NEW DELHI (India CSR): In a landmark decision that could reshape the landscape of India’s mining and steel sectors, JSW Steel Ltd has been granted a significant reprieve. On May 2, 2025, the company announced that a Rs 702 crore demand notice, issued due to alleged violations at its iron ore mining operations in Odisha, was set aside by the revisionary authority . The case has been remanded back to the Odisha state government for further deliberation, with explicit instructions to afford JSW Steel a fair hearing. This development not only alleviates immediate financial pressure but also underscores the importance of procedural fairness in regulatory actions.
| Aspect | Details |
|---|---|
| Mining Demand | Rs 702 crore, set aside by revisionary authority |
| Case Status | Remanded to Odisha government for reconsideration |
| Mines Involved | Narayanposhi, Jajang, Nuagaon, Gonua |
| Alleged Violations | Drop in production grade, deviation from mining plan, higher mesh size |
| Initial Notice Date | August 30, 2023 |
| Order Received | May 1, 2025 |
| Stock Impact | Closed at Rs 972.15, down 5.46% on BSE |
| Other Legal Issues | Supreme Court rejected Rs 19,700 crore BPSL resolution plan |
Background of the Case
The controversy originated on August 30, 2023, when the deputy director of mines issued a demand notice against JSW Steel, alleging multiple infractions at its mining leases in Narayanposhi, Jajang, Nuagaon, and Gonua. The accusations included a decline in the quality of iron ore produced, non-adherence to the sanctioned mining plan, and the use of a larger mesh size in the screening process. If upheld, these charges could have imposed a substantial financial liability, potentially disrupting JSW Steel’s operations and profitability.
JSW Steel acquired these four iron ore mining leases through competitive auctions in 2020 as part of its strategy to secure captive iron ore supplies (JSW Steel). The company’s aggressive bidding, including a 110% premium commitment for the Jajang Iron Ore Block, reflected its long-term vision for growth in Eastern India. However, high premiums and operational challenges have strained the economic viability of these mines, leading to past considerations of surrendering one of them.
Revisionary Authority’s Ruling
On May 1, 2025, JSW Steel received the order from the revisionary authority, which set aside the original demand notices. The authority directed the Odisha government to reconsider the case, ensuring JSW Steel is given a proper opportunity to present its defense. In a regulatory filing, JSW Steel stated, “…the Revisionary Authority has set aside the aforesaid Demand Notices and the matter has been remanded back to the State Government of Odisha to dispose of the same after giving proper opportunity of hearing to the company”.
This ruling suggests potential procedural irregularities or insufficient opportunities for JSW Steel to address the allegations initially. The directive emphasizes natural justice, ensuring the company can engage in a transparent and fair process.
Strategic Importance for JSW Steel
This development is pivotal for JSW Steel, both financially and operationally. The temporary relief from the Rs 702 crore demand preserves the company’s financial health, allowing it to focus on its ambitious expansion plans in Odisha. JSW Steel has committed to investing Rs 50,000 crore in a greenfield steel plant with a capacity of 12 million tonnes per annum (MTPA), expected to create thousands of jobs and boost the local economy (JSW Steel Integrated Report).
The four Odisha mines are integral to this strategy, providing raw materials for the planned steel plant. JSW Steel has invested heavily in infrastructure, including a 300 km slurry pipeline to transport beneficiated iron ore from the mines to its plant at Jatadhar, Paradip. This pipeline reflects the company’s commitment to efficient and sustainable mining practices.
However, challenges persist. The high premiums committed during the 2020 auctions, combined with regulatory scrutiny, have made these mines less economically viable. In 2023 and 2024, JSW Steel considered surrendering the Jajang Iron Ore Block due to “uneconomic operation” but later withdrew the application after reassessing market conditions.
Market and Investor Response
The announcement impacted JSW Steel’s stock performance. On May 2, 2025, shares closed at Rs 972.15 on the BSE, down Rs 56.15 or 5.46%. While the setting aside of the demand notice is positive, the decline may reflect broader market concerns, including a recent Supreme Court ruling on Bhushan Power and Steel Ltd (BPSL).
On May 3, 2025, the Supreme Court struck down JSW Steel’s Rs 19,700 crore resolution plan for BPSL, ordering liquidation due to irregularities in the plan’s execution and non-compliance with insolvency laws. This ruling, citing the use of equity and optionally convertible debentures instead of solely equity, has added complexity to JSW Steel’s strategic maneuvers.
Regulatory and Legal Precedents
This case highlights broader challenges in India’s mining and steel sectors, where companies face intense regulatory scrutiny. The outcome could set a precedent for handling similar disputes, particularly regarding the interpretation of mining plans and operational standards. It underscores the need for transparent and fair regulatory processes, ensuring companies have adequate opportunities to defend themselves.
The Supreme Court’s ruling on mining royalties in August 2024 further complicates the landscape. The court allowed states to collect past dues from mining companies starting April 2005, potentially impacting JSW Steel and others. However, Fitch Ratings suggests JSW Steel faces lower risks compared to competitors like Tata Steel due to its smaller mining scale and shorter ownership period.
JSW Steel’s Operations in Odisha
JSW Steel’s Odisha operations are a cornerstone of its growth strategy. The company’s four iron ore mines, with aggregate reserves of 1.1 billion tonnes, support its steel production capacity, currently at 29.7 million tonnes and projected to reach 38.5 million tonnes by March 2025 (GMK Center). JSW Steel is also collaborating with South Korea’s POSCO to invest Rs 650 billion in a new steel plant in Odisha, with an initial capacity of 5 million tonnes (GMK Center).
Despite these ambitions, operational challenges persist. The company has faced economic unviability issues, leading to past surrender attempts for the Jajang and Gonua mines (The Hindu BusinessLine). The current reprieve offers JSW Steel a chance to stabilize its operations and align with regulatory requirements.
Looking Ahead
As the case returns to the Odisha government, JSW Steel must prepare a robust defense to counter the allegations. The company’s ability to navigate this legal challenge will impact its operations, financial health, and reputation in Odisha. A favorable outcome could reinforce JSW Steel’s position as a leading player in India’s steel industry, while an unfavorable ruling could strain its resources.
For now, the setting aside of the Rs 702 crore demand provides a glimmer of hope. JSW Steel’s collaboration with the Odisha government and its commitment to sustainable practices will be critical in shaping the future of its mining operations.
You Learn
The setting aside of the Rs 702 crore demand notice marks a critical juncture for JSW Steel. As the case returns to the Odisha government, the company has a renewed opportunity to address the allegations and strengthen its operations. This development not only benefits JSW Steel but also signals a potential shift toward more equitable dispute resolution in India’s mining sector. Industry stakeholders, regulators, and investors will closely watch the outcome, which could shape the future of mining regulations in India.
(India CSR)
