The iron ore in Goa is mainly low grades which is not possible by the domestic steel plants to utilize directly. After China started importing low grades in 2005, the exports of low grades iron ore increased eight times and it resulted in increase of exports from Goa comparing to other state ports in country.
With high in demand and exports from Goa, demand of low grades also increased and extensive mining of iron ore within and outside lease area. The mining in Goa is cheap and this makes the mineral business more profitable. The fee for mining lease is Rs.5000 which is paid one time. The costing for mining the ore is Rs.50 per ton for excavating; transporting and processing the iron ore cost around Rs.500 per ton and return transport to the port cost around Rs.200 per ton. The royalty charges is Rs.270 per ton and the vessel loading charges around Rs.400 per ton. Government duty of 20 percent is applicable on the total value. The average exports FOB value was USD 90 per ton in the peak season for average grade of 52 percent iron ore fines.
This profit making business made the miners and exporters to mobilize the highest quantity in short period which gave a rise to illegal mining.
Most of the miners are found either mining above their permitted limit means if the miner is provided the permission for mining 50,000 ton of iron ore every month, the miner have been found to cross the limit and excavated above 50,000 ton quantity which is illegal. The other source of illegal mining found was that, some miners have even cross the permitted leased areas of mining allotted to them and excavated iron ore in the neighboring areas and the most have done mining in environmentally sensitive areas, forest and wildlife sanctuary land.
The over mining and degradation has affected the environment of Goa in such way that while Goa receives 120 inches of rainfall every year then also the state is facing the water scarcity.
The profits which surges fifty time compare to past ten years made everyone attracted to Goa for mining and exports of iron ore. The profits in iron ore business accounted to 75 percent, which is unheard of any legitimate business in India. As per records exports of iron ore rose from 14 million tons in year 2000 to 46 million tons in year 2009-2010. The private figure says its around 64 million tons in year 2009-2010.