Bhubaneswar: Supreme Court advocate and activist Manohar Lal Sharma has sent a legal notice to the Centre and the Odisha state government accusing authorities in both of being ‘hand in glove’ with 10 bidders who were given mining lease of 20 mining blocks in the state through an e-auction.
The legal notice was sent to Union Minister of Coal Pralhad Joshi, Prime Minister Narendra Modi’s Principal Secretary PK Mishra, Union Mines Secretary Anil Kumar Jain, Chief Minister Naveen Patnaik, Odisha Mining Department Secretary Surendra Kumar and Director of Mines Debidutta Biswal. The notice alleges that their actions to alter or tweak conditions of the mandatory terms of auction/agreement/tenders for 20 iron ore mines to favour the new mine owners who bagged mines only this January, even after the tender process was over will result in financial losses worth lakhs of crores of rupees to the state and central exchequer and thereby the people.
The legal notice says according to the notification issued for the e-auction 6 December 2020, the reserve price was set at 35% of the value of mineral dispatched for the mineral block and that the “value of mineral dispatched” shall be an amount equal to the product of (i) mineral dispatched in a month; and (ii) sale price of the mineral (grade-wise and state-wise) as published by the Indian Bureau of Mines.
It was also clarified that payment in accordance with the final price offer should be paid monthly in addition to the payment of royalty or dead rent, as applicable. According to the legal notice, the model of this auction was forward ascending as the successful bidder agreed to pay the highest premium in terms of revenue share based on the average sale price of mineral as per the rules under the Mineral Concession Rules 2016.
Advocate Sharma stated that he had learnt from reliable sources that the successful bidders have approached all the ‘accused’ and the latter allegedly changed the terms of the tender documents/agreement to favour the successful bidders by converting average rate of sale price.
Sharma further alleged that the ‘above mentioned’ people intend to include the transactions or transfers done by mining companies for their self-consumption or to some associated companies on cost-plus basis to be included in the average sale price of IBM or National Mineral Index to bring down the IBM price of iron ore. This will unduly benefit these large companies as they would be exempt from paying royalty and premium.
Moreover, they are changing terms of payment for royalty upon iron ore from 15% to 5% which was one of the basic foundations for arriving at the cost to participate in bidding.
Sharma also accused the recipients of the legal notice of lowering the percentage of “Fe” grade in iron ore from the auctioned mineral blocks from 62% even as all these mines have been producing high-grade iron ore of above 62% Fe content for 50 years. Lowering the “Fe” contents of the iron ore to about 58% to 45% will reduce the actual value of the ore and give unlawful benefits to the bidders.
After the Cabinet gave consent to commercial mining of coal, it has now proposed certain “Aatmanirbhar” structural reforms for non-coal mineral sector. Joshi, Minister for Coal and Mines, described these as “more industry-friendly, production-friendly reforms” addressing a webinar organised by industry association FICCI earlier this month.
The proposed reforms have been put up on the Ministry’s website on Monday 24 Aug 2020 which seeks comments before 3 September 2020. They include a rationalisation of taxes, a National Mineral Index (which royalty, DMF and other taxes will be based on) and relaxing conditions for mines allocated as ‘captive’. These will be allowed to sell, from the current 25 percent up to 50 per cent of their raised ore in the open market, thus giving these companies an opportunity to rake in super normal profits at a great cost to the state.
While the going was good, which it has been for a long time for Odisha’s high grade and bountiful iron ore mines, miners were happy to overlook some of the state’s practices. Odisha charged royalty on the highest grade of ore and it did the same while calculating stamp duty. Indian Bureau of Mines (IBM) also included royalty–a cost that miners happily passed on to consumers–in its consideration of average sale price, in effect charging royalty on royalty.
All of this is expected to be addressed by a National Mineral Index. Sharma’s notice however contends that it can only result in lower collection of royalty for the state.
More importantly that it was unfair and illegal to change the rules of the game that decided who participated and who won mining rights only six months ago.
The notice, a copy of which Orissa POST has reviewed, accuses successful bidders of “directly and indirectly approaching the ministry to influence it to manipulate mandatory terms of the tender documents and mining agreement (at the time of auction) to now favour them.”
The activist advocate sometimes exasperates the Supreme Court with his persistent petitions. They aren’t however, always dismissed. In July last year the SC asked the Centre to respond to Sharma’s petition accusing the Government of causing huge losses to the exchequer by allowing more than 358 mines to continue while introducing auctions into the MMDR Act in 2015.
Quoting the landmark coal block allocation case in which he was the first petitioner, the notice warns, “…changes of any terms with effect to directly or indirectly attract financially injury to the state and central exchequer or a serious financial loss to public money will attract prosecution under Sections 309, 120-b , 420 of IPC read with P C Act jointly and severally to all involved persons as already applied in the WP (CRL) 120 of 2012 in Manohar Lal Sharma vs Principal Secretary and others.”
The Odisha government is seeing its revenues shrinking as swiftly as the spread of the virus. Overwhelmed by both, it takes solace in the fact that mining has managed to do better than other sectors through the lockdown period.
Covid19 brought the state to its knees – Odisha was among the first to announce a lockdown – but not the mining sector, apparently.
With permission of the district Collectors, the new owners of these mines – JSW Steel, ArcelorMittal-Nippon JV, Jagat Janani and others conducted ‘bhumi pujas’ for an auspicious start.
The auction, in January this year, of some of the best endowed deposits in the country was a whopping success by the state’s own estimates, based on the committed premiums, some as high as 154 per cent. What this translates to is an additional cost greater than the value of the ore. Speaking on condition of confidentiality, senior bureaucrats in the central ministry concede this is an “unviable business model that can only lead to rent-seeking.”