5500Cr. Revenue loss due to delay in imposition of applicable penalty for violation of MCR

5500Cr.  Revenue loss due to delay in imposition of applicable penalty for violation of  MCR
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By Bijay Mishra
Bhubaneswar, 02-02-2021


There is a huge revenue loss of over Rs.5,500 Crore rupees due to delay in imposition of penalty for violation of Rule 12A of Mineral Concession Rules 2016 for the shortfall in dispatch quantities of Iron Ore from the auctioned mines in Odisha  even after the express approval of the State Government for early recovery.

The Govt has  already approved the
principle to be adopted for calculation of the said penalties on 22.12.2020, but even after lapse of one and half month, the clear instructions for early recovery has not been executed leading to huge loss of revenue for the State.  The State Government  approved that the shortfall in dispatch to be estimated against the targeted monthly dispatch calculated on pro-rata basis.

This  gross violation of the State Order besides delay in its  implementation  is giving sufficient opportunity to new lessees to adopt all manipulations and policy advocacy through various interested agencies to change such statutory provision of minimum dispatch
requirement on quarterly basis in place of monthly basis.

  Sub-rule 1 of Rule 12A of MCR 2016 states compliance of minimum dispatch of 80% of the average of the annual production of two immediately preceding years on pro-rata basis from all auctioned mines. The relevant clause 7.1.1 of the MDPA of Mining Lease Deed prescribes premium payment on monthly basis within 20days of expiry of each month read with schedule D prescribes that penalty in case of shortfall in dispatch quantity will equal to 24% of IBM sale price × shortfall quantity + premium % × average sale price of mineral × shortfall quantity.

The legislature has explicit understanding of the word ‘pro-rata’ and this was introduced to ensure that the monthly dispatch levels are maintained to pre-existing levels and artificial scarcity of iron ore is not created in the market. Else, the same could have been to maintain
80% dispatch of the previous average two years production on a yearly basis. There cannot be any room for understanding that a lessee can be allowed zero dispatch in the initial 8 months, and dispatch more than monthly pro-rata capacity in balance 4 months of a year to comply MDPA requirement. Thus, the compliance of dispatch on monthly pro-rata basis is utmost important

Due to loss dispatch by the auctioned mines, the State Government has already lost revenue of over Rs.5500Cr. during July to Dec’20. There is 61% shortfall in supply from mega iron ore mines of
Nuagaon, Jajang, Naryanposhi and Ganua iron ore mines of M/s JSW, Thakurnai iron ore mine of Arcelor Mittal India and Balda iron ore mine of Sirjuddin against the minimum dispatch requirement
of 15.18million tonne there was shortfall of 9.24million tonne during July- Dec’20 incurring revenue loss of over Rs.5004Cr.


Submitting details of the huge revenue loss to The Principal Secretary, Department of Steel & Mines, Government of Odisha , Mr Subrat Tripathy , Secretary "MASS" demanded that the shortfall in despatch to be estimated against the targeted monthly dispatch calculated on
pro-rata basis. In case the dispatch during certain month is more than the targeted minimum dispatch, it shall not be adjusted against the other months.
For calculating the penalties for a particular month, the average sale price of the highest grade of lumps may be charged as the new lessees are already manipulating the ex-mines prices leading to about 44% lower Average sale price published by IBM compared to prevailing market price.
   MASS urged the Govt. to recover over Rs.5500Cr. in the form penalty for those auctioned mines which have dispatched less than the minimum production requirement under their respective MDPAs. In addition, as per action
envisaged in the MDPA the regular offender mines may also be cancelled.