Odisha, miners dispute mapping in probe on illegal mining

A labourer unloads iron rods from a vehicle as it drizzles at a construction site on the outskirts of Agartala September 26, 2010.

BHUBANESWAR (Reuters) - A government panel has asked Odisha to re-survey more than 40 iron ore mines as part of an investigation into illegal mining after firms contested the use of satellite images to define their mining areas.

The state government, meanwhile, has imposed a cap on output from iron ore mining, and the mapping dispute threatens to prolong that cap and increase pressures on Indian steel mills to import ore.

Lawyers representing miners said the government-appointed Shah Commission used satellite maps from Google (GOOG.O) to identify whether companies were operating beyond their legal boundaries. They said miners' operations have been based on maps used when the state government granted them leases.

"It is like you drawing my picture and then taking a photograph of me and superimposing the photograph on the painting. Obviously there will be some differences," Ashok Parija, a lawyer who is defending dozens of mining leaseholders, said in an interview.

To resolve the dispute, the Shah Commission has asked the state government to re-survey more than 40 mines for illegal operations including those of Tata Steel(TISC.NS) and Steel Authority of India Limited(SAIL.NS) and has asked the miners to bear the additional costs.

Steps taken by centre and state authorities to clean up the mining and export of iron ore have already shut down output in two key producing states, Goa and Karnataka, slashing shipments and forcing steel mills to import a raw material that India has in abundance.

The Shah Commission had been aiming to submit its report on illegal mining in Odisha by a July 16 deadline.

"It is very difficult to say in the present situation that we will be in a position to meet the deadline. The reasons being repeated hearings as well as disputed facts (which) require reconsideration," Justice M.B. Shah, who heads the commission said.

Unlike the ore mined in Goa and Karnataka, Odisha's is high grade and intended for the domestic steel industry rather than export. Odisha produced about 66 million tonnes of ore in fiscal 2011/12, according to government data, but of this just 10 million tonnes were exported, mainly to China.

A senior official in the Odisha government said the state's iron ore output may fall by 10 percent in fiscal 2013/14 and that exports may drop by a third following a 30 percent export tax and growing domestic demand.

Over the past decade, Odisha has fined companies more than $12 billion for excessive mining of iron ore.

(Editing by Jane Baird)