Mining ban in Goa extracts heavy economic price

A ban on iron ore mining in the Indian state of Goa is taking a heavy toll on its economy. The closure of the US$4 billion industry affects one in every three Goans, according to a report compiled by mining industry associations.
Chowgule iron ore mine, south Goa.  The mine is at a standstill and the workers nowhere to be seen after mining was banned in the state.
Chowgule iron ore mine, south Goa. The mine is at a standstill and the workers nowhere to be seen after mining was banned in the state.

Panaji, GOA // Rajendra Naik is worried about his future. The 54-year-old miner has not worked for more than a year after iron ore mining was banned in the Indian state of Goa.

“We’re worried about when work will start,” says Mr Naik, who has four children. “It should start, otherwise it will be a big problem for us and our families. What can we do after this?

“It’s an uncertainty that has fallen on us. If the company stops paying tomorrow, what would I do? We’re tense. We don’t have any alternative.”

A battle is raging in India’s Supreme Court over an illegal mining case, filed by the Goa Foundation, an environmental non-governmental organisation, which alleges that “more than a decade of senseless extraction and looting [has] irreversibly brutalised the natural environment” in the state.

The court banned mining activity in Goa last October. The state government and India’s ministry of environment and forests issued their own blocks on mining in Goa last September following the Shah Commission report on Goa’s mining industry, an inquiry which stated that “unregulated” and “unrestricted” illegal mining had resulted in losses of 350 billion rupees (Dh21.13bn) to the state, with politicians among those blamed.

Iron ore mining has been Goa’s biggest economic contributor after tourism in recent years. The state was India’s largest exporter of iron ore, with huge demand from China as the emerging superpower ramped up steel usage and production.

Mr Naik is one of the more fortunate miners because he is still being paid by his company. Many others have lost their livelihoods because of the ban.

“Around 93,000 workers have lost their jobs,” says Christopher Fonseca, the general secretary of the All India Trade Union Congress. “Only about 13,000 are being paid a salary. We’re passing through a very difficult phase in the economy of the state and also the lives of the people.”

The closure of the US$4bn Goan iron ore mining industry affects one in every three Goans, according to a report compiled by various associations in Goa’s mining industry.

The state has lost 35 per cent of its revenues since the ban, while the loss of foreign-exchange earnings that would have been generated for the country only widens the current account deficit further, the report states.

Barges to transport ore and thousands of trucks have been idle in Goa since the mining ban took effect. A state government benefits scheme is offering some affected parties, such as truck owners, some relief, but it is proving to be a drain on government coffers.

“The state is short of funds and how long can they do it?” Mr Fonseca asks.

“The barge owners and the truck owners have to pay loans. Even the machinery owners who borrowed from the banks are not able to pay back [their loans].

“The banks are facing non-performing assets and they are not able to recover the money because there is a valid reason – there is no business.”

Mr Fonseca explains that he supports environmental issues, but feels that there are more pressing human-rights issues to be taken into account in this case.

“Those who went to the Supreme Court saying that we must protect the environment – while their concerns are genuine – more than 30 per cent of Goa’s people are today facing destitution and are in great despair because there are no alternatives,” Mr Fonseca says.

“The government and the entire state are dependent on two major planks of the economy – mining and tourism.

“The tourism industry is intimately linked with the vagaries of the international market forces. So one leg is cut and we are standing on the other leg, which is tottering.

“Having totally neglected our agriculture, our industry, in our view, mining should start with sufficient checks and balances.

“Do not say that mining has to stop because that would amount to denying people their livelihood, and you are destroying one big arm of the economy of the state without even preparing for it.”

The ban has had a cascading effect on Goa’s economy, as disposable incomes have fallen and purchases postponed.

Sarvesh Nagvekar, a jeweller in Panaji, says his sales have declined 20 per cent because of the ban, and he is expecting subdued demand as the festival season begins. “I hope that mining restarts soon,” he says.

The Supreme Court hearing on the mining ban case started last month. Some expect this might result in a resolution in the coming weeks.

S Sridhar, the executive director of the Goa Mineral Ore Exporters’ Association, says: “Now we are hopeful because the hearings have commenced. I’m hoping that by December at least it will start.”

But it will take time for the industry to restart.

“It’s not going to be a cakewalk. If tomorrow, the Supreme Court says start, we will not be able to get the buyers also. They have already planned their contracts for a year,” says Mr Sridhar.

Meanwhile, ore-importing countries have been turning to Australia for the resource.

Glenn Kalavampara, the secretary of the Goa Mineral Ore Exporters’ Association, says “our loss has been someone else’s gain”.

In recent years, he says, demand from China has been surging while iron ore prices have been rising.

As a result, many “fly-by-night operators” have been jumping on to the mining production bandwagon despite having other professions. They are trying to exploit the mining boom, and have been causing many problems that have arisen.

“It’s unfortunate that the long-term players are today paying the price because of a few greedy short-term players that have come in and probably vanished,” Mr Kalavampara says.

“The problems have been generated by those who have come in and had no business to be in iron ore. There were lots of people who tried their luck.”

Haresh Melwani, the chief executive of HL Nathurmal, a mining firm in Goa, says he has started leasing mining minerals in Bangalore in an effort to compensate for revenues of 73 million rupees his mine was expected to have generated over the past year.

“It’s not as profitable but at least it keeps the machinery working,” Mr Melwani says. “We’re trying to find alternatives and pick up the pieces.”

He estimates it could take another two years for the ban to be lifted and, even then, mining activity would be on a reduced scale.

“The Supreme Court will not take things very lightly,” he says. “If they lift the ban, they’ll want everything to be properly regulated.

“It won’t be like it used to be. What has happened here is that mining existed before governance came to Goa.”

That is, however, an opportunity for Goa to be less “complacent” and diversify its economy into logistics, manufacturing and even medical tourism, Mr Melwani says.

Others agree with him.

Mr Fonseca of the All India Trade Union Congress says: “One of the things that the government has to do is diversify its economy. Mining is not forever, it’s a non-renewable resource.”

The Goa Foundation is hopeful that the industry will do less damage in the future.

Claude Alvares, the executive director of the NGO, says: “Mining is not a sustainable industry. Most of the damage it does is irreparable. Things will never be the same.

“I think that there will be mining, but it will be on a low scale and highly controlled.

“Those problems which are there – unemployment, a lot of investments made because of the boom and so on – people are going to reconcile and ultimately it will come to the balance that should have been there in the beginning.”

Effects of ban ripple through deep layers

Prasanna Acharya, the director of the state government’s mines and geology department in Goa, talks about the ban on the iron ore mining industry.

What kind of impact has the mining ban had?

It’s a cascading effect. Disposable income has gone down. Car sales have gone down. Hotels are empty – people used to come and stay in these hotels for trading activity. Real estate has gone down. People are trying to sell off what they have bought. The big, luxurious cars are being sold.

What is likely to be done to regulate Goa’s mining industry in the future?

What we are trying to do is monitor everything electronically by GPS systems from the dispatch to the destination. All loopholes will be closed. There were some irregularities related to unregulated activity. The exports were unregulated to a large extent. That led to chaos, and there was no proper accounting. Mining is one issue. Trading is another. There were about 461 traders. Under the new draft rules, we are cancelling each and every trader and just allowing lease holders to operate. We’ll not allow movement of ore by a third person other than a leaseholder. The lease owner will be responsible for the ore, so there will not be a chance for manipulation.

Even if the Supreme Court case is settled, aren’t there still restrictions in place from the state government and the ministry of environment and forests that would prevent work from restarting?

We have relaxed this in certain cases, which we have cleared. About 28 such cases have been cleared by us. The ministry of environment and forests has also suspended some, and they will have to take a call on that. They will definitely have to pass those environmental clearances, but the process has commenced.

Published: October 12, 2013 04:00 AM


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