The state government has decided to cancel the mining lease granted to the Obulapuram Mining Company, according to sources.

Sources said that government has asked the mining department to issue notices to the company on cancellation of lease as the OMC has resorted to illegal mining and violated the rules of the lease contract. It is said that the government has authority to cancel a mining lease under section 27 (5) of the Mining Act, 1957 when the mining contract is violated.

The YSR Government had leased 270 acres of mining land to the OMC on June 18, 2007 and already the company has extracted iron ore worth Rs. 7500 Cr violating all the rules as has been established by the CBI.

Sources said the Government wants to cancel the lease to the OMC and transfer it to the state owned AP Mining Development Corporation. The state government is likely to issue the notices to the OMC after the CBI submits its report to the government.