The Karnataka cabinet on Tuesday cleared the mining lease for National Mineral Development Corporation’s (NMDC) Donimalai iron ore mine, which had been stopped since 2018.

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The move comes after the request made by Ministry of Mines to clear the NMDC mining lease applications.

"We have resolved that the impediment pertaining to NMDC mine lease is removed. Consent has been given to start mining at Donimalai in Sandur Taluk," law and parliamentary affairs minister J C Madhuswamy said at a media briefing after the cabinet meeting.

The state had been losing revenue ever since the mining was stopped, he said, and recalled that Chief Minister BS Yediyurappa and Union Minister for Coal and Mines Pralhad Joshi had held a meeting last month and resolved to sort out the matter.

The renewal of the lease comes as a positive development for NMDC as the mine has a capacity of 7 million tonnes.

However, the proposed 22.5 percent additional premium on Donimalai sales volume with retrospective effect will be negative for the company. The premium will take a hit on the profitability of the company.

There is also a possibility that other mines may also be levied the additional premium.

The Kumaraswamy mines in Karnataka comes for renewal in 2022 while the Chhattisgarh mines were renewed earlier in 2020.

"Post the amendment of MMDR ACT, an additional premium of approx 22.5 percent will be levied. If MMDR ACT is amended then all mines will have to pay this additional 22.5 percent permium. The proposed premium is not a pass-through and so NMDC will have to take the hit. This additional premium will have to be paid not just by NMDC but by all PSU," NMDC management told CNBC-TV18.