Unable to operate its mine upto expectations, Serajuddin & Co now face a staggering INR 6,028 crore payout. This is one of the ten odd notices sent out over the weekend by the Odisha mining directorate to lessees at the end of their first year of production under auction rules.
The staggering figure, reflecting the poor performance of many of the lessees who bagged mining rights at steep premiums in early 2020, raises serious concerns over iron ore supply in the coming months.
The Odisha based miner bid 118.05 per cent to retain the 343.98 ha, Balda iron block it had rights to until March 2020. Serajuddin, like the 18 others who won rights to these operating mines, and were extended environment and forest clearance for two years, had to meet 80 per cent of their past average production under strict Mine Development and Production Agreement. In Balda’s case this was 8.5million’ the company only managed 1.39mn t.
While Serajuddin’s notice eclipses almost every other notice issued by the Odisha Mining Directorate, more than half of the mines auctioned last year have met less than half their despatch targets. A quick back-of-the-envelope calculation suggests at least 10-15 million tonnes are at stake, including the Ganua and Jajang mine that JSW Steel is considering surrendering. Many of these players issued notice on Friday the 13th Aug may find it difficult to compensate the state to continue mining and could choose to forgo their rights.
Last year, despite their best efforts, neither the Centre nor the state government could avoid a domestic iron ore shortage aggravated by pandemic lockdowns and the record-breaking export prices. Two of the mines auctioned unsuccessfully (Jilling and Guali) were handed over to Orissa Mining Corporation. Two others – Nadidih and Terehai are among the 11 that have been put up for the second round of auction.
In refusing to sign the lease for Nadidih, Fomento had argued that the provisions of the MDPA were introduced after the auction process began and in any case it wouldn’t make sense to exhaust the reserve operating at these levels long before the end of the lease term.
In a petition before the High court, stopping short of blaming the state itself for delays in permits, Serajuddin has also made the same argument that if it continued mining as it did, as the ex-lessee, it would be violating principles of sustainable and scientific mining.
It is unclear if the state intends giving lessees any relaxation, so far it has remained unmoved by letters seeking some allowances – either in quantum or time — considering the pandemic and other logistical issues that they had to cope with.
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