Auction of 3 lakh tonnes iron ore in ROM form from  Nuagaon & Jajang  mine will lead to revenue loss of 203 crores

Auction of 3 lakh tonnes iron ore  in ROM form from  Nuagaon & Jajang  mine will lead to revenue loss of 203 crores
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 By E B Dash
 Bhubaneswar, 05-12-2020

   The  proposed E-auction of JSW Steel Limited for auction of iron ore in the form of ROM from Nuagaon  and Jajang iron ore mine , which is a  gross violation of rule 2(f), rule 39 and rule 49 of MCR 2016  will lead to revenue loss of 203 crore rupees towards premium, royalty, DMF, NMET and shortfall in minimum dispatch requirement under respective MDPA(s).

   Submitting a  petitions to the IBM and Department of Steel & Mines, Govt. of Odisha, MASS , an organization of concerned citizens urged the Govt. to examine the Auction Notice of JSW Steel  to sell iron ore in the form of Run of Mine (ROM) through auction from its Nuagaon  and Jajang iron ore mine situated in the district Keonjhar, as there is fair chance of violation of the statute .The quantity under said auction consists of  two lots of  iron ore ROM from Nuagaon iron ore mine of 1 lakh tonne, size 10-180mm, 60-62%Fe and 1 lakh tonne, size 10-180mm, grade 62-65%Fe and one lot of RoM from Jajang iron ore mine of 1 lakh tonne, size 10-180mm, grade 56-60%Fe .

  MASS informed that the size specification of iron ore ROM under e-auction notice is 10-180mm whereas run-of-mine (ROM) defined under rule 2(f) of MCR 2016 as the raw, unprocessed or uncrushed material in its natural state obtained after blasting or digging, from the mineralized zone of a lease area. Thus, ROM consists of material of size below 10mmand size above 180mm besides the size range of 10-180mm. In this JSW is selling lumps under the garb of ROM. Further, grade of lot of iron ore ROM Jajang iron ore mine have been shown as 56-60% Fe whereas there is no such grade band of iron ore either in statutory return Form F 1 and Form G1 under rule 45 of Mineral Conservation and Development Rules, 2017.

MASS requested the IBM, Bhubaneswar to clarify the sale price of ROM will not be included in the calculation of Average Sale Price (ASP) of different grades of iron ore lumps and fines as ROM; iron ore lumps and fines are different commodities clearly defined in law. The ASP of ROM for the purpose of computation of Royalty should be that of the highest grade of iron ore lumps unless IBM concludes the methodology of computing price of ROM. The price determination for ROM should ensure that the weightage average price of lumps and fines in ROM is similar to the price of iron ore lumps and fine of similar grade sold separately in the market.

In the  petition to Department of Steel &Mines, Odisha, MASS has stated that prior to auction of the working merchant mining leases lapsing on 31.03.2020, the majority of mines where in merchant mining category in the State of Odisha and contributed more than 55% of the country iron ore requirement. The 21 iron ore mines of 89mtpa have been won by various bidders at exorbitant and unviable premiums, in most cases higher than market price i.e. IBM price. It is evident that intent of new lessees is to manipulate the grade of ore and prices to compensate the high premiums. This fact was authenticated by the recent squad visits of various mines.  JSW Steel Limited won four mega mines with combined capacity of 29million tonne which is presently 59% of the total auctioned mines operating in the State. These mines have dispatched only 23% of minimum dispatch requirement of 13.35 million ton in this financial year on pro-rata basis. 

Lower floor prices of range of Rs.2400- 2500/tonne of iron ore lots under Auction Notice of JSW Steel Limited vis a vis higher prevailing market prices hovering at Rs.8400/tonne for lumps and Rs.6000/tonne for fines leading to loss of Revenue of over Rs.203Cr. in a single auction alone. 

MASS  further cautioned  about unfair industrial practice of JSW Steel Limited Sale of ore to interested players without dispatch, then also showing compliance MDPA citing provisions of Sale of Goods Act,1930. The section 33 of said Act prescribes that once lessee delivers the goods to the purchaser after weighment and payment of the value thereof by the purchaser, the ex-mines sale of mineral has been completed. The intent of JSW Steel Ltd is sale of iron ore ROM through auction to have lower ex-mines prices and collecting the value of iron ore and showing as sales in their returns. Thus, the title of sold out material will be transferred to purchaser and  JSW  will show as its dispatch. This will pave the way to for not paying the premium and 24% of IBM price on the shortfall in dispatch from the minimum dispatch requirement under its MDPAs.

The State Government must seek clarification from IBM that the sale price of ROM will not be included in the calculation of the ASP of iron ore lumps and fines, and unless this is obtained the auctions may be put on hold/annulled as this is a clear design to substantially reduce the State revenues.