Changing permissible stack size of iron ore will cause revenue loss of Rs.1,80,000 Cr.

Changing permissible stack size of iron ore will cause revenue loss of Rs.1,80,000 Cr.
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By E B Dash
Bhubaneswar
08-12-2020


The proposed  increase  of the permissible iron ore stack size from 4,000 tonnes to 25000 tonnes , nearly six times the present stack norms will lead to a huge revenue loss of over Rs.180,000Cr over the granted lease period of 50yrs .
   Submitting details to the State Government, MASS, an organization of social activists mentioned that some new mine owners led by a leading industrial group which has taken mines at unsustainable premiums is pushing hard and it appears that the government is also inclined to grant this favour. This  calculation is for only 6 mines, and the actual loss will be humongous if the all the mines are taken into consideration. Such proposal was past rejected by the State government.

The proposal for increasing the lot size from 4,000 tonne to 25,000 tonne of individual grades of ore will severely affect the dispatch and reduction of mining revenue by thousands of crores by easy manipulation of grades by lessees due to large lot size. It will be difficult by the mine officials to collect a representative sample and verification of grades thereof. When the mining officers have not been able to manage the 4000-tonne stacks and ensure proper sampling effectively it is difficult to imagine the management of larger stacks above 4000 tons. In the present scenario where there is not even the provision of any automated mechanism to ensure accuracy such a proposal will only ensure fraud and Non-compliance.

The discrepancies in the stacks regarding geometrical dimensions and grade vis a vis present prescribed stack size of 4,000-tonne grade-wise have been observed. Subsequently, the officials of Directorate of Mines had conducted spot visits and found allegations were true and there was a massive loss of revenue.  Various Mines  were found to be violating the rules and fined heavily.
  The larger stack sizes lead to greater manipulation of grades leading loss of revenue. It is estimated that there wiil be revenue loss Rs. 3474 cr annually to the State considering EC limit of 49.95 mtpa of 5 major auctioned mines of Jajang, Nuagaon, Narayanposhi, Ganua iron ore mines of M/s JSW Steel Ltd, Thakurani iron ore mine of M/s Arcelor Mittal and Balda iron ore mine of  M/s Serajjudin. The impact of manipulating 1% in grade of the stack from 62.5% to 61.5% will lead to a Revenue loss of Rs.3,474Cr. (Premium: Rs.3013 Cr and Royalty+DMF+ NMET = Rs.462Cr.) at 12 months average IBM price with lumps to fines ratio of 40: 60. The reduction of the number of stacks for dispatch of 49.95 million tonne iron ore from 1041 nos. of stacks at 4000tonne qty each month-wise pro-rata basis to 167nos. of stacks, reduction by nearly six times will create sufficient space of manipulation of grade and difficult for Govt. officials for verification of such larger stack sizes.
   The lessee of a fully mechanized mine shall declare to pay the highest grade of royalty as prescribed in the second schedule of the Act to prevent mixing and manipulating grades. The State Government can generate additional revenue of Rs.14,288Cr./annum on computing premium, royalty, DMF and NMET at an average sale price of the highest grade of lumps on mine capacity of 49.95mtpa of above said auctioned mines (Additional Premium: Rs.12,391Cr and Additional Royalty+DMF+NMET = Rs.1891Cr).


It is easily inferred that larger stack sizes will promote the theft of grade in a profound manner as there is no mechanism to ensure consistency of grades in such big stacks and thus stacking and sampling will become an eyewash. Changing rules post-auction is only to benefit big corporate houses who won maximum blocks with exorbitant premiums higher than market prices. The auction of 21 iron and manganese mines conducted by the State Government under the prevailing Act and Rules made thereof. Any substantial change in the rules benefiting only a few lessees will lead to serious litigations besides the huge loss of revenue and may jeopardize the auctions.

MASS submitted that in the year 2016, the State Government had done a detailed assessment of mining revenue in a matter of stacking and sampling. The then 23 lessees of iron-producing mines of working 40 iron ore mines were granted dispensation from stacking, and sampling and the State Government had projected huge of revenue in case revocation of dispensation was granted. The permissible stack size has been maintained at 4000 tonne quantity and promoting dispensation from stacking and sampling from fully mechanized mines for sustainable revenue collection. Further, stacking of minerals is defined at designated areas earmarked in the approved Mining Plan. There is a fair chance of making stacks beyond the earmarked places for the larger size of stocks stable matching with the angle of repose of ore.

  MASS suggested that  in all fully mechanized mines, mining levies may be computed at the highest grade of lumps for all dispatches of mineral applicable for auction as well as non-auctioned blocks. New lessees who have taken the mining lease through auction should continue with the same practice of paying the highest royalty as was being followed before auctions. The stack size of 4000tonne may be maintained and may not be increased to prevent loss of revenue to the State Government. The present proposal of increasing lot size by six times from 4,000tonne to 25,000tonneor to any size greater than 4000 tonnes, is only benefiting a few players, leading to corruption and malpractices at lower levels while the State government will continue to suffer lower collection on Royalty, DMF and NMET. The vigilance of mining and transport of mineral using drone technology may be adopted at the earliest Inquiry may be initiated on position and movement of material from stacks, based on the google map/image from Cartosat satellite as these are capable of show movement of material stack wise for retrospective dates also. 

MASS urged the Govt to immediately act on tn the manipulation of big corporates who have taken mining lease at very high unsustainable premiums.