Revenue loss of over Rs.309Cr. April’21 due to under reporting of ex-mines prices of iron ore by Balda iron ore mine .

Bhubaneswar, 19-5-21
 By Our Special Correspondent 

   The State Govt incurred heavy loss due to unfair trade practices being adopted by the new lessees of auctioned mines during declaration of their ex-mines prices in their monthly returns form F1 under Mineral Conservation and Development Rules 2017. It is learnt that new lessees of auctioned mines are working in close collusion with big companies, and are declaring their ex-mines sale prices of iron ore much lower than prevailing market price, directly affecting revenue collection of the State. The State Government has already lost revenue of over Rs.309 cr. in April’21 for a single mine Balda iron ore mine.
 
 The lessee Serajuddin and Company Ltd of Balda iron ore mine hasreported ex-mines prices for 62-65%Fe grade lumps at Rs.1,805/tonnewhich is 84% lower than prevailing market price of Rs.10,600/tonnefor lumps of similar grade. Similarly, the lessee has reported ex-mines prices for 62-65%Fe grade fines at Rs.1,818/tonne which is 77% lower than prevailing market price of Rs.8,000/tonne. The big corporate like Arcelormittal India Pvt Ltd and Rashmi Metallicks and their subsidiary Orissa Metalliks are major buyers of iron ore from the said mine, and had  their respective procurement share of 22% and 28% of total iron ore fines sold by the lessee in April’21.It indicates unfair trade practices being followed by the lessee in nexus with its major buyers besides violation of rule 38, 42 and 43 of the Minerals (Other than Atomic and Hydrocarbons Energy Minerals) Concession Rules, 2016. There may be two types of invoices, namely, one for ex-mines sale and another for collection of premium from the buyer under different heads.
 
The excerpts of the data submitted by the lessee in its monthly return form F1 for April’21 is furnished below for your kind reference. The lessee has dispatched 3.45 lakh tonne iron ore against the minimum dispatch requirement of 7.08lakh tonne under its MDPA. On one hand the State government is not charging penalty for the shortfall in MDPA and on the other hand mines owners like Sirajuddin are cheating the State government in their endeavor to lower the ASP.
 
   Numerous attempts are being made for lowering the Average Sale Price (ASP) by adopting measures to sell the ore to related parties or sell the ore (lump and fine) at discount and then take the balance in cash. Evidently cash is not visible, but this circular economy is taking shape in our State of Odisha.
 
    Unfair trade practices being adopted by new lessees and modus operandi being evolved to make exorbitant bids economical through malafide strategies. There may be two types of invoices, namely, one for ex-mines sale and another for collection premium from the buyer separately under different concealed heads.
 
    Manipulation of ex-mines prices have been continuing in many auctioned mines ,and IBM  had rightly observed in October’20 requesting the State Government vide letter dated 24.12.2020 for examination of returns of lessees with reference to the vouchers of dispatches, sale invoice including GST etc. The IBM had put on hold the declaration of average sale price of lumps and fines other +65%Fe till outcome of the verification.
 
Huge revenue loss over Rs.8793 Cr.  to Government due to shortfall in dispatch from auctioned mines. None of the auctioned mines have fulfilled their commitment of minimum dispatch as per their signed MDPAs and a result, production of iron ore in Odisha has fallen by 26% from 145million tonne in FY20 to 108million tonne in FY21.
 
This inordinate delay in recovery of revenue loss even after explicit provisions of computation of dispatch on monthly pro-rata basis under rule 12A of the MCR 2016 read with Rule 13 of Mineral Auction Rules and para 7.1.1 of the tender documents has badly affected the economy of the State.
 
   It is demander to take the necessary actions to recover the revenue loss and sustainable supply of ore for protecting livelihood of natives of people:
    Appropriate actions must be taken against the lessees including Balda Mines (Serajuddin) and investigation needed to the involvement of big corporate like Arcelormittal India Pvt. Limited and Rashmi Metallicks  regarding lowering the ex-mines prices of ore during their sale transactions.
 
Immediate recovery should be done of Rs.309 Cr. from M/s Serajuddin and for alleged under reporting of ex-mines prices. Appropriate action under section 21(1) and section 25 of the MMDR Act may be taken.
 
Immediate recovery of Rs.8,793 Cr. towards shortfall in dispatch from auctioned mines as the shortfall has resulted 26% fall in overall production of iron ore in the State in FY2021.
 
The Indian Bureau of Mines in consultation with State Government of Odisha may urgently constitute a committee to monitor the sale transactions of lessees as these are directly linked to State Revenue in terms of premium, royalty, DMF and NMET arrived from the average sale price.
 
Every sale transaction should be scrutinized, else it will lead to revenue loss of thousands of crores.
 
To avoid related party transactions and the like the ASP should exclude all prices that are beyond a range from the highest price e.g. the price band may have to defined such that any price lower than 10-15% from the market price will not be taken into consideration.
 
Sale value is the gross amount payable by the purchaser as indicated in the sale invoice where the sale transaction is on arms’ length basis and the price is the sole consideration for the sale, excluding taxes, if any. The arm’s length definition. is the most important aspect, and it should be exhaustive, as this is the area where the big corporates with voice at levels are aiming to play with and thus have the ASP reduced. The entire momentum of National Mineral Index etc has the sole objective as above and this is against national interests.
 
 Monitor the front level employees in the State machinery and take appropriate punitive measures if required. A separate Vigilance cell may be created.
The above said proactive measures will promote fair trade practices in mining operations and help in maintaining an eco-system for large employment and sustainable revenue to the Exchequers.