Steel rolls at the Tata Steel plant in Jamshedpur (file photo)

For the past 45 days, Tata Steel has not been allowed to move iron ore from its prime captive mines at Noamundi on the orders of the Jharkhand government.

Tata Steel sources confirmed to BusinessLine that in early July, the State government stopped issuing forwarding notes for iron ore dispatches from the mines to the company’s Jamshedpur plant.

Jharkhand’s move has come as an extension of an unresolved lease renewal issue that has been pending for many years now.

It has effectively dried out supplies from the nearest in-house and dominant raw material mine in West Singhbhum district for Tata Steel’s plant in East Singhbhum.

The 10-million tonne (mt) capacity mine normally supplies around 8 mt — or about 45-50 per cent of the plant’s requirement — a year.

However, supplies from other captive iron ore mines, except one in Odisha, are on.

“There will be a financial impact till the matter is resolved,” Tata Steel said in a statement.

Root of the issueIndustry sources said that at the root of the problem was the fact that the Jharkhand government did not act on Tata Steel’s application for lease renewal in 2009.

The government allowed the company to extract ores after the expiry of the lease on a “deemed renewal” basis. However, last year the Jharkhand government decreed deemed renewal unlawful and demanded a penalty equivalent of the ore value extracted after lease expiry.

Meanwhile, Tata Steel had resumed operations at the Jharkhand mine on January 1 after receiving an ‘expressed order’ from the Jharkhand government.

Last year, Noamundi mines had remained shut from September 5 to December 31 on the instruction of the State Government.

This time, however, the mine was not ordered closed, sources pointed out.

Mining industry observers said that though the State government, on a direction from the Jharkhand High Court, issued orders allowing resumption of Noamundi mines operations in January, it had also attached certain conditions to renew the lease.

The State also demanded ₹3,500 crore as ‘penalty’ for iron ore extracted by Tata Steel (using the ‘deemed renewal’ clause) during the period between December 31, 2011 (when the lease period expired) and September 5, 2014 (when the mines were closed).

Initial paymentTata Steel, which had to “accept” the terms “without compromising it legal right on the mine”, made an initial penalty payment of ₹152 crore.

In March, the Mines and Minerals (Development and Regulation) Amendments Act, 2015, made the renewal for 15 years automatic through the execution of a supplementary lease deed.