Mining should be moved from unorganised sector to organised if it is to be done in a legal,scientific and environment-friendly manner, it said.
But any interruption in supply of iron ore to steel industry would throw lakhs of employees out of jobs and their dependents would suffer, The Associated Chambers of Commerce and Industry of India said.
The mines in Karnataka supply iron ore to several large steel plants like JSW, Kirloskar Ferrous, Mukand Ltd and Kalyani Steels. The state also supplies raw material to units located in Maharashtra, Gujarat, Andhra Pradesh, Tamil Nadu and dozens of small and medium-sized sponge iron units.
"Absence of iron ore supply would be a death blow to the steel industry which is already grappling with numerous other problems," said ASSOCHAM's Secretary General D S Rawat in a communication to Karnataka Chief Minister B S Yeddyurappa.
One of the observations made by Lokayukta is that several mines entered into raising contracts and transferred mining leases without the state government's permission in contravention of Rule 37 of Minerals Concession Rules 1960.
"There is apprehension that in case a conclusion is arrived at by the apex committee without studying individual agreements and makes a prima facie determination of illegality, it could result in wrongful closure of many mines," said Rawat.
Steel, iron and other industries have invested Rs 62,000 crore in the landlocked Bellary-Hospet region as it has abundant availability of iron ore. "Shutting down of these industries will also cause loss of immense magnitude to the state exchequer," Rawat said.
ASSOCHAM said it fully supports the government in ensuring effective implementation of rules and regulations by adhering to systems and procedures as stipulated by various governmental agencies. "We would like to re-emphasise that a decision regarding closure of any mine should be done judiciously after investigating all aspects," he said.
Keeping in view the huge investments, employment of lakhs of workers, social responsibilities and dependency of industries on iron ore, ASSOCHAM requested uninterrupted availability of iron ore lumps and fines to meet industrial requirement while framing policies, he said.
Last month, Karnataka formed a team of officials to compile a detailed reply over issues raised by CEC on illegal mining in the state.