Iron ore miner Serajuddin is seeking High Court direction to prevent the Odisha government from penalising it for not meeting its minimum production target. Considering the circumstances of the last one year, the miner wants the state to waive of 1.5 mn t of its 8.5 mn t target (by 7 July 2021) or grant it six more months.
Auction rules require mines which were vested with past clearances to meet 80 percent of past production in the interest of supply and to safeguard the state’s earnings from bids, which are a percentage of sale price. Many of Odisha’s operating iron ore mines auctioned in 2020, like Serajuddin’s Balda block, are a year since falling short of this Minimum Production Requirement (MPR). They risk having their performance security forfeited. For Balda this is INR 143.25 crore.
Serajuddin had bid a steep 118% to retain the iron ore block it had been mining for decades. Operations had been contracted to MDO Thriveni Earthmovers Ltd with whose help it had produced 9.361mt in 2018-19 and 14.9 mnt in 2019-20.
Its petition argues that MPR, as spelled out under Section 48 of the MMDR Act, was applicable to “production” and not “dispatch.” The word is also absent from the tender document. This was also evident in the fact that the Ministry of Mines’ 10 June 2021 notification replaced production with dispatch in Rule 12 A of the Minerals (Other than Atomic and Hydro Carbons Energy Mineral Concession) Rules 2016 supported this. Any retrospective application of the amended rule would be “illegal, arbitrary, irrational, unreasonable and unworkable owing to several extenuating circumstances”, the petition argues.
It seems to suggest the company got no support from the state government in meeting the MPR which was conditional upon the successful bidder being vested with all the relevant statutory clearances held by the previous lessee — in this case Serajuddin itself based on whose past production the MRP is being arrived at.
It was restricted to 58.836 ha of the total 171 .566 ha forest area, being barred for five months from its main pit which contributes 80 percent of its production. While it ran “from pillar to post”, groundwater filled the old deep quarries which even after it was pumped out made it hazardous to operate in for another 12-16 weeks.
In December 2020 it was restrained from a smaller block, this time because that was Sabik forest area (non-forest land recorded as forest as on 25 October 1980 in Revenue Records). This too had been worked by the lessee since the sixties until 2014 circulars of the MoEF restricted them. The Ministry on 10 March 2015 had relaxed this to allow work in already broken areas for a year. Serajuddin had then operated on the strength of a Orissa High Court order.
And finally it was badly hit by both phases of the pandemic with more than 50 people catching the COVID-l9 virus in each phase (and one dying) which should count as a force majeure event. Its petition also underlined the fact that this was a merchant mine and could not, as a captive miner might, dispatch material to its own end-use plant. It had no control over market conditions and “no commercially prudent businessman would deliberately refrain from dispatching minerals.”
Serajuddin also complained that if it was forced to produce 80 percent of what the old lessee (Serajuddin itself) did, it would exhaust the estimated resources of about 200 million in under 20 years which would be “contrary to all principles of sustainable development, systematic and scientific exploitation of resources and the principles of inter-generational equity.”
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