Jindal Steel and Power bought iron ore below market price: Probe panel

3 JUL, 2012, MEERA MOHANTY, ET BUREAU
NEW DELHI: Naveen Jindal's flagship Jindal Steel and Power is under the scanner for allegedly accessing iron ore from Sarada Mines- the group's mining associate- at rates below the market price, thus depriving the Odisha government of royalty.

The rates charged for the mine ore that JSPL processed, largely for its own use, was about one-tenth the prevailing market price for processed iron ore in 2008-09, an enquiry report by a five-member committee has stated.

The report, which was finalised in November last year but is not in the public domain, claims "prima facie evidence in respect of violation of Rule 37 of Mining Concession Rules 1960" which could potentially lead to the mining lease being cancelled.

Acting on the report, AK Rath, the additional secretary of Odisha, has asked the state's mines director to reassess royalty payment from 2009 onwards, excluding Sarada prices from consideration. The lessees affected by the revision should be asked "to pay the differential royalty amount," Rath said in a communication dated 29 June.

Email queries to JSPL did not elicit any reply as senior officials were travelling.

The enquiry report of the committee constituted by the state government also alleges that Jindal Steel and Power controls the Thakurani iron ore mines of Sarada Mines.

Some verifications, however, are pending as documents were unavailable for inspection by the committee. The committee will be sent again for inspection, confirmed the mines director Deepak Mohanty.

"Violation of rule 37 needs to be established and we will be resubmitting a report before end-July," added Mohanty.

Mineral royalty earned by the state is calculated on the basis of average price charged by the 10 largest mines in the state. The state relies on data compiled by the Indian Bureau of Mines for the purpose of calculation.

A discounted sale will lead to a lower average and in turn to a loss of royalty for the state.

Sarada's 947.06 hectare mine in Block B of the Thakurani Reserve Forest in Keonjhar district has a long association with the Naveen Jindal company.

All of the hilltop mine's 6 mtpa high grade ore is carried through a 1.8 km conveyor belt to JSPL 4.mt pellet plant in Joda. Some of it also goes to its 3 mtpa Raigarh plant.

The enquiry committee has alleged that JSPL's access to ore at way below prevailing market rates amounted in effect to "transferring the interest in the lease to JSPL".

According to the report filed by the committee, a copy of which is with ET, "The arrangement, apart from being in violation of provisions of Rule 37 of MCR, 1960, also contributed to lower value added tax collection by the Odisha government on account of low pricing in comparison to the value derived by JSPL from the product vis-a-vis the market price."

Mining rules also forbid a miner from transferring a lease without prior state and central government approvals under rule 37of MCR. The lease owner is, however, allowed to control finances and management and make all the major capital investments.

The state had constituted a special committee which submitted its report in November after a visit to the Sarda's Thakurani mine in August last year.

In its report, the committee noted that Sarada had sold JSPL iron ore during 2008-09 at an average rate of 400 a tonne according to its tax audit report. JSPL then crushed this ore for its own use.

Other miners (such as Mid East Integrated Steel Ltd, for example) in the market sold crushed ore for 3,350 a tonne and 4,000 a tonne in the market during the same time, according to the report.

"It is pertinent to note that by spending an insignificant amount on processing ROM the value of product obtained in the form of sized ore and others enhanced significantly," it observes.