After two-year spat, Karnataka accepts Centre’s rate deal on Ballari mine

BENGALURU: A two-year-long disagreement with the Centre over the rate of premium on Donimalai iron ore ended last week after Karnataka, desperate for new revenue streams amid pandemic-induced economic pain, agreed to adjust its expectations. From demanding 80 per cent premium, it accepted 22.5 per cent, on top of its royalty share (15 per cent), at a discussion lasting less than two hours.
The compromise means that mining can now begin at the Donimalai site in Ballari’s Sandur taluk, which has the richest iron ore deposits in Karnataka — 143 million metric tonnes (MMT).The site has been shut since 2018 because of the price dispute between the state, then led by the Congress-JD(S) coalition government, and central PSU National Mineral Development Corporation (NMDC).
Annual extraction is capped at 7MMT. Because of the high potential, the state had proposed 80 per cent premium and threatened to sell the extracted mineral in an open auction if it didn’t get the desired rate. Senior officials from the central government argued that 80 per cent premium was an unrealistic expectation and would push up the market price of the iron ore to a point where no one would buy it.
The row continued even after BJP formed a new government in Karnataka last year, and the issue went to the mines tribunal. On Friday, August 28, it took a central team less than two hours to persuade chief minister BS Yediyurappa to agree to a lower rate of premium and allow NMDC to resume mining. Economic challenges faced by Karnataka — poor revenue collections and high unemployment rate — are the main reasons for the climbdown.
Senior ministers rued the fact that Karnataka could not push for a stronger deal. “We had hoped that Union minister for mines Pralhad Joshi would help us get a better deal. In the end, we had to settle, which is better than not having any agreement,” said a minister. Joshi had asked Union steel minister Dharmendra Pradhan to sign off on 22.5 per cent premium and told the state that this was the maximum the Centre could pay.
After Friday’s discussion, the state can expect revenue of Rs 800 crore to Rs 1,000 crore annually from the Donimalai mining site as against Rs 600 crore with only 15 per cent royalty.