Goa’s shuttered mines highlight India growth dilemma



Source: FINANCIAL TIMES

Forty kilometres inland from the south Goa beaches beloved of European backpackers, lies the Codli iron ore mine: two yawning grey-ochre pits that were, until recently, among India’s most lucrative mineral resources.

But now the mine — controlled by London-listed Vedanta Resources — has the feel of a site being reclaimed by nature. Birdsong floats over the deserted frame of a plant that once treated 15,000 tonnes of ore each day, while Volvo diggers sit in the mine’s central compound.

Codli is the biggest of several dozen Goa iron ore mines that halted production in March after India’s supreme court ordered an industry shutdown in the state. The judges accused Goa’s government of “patently illegal” behaviour in its renewal of mining leases three years before — issued for token payments from miners who had repeatedly broken environmental regulations.

The upheaval in Goa is the latest in a string of controversies that highlight a key tension surrounding the country’s economic development: how to remain a fast-growing main market while protecting the environment and enforcing the rule of law.

Goa is India’s smallest state but its richest in terms of per capita output. As well as its outsized tourism industry, it holds vast iron ore reserves that yield the bulk of national exports of the mineral.

But, as elsewhere in India, the state’s mining industry has come under heavy fire, with complaints that it has exploited political connections to flout laws while damaging the health and livelihoods of local farming communities. That has prompted swingeing official action against the sector, prompting debate over whether such moves are in India’s broader economic interest.

The supreme court’s bombshell decision this year was the latest chapter in a legal saga that has gripped Goa for nearly a decade. After activists’ complained about illegal mining practices, the government in 2010 commissioned retired judge MB Shah to investigate the claims.

His report two years later sparked outrage, with allegations of systematic illegality in Goa’s mining sector as companies were accused of operating without valid licences and ignoring environmental laws. That prompted the supreme court’s first ban on mining in the state, which lasted until 2014.

The resumption of mining was a relief to thousands of mining workers, and many more in auxiliary industries, such as trucking and barging. This year’s renewed suspension, however, has dashed hopes that Goa could restore its reputation as a reliable supplier to steel groups in China and Japan.

“We were trying to stress to the market that [the first suspension] was an anomaly,” said Ambar Timblo, managing director of Fomento Resources, the state’s second-biggest miner after Vedanta-owned Sesa Goa. “And just when we were getting back the credibility in the market, it’s shut down again.”

In its most recent judgment, however, the supreme court homed in on what critics say has been a longstanding problem in India’s primary industries: government officials giving mining rights for minimal payment to well-connected tycoons, costing billions to the public.

In Goa, “anyone who was powerful was essentially co-opted”, said Rahul Basu, research director at the Goa Foundation, an activist group whose lawsuit triggered the apex court’s latest ruling. “The classic way of doing this was to say: you buy a truck and we’ll guarantee you business at a ridiculous rate.”

While it cited no specific evidence of corruption, the supreme court found that Goa’s government had raced to renew mining leases at minimal cost in the days before the 2015 introduction of a national law that would have forced it to hold competitive auctions for such leases.

Goa’s mining shutdown

“The state sacrificed maximising revenue for no apparent positive reason, virtually surrendering itself to the commercial and profit making motives of private entrepreneurs,” the court wrote. “The real intention . . . was to satisfy the avariciousness of the mining lease holders.”

The Goa mining suspension has coincided with the shutdown of India’s largest copper smelter in southern Tamil Nadu state, also owned by Vedanta, after police killed 13 people protesting against its pollution record. The supreme court had previously plunged India’s coal industry into crisis in 2014, by cancelling more than 200 coal mining licences mostly issued without payment.

Ritika Mankar, an economist at Ambit Capital, said India had long suffered from “a serious amount of rent-seeking”, with politicians offering favourable treatment to companies in exchange for bribes and campaign contributions that are illegal under India’s strict political funding rules.

But she added that the supreme court could have found ways to tackle this problem without sweeping shutdowns of entire industries, which “often cause more damage than benefit”.

The turbulence in Goa has played havoc with India’s exports of iron ore — to which the state’s mines have been the biggest contributors owing to their proximity to the coast. National iron ore exports swung from 47.2m tonnes in the 2011-12 financial year to 5.4m in 2015-16, and back to 30.4m the next year as miners again ramped up production.

But activists argue that the immediate economic hit pales beside the long-term losses from a mining system where the Goa public purse has sacrificed potential revenue of Rs350bn ($5.2bn), or nearly $3,000 per inhabitant, according to the Shah report.

The shutdown is set to continue for at least two years, said Neha Panvelkar, deputy director of mines and geology in the state government, noting that it would now have to pursue fresh auctions for mining leases and conduct lengthy processes around environmental clearances.

Such an extended suspension would be “a catastrophe for Goa”, said Mr Timblo — a sentiment echoed by workers at the Codli mine, who say local communities are now threatened by a sharp increase in unemployment.

Goan farmer Rama Velip has spent two decades campaigning against breaches of environmental laws by mining companies.

But 20km to the south, farmer Rama Velip, who has spent the past two decades campaigning against illegal mining practices, said many others would benefit from the shock to an industry that was on an unsustainable path.

It would now force a shift in behaviour, after agricultural communities had suffered for years from the depletion of underground aquifers and harmful dust suffusing fields and villages. “We have won,” he said.

Source: FINANCIAL TIMES