In a significant judgment, the Orissa High Court has upheld the State Government’s decision mandating sale of 50 per cent of mined iron ore lumps and fines to State-based industries.
The division bench of Chief Justice AK Goel and Justice Ak Ratha has, however, directed the State to evolve a mechanism to fix the quantum of minerals to be purchased and the prices including delivery and payment within a reasonable time. The mechanism should be notified within three months, failing which the memo issued by the Government will cease to operate.
The bench held that the ownership of minerals is vested in the State and the right of pre-emption must be exercised by the State itself. But the memo in question lacks a procedural mechanism by which the State can directly exercise its right by fixing price, quantum of minerals to be purchased and beneficiary determined. The mechanism should be laid down to give validity for exercise of the right of pre-emption, the bench ruled.
A batch of petitions filed by Federation of Indian Mineral Industries (FIMI) and several industries challenging the validity of the memo issued by the Steel and Mines Department in December 2012 on the ground that the State Government had no competence to enact any law on the subject except in accordance with the Scheme of Mines and Minerals Development and Regulation (MMDR) Act.
The Central Government is competent to make rules for regulation of the grant of reconnaissance permits, prospecting licences and mining leases for minerals (other than minor minerals) while the power to make rules regulating grant of quarry leases, mining leases or mineral concessions in respect of minor minerals was vested in the State, the petitioners submitted.
They further stated that the demand for iron ore by the industry in Odisha is around 12 to 13 per cent of the actual demand and thus, mining lessees cannot sell 50 per cent of the extracted ore to industries in the State. The lessees are therefore prevented from disposing the unutilised quantity.
Advocate General Ashok Mohanty in the counter said the State was well within its rights to ensure equitable distribution of resources. The State has adopted a policy of value addition to the mineral resources by establishment of mineral based industries in the State, thereby generating employment opportunities and also greater revenues.
Without captive mines, many steel plants were facing difficulties in sourcing iron ore while the miners found it lucrative to export ore instead of supplying to local industries. As a result, many industries are facing closure.
In these circumstances, the State has exercised its power as the owner for the larger interests of industries.