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In agreeing to mediate in the spat between State-run miner NMDC and the government of Karnataka over Donimalai iron-ore mine, the Steel Ministry has suggested that the Karnataka government not invite a new miner to take control of the iron-ore mine.
Officials said that the Steel Ministry is confident of resolving differences between Karnataka and NMDC within the next few weeks and that the former should escalate the conflict between the two parties by pushing ahead with its threat that Donimalai will be put up for allocation through a fresh auction.
As reported earlier by Mining Weekly Online, the Karnataka government in November had renewed the lease of Donimalai mines in favour of NMDC, but with the provision that the latter pay an 80% premium on sales as lease rental for the asset to the state government.
Disputing the provision that payment of premium on sales as lease rental was not applicable in the case of renewal of mining leases and that such high payment liability would make operation of the mine unviable, NMDC closed down operations of the seven-million-ton-a-year mine last month.
The Steel Ministry has already held one round of talks between the warring parties and though no breakthrough was achieved, officials maintained that a tentative outline of a resolution had been put forth by the central government.
Nudging the Karnataka government not to pursue holding of a new auction of Donimalai, the central government pointed out that such a move to allocate the mine to a new operator might not attract any response as no new investor would be willing to risk getting embroiled in legal challenges with NMDC having the option to move courts against the lease renewal terms of rental payment.