New Delhi: The Supreme Court on Friday allowed state enterprise National Mineral Development Corporation (NMDC) to operate its two mines for the extraction of iron ore in Karnataka's Bellary district for domestic consumption.

The interim order of the Apex Court assumes significance as it had on July 29 ordered suspension of mining and transportation of iron ore from Bellary district saying "over-exploitation" of the area has caused large-scale environmental degradation.

However, a special forest bench headed by Chief Justice S H Kapadia, kept the private miners out from carrying any mining activity and said future course of action would be decided after receiving report of Environment Impact Assessment (EIA) study done by Indian Council of Forestry Research and Education (ICFRE) in collaboration with other expert bodies.

The bench said that the iron ore extracted by the NMDC from Bellary would not be exported and the PSU will sell the production to other states in consultation with the Ministry of Steel.

Further, it directed that Karnataka government would charge the royalty on iron ore at 10 per cent of the current market value of the mineral which could be utilised for the rehabilitation of the Bellary forest.

The bench said it was allowing the state PSU to carry out operation for iron ore as there was a need to maintain balance between environmental concerns and economic development and the private players can be considered after the state government comes out with the "reclamation and rehabilitation" plan of Bellary district in which they have to make monetary contribution.

"In order to balance environmental concerns with economic development and keeping in mind the mandate of Article 21 of the Constitution, including inter-generational equity, we are of the view that in extra-ordinary circumstances, NMDC alone be allowed to operate its mines to the extent of providing one million tonnes per month commencing from August 6, till further orders," the bench further said.

"Further, we make it clear that Karnataka will charge royalty on the basis of ten per cent of the current market value of the iron ore. NMDC will maintain accounts in that regard," it said.

The bench, also comprising justices Aftab Alam and Swatanter Kumar, noted that Karnataka has been charging royalty of 10 per cent of the rates as determined by Indian Bureau of Mines (IBM) at the pithead.

It said the differential between IBM rate and the market rate will be accounted for by the Karnataka government the "differential rate will be deployed for rehabilitation purpose of the area concerned". It directed the government to submit the reclamation and rehabilitation plan of the Bellary district within three months.

However, before allowing NMDC to carry mining operation, the bench said a holistic view has to be taken for safeguarding various rights for which a detail study was needed of the Bellary region.

"We direct macro level EIA study to be undertaken by ICFRE in collaboration with Wildlife Institute of India, FSI (Forest Survey of India) and such other domain experts, as may be decided by ICFRE in consultation with Ministry of Environment and Forest (MoEF). This would be in respect of the Bellary district," the bench said.