% of the quantity offered for sale has been purchased by the end users in the e-auction whereas on remaining 157 days less than 50% of the quantity offered for sale has been purchased. On 8 days when e-auction was conducted there has been zero bid while on 12 days 100% of the quantity offered for sale has been bid.

xxxx

25. It is not in dispute that the “iron ore lumps” are in demand and get sold at market price. As such the issue before this Hon’ble Court is with regard to the sale of “iron ore fines” which is not taking place specially from the mines located in Districts Tumkur and Chitradurga. The mining lease of the Applicant is also one such mine located in District Chitradurga. The quality of the iron ore fines from these two districts is also of concern as they have higher manganese content and other impurities. All this adversely affect the demand for the iron ore fines so much so that even at the reserve price at Rs. 450/ Page 17 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

per tonne the material is not getting sold in consecutive auctions.

xxxx

28. This Hon’ble Court in its order dated 1.9.2016 in IA Nos. 259 and 263 IA Nos. 259 in WP (C) 562/2009 while considering the application for permission for export of iron ore has, amongst others, observed that :

“Permission for export must be governed by norms and parameters of general application as distinguished from ad hoc decisions in individual cases. Until such guidelines are framed, the prayer of M/s. Vedanta Ltd. for export of its iron ore cannot be granted. So far as issue of framing of guidelines/norms for export are concerned, the same will be dealt with separately at an appropriate time and state”,

Permission to export is only an enabling provision to be made in respect of unsold stock of iron ore subject to the extant policy of Government of India in this regard. The actual export of iron ore, however, will depend on the price of iron ore in the international market vis-à-vis domestic market. Since the production of iron ore has crossed 30MMT per annum, a question that arises is whether it is time to review that State specific restrictions in Karnataka on sale of iron ore so that such State specific restrictions do not work to the disadvantage of either’ the producer or the manufacturer or both. This is more so in the changed situation, when the raw material requirement of steel and allied industries is not limited by the production of iron ore. In these circumstances ideally the demand/supply and the price of the ore are best left to be determined by the market forces.

Page 18 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

29. New mining leases are now sold through e-auction to the end users and the premium to be paid by the successful bidders is limited to the State specific prices notified by IBM based on the monthly average price realized in respect of a given grade or iron ore sold in the State. The eligibility to participate in the sale of the new mines and to participate in e-auction sale of iron ore in Karnataka State is limited to the steel and allied industries, the end users. It has been stated by the Applicant that this situation gives scope to the end user industry to manipulate the sale price of ore which in turn will impact the premium amount to be paid in respect of iron ore produced from the captive mines purchased by them. The sale price data form steel mint in respect of Fe Fines and price at ex-mines furnished by FIMI indicates that the IBM published iron ore prices between January, 2018 and May, 2019 have gone down in Karnataka by (-) 18.7% while during the same period the IBM published prices in the States of Odisha and Chhattisgarh have gone down by only (-) 2, 7% and (-) 7,7% respectively. A copy of the statement showing the ex-mines price for 60% Fe Fines for the period January, 2018 to May, 2019 is enclosed as ANNEXURE R-9 to this Report. It has been that the difference in sale price is the result of limiting the participation in e-auction to the end users who even resort to importing iron ore at higher landed cost though the same is available in the State. In these circumstances the possibility of manipulation of iron ore prices because of exclusivity given to the steel industry in purchase of iron ore from the mining lessees needs to be addressed.”

27. In its Report No. 16/2020 dated 29.06.2020, CEC had made the

following pertinent observations:

Page 19 of 24

WRIT PETITION (CIVIL) No. 562 OF 2009

“10…..this Hon’ble Court had no intention of imposing a permanent ban on export of iron ore or pellets from the district of Bellary, Chitradurga and Tumkur in Karnataka. Further ban on export of iron ore and pellets has been ordered by the Hon’ble Court solely in the context of ban on mining operations in the three districts and as an interim measure. The re-opening of the Category “A” and Category “B” mines has taken place in a phased manner after fulfilment of conditions relating to implementation of the R&R Plans and compliance of annual production limits fixed in respect of each mining lease based on the scientific principles on availability of reserve, availability of the dump area and the transport infrastructure available for evacuation of the iron ore from the mines.

11. Pursuant to the implementation of the R&R Plans and the scientific fixation of the production limits in respect of each of the operating mining lease, there ha been substantial improvement in the environmental parameters in the three districts of Bellary, Chitradurga and Tumkur. The opposition by the Karnataka Iron and Steel Manufacturers Association (KISMA) to export of iron ore and pellets are based mainly on commercial considerations and are not directly related to environmental issued concerning mining.

The annual production levels have crossed 25 MMT which limit was earlier suggested by the CEC in its Report dated 2.4.2014 in IA No. 205 and IA No. 206 of 2014 filed by KIOCL for lifting ban on export of iron ore and pellets. Currently there is no restriction on grant of new mining lease in Karnataka.

12. The recommendation made by the CEC in its Report No. 19 of 2020 dated 18.07.2019 and Report No. 20 of 2019 dated 18.07.2019 for lifting the ban imposed on export of iron ore fines and pellets Page 20 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

respectively have been made after considering the availability of the iron ore on a sustainable basis and the general policy of the Government of India on the subject. In the circumstances, CEC is of the considered view that orders specific to the three districts in the State of Karnataka banning export of iron ore and pellets issued by Hon’ble Court in the context of the total ban on mining in the three districts ordered by this Hon’ble Court now requires to be reviewed. The method of sale and price fixation of iron ore are best left to be determined by the market forces as any restriction on sale including export will only benefit one party at the cost of the other.

Artificial suppression of the iron ore prices will also adversely impact the revenues of the State Government. The recommendation of the CEC in its Report No. 19 dated 18.7.2019 on export of iron ore is restricted to iron ore fines which remains unsold/not purchased by the user industry and lays down the guidelines/method of sale. There is in built provision in the condition of sale suggested by the CEC to overcome the scope of manipulation of prices. It may be stated here that this Hon’ble Court in its order dated 13.04.2012 and Judgment dated 18.04.2013 has stated that the exports outside the country should be permissible only in respect of the material which the steel plants and associated industries are not willing to purchase on or above the average price realized by the Monitoring Committee for the corresponding grades of fines/lumps.”

28. The Ministry of Steel, Union of India has supported the

applications moved by the interveners and submitted that the mining

scenario has improved considerably since the year 2018 and in that

Page 21 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

background, the Court may consider treating the mines situated in the

State of Karnataka equal to those situated in the rest of the country

since that would permit inter-state trade of iron ore mined in the State of

Karnataka, which is presently prohibited. The Ministry of Mines has also

given its no objection to export of iron ore to other countries in terms of

the prevalent policy of the Government of India.

29. We are in broad agreement with the stand taken by the Ministry of

Steel, Union of India and Ministry of Mines that it is necessary to create

a level playing field for the mines situated in the districts of Bellary,

Chitradurga and Tumkur with others situated in the rest of the country.

As the CEC has indicated, the demand/supply and price of iron ore are

best left to be determined by the market forces. This Court is of the

opinion that the time has come to review the system that was put in

place over a decade ago, on halting the unchecked excavation of iron

ore in the three prime Districts in the State of Karnataka. Ever since

then, e-auction has been the only mode available for disposal of the

excavated iron ore. The said arrangement has worked out satisfactorily

so far. The situation that was prevalent in the region prior to the year

2011, has now changed for the better. Having regard to the course

correction that has taken place, the regeneration post the ruinous

damage caused to the environment and the various steps taken by the

Government, we are of the opinion that the order passed on 23 rd

Page 22 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

September, 2011 deserves to be relaxed. Additionally, it is a matter of

record that consecutive e-auctions conducted by the Monitoring

Committee have been receiving a poor response and sale of iron ore

even at the reserve price is dismally low. Looking at the overall change

in the outlook, the restrictions placed on the manner of conducting the

sale of iron ore and fixation of the sale price need to be removed.

30. Keeping in mind all the aforesaid factors, we are inclined to

favourably consider the prayer made by the applicants and grant them

permission to sell the already excavated iron ore stock-pile at various

mines and stock yards located in the Districts of Bellary, Tumkur and

Chitradurga in the State of Karnataka, without having to resort to the

process of e-auction. Permission is granted to the applicants to enter

into direct contracts to lift the excavated iron ore through inter State

sales. We also grant permission to the applicants to export the iron ore

and pellets manufactured from the iron ore produced from the mines

situated in the State of Karnataka, to countries abroad, as is being done

in the rest of the country, but strictly in terms of the extant policy of the

Government of India.

31. With the above order, all the applications listed in paragraph 12

stand allowed to the extent indicated above.

32. With respect to the submissions of the parties in relation to the

lifting of the ceiling limit for production of iron ore for mining leases in the Page 23 of 24 WRIT PETITION (CIVIL) No. 562 OF 2009

Districts of Bellary, Chitradurga and Tumkur, we are of the considered

opinion that it would be expedient to obtain an opinion from the

Oversight Authority appointed by this Court vide order dated 21st April,

2022 about the same before deciding the said issue. We request the

Oversight Authority to take inputs from the stakeholders, including the

CEC and the Monitoring Committee, and to send his opinion to this

Court preferably within a period of 4 weeks.

33. List for hearing on the said issue in the second week of July 2022.

.................................CJI.

[N. V. RAMANA]

...................................J. [KRISHNA MURARI]

...................................J. [HIMA KOHLI] New Delhi, May 20, 2022

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