India: High Court disposes JSW Steel petition challenging IBM’s ASP for Sept, Oct’2021

~By Meera Mohanty/SteelMint Bureau

The High Court of Odisha has refused to set aside the Indian Bureau of Mines’ Average Sales Price (ASP) for the months of September and October last year, determined by excluding the steelmaker’s iron ore sales in Odisha.

The court found the fixation of ASP published under the Mineral Concession Rules 2016 separate from MCDR 2017 which JSW Steel is accused of violating and thus not “illegal or arbitrary” as the steelmaker had claimed in its petition.

To recall, JSW Steel carried out 11 auctions between August – December 2021 through Central Government agency MSTC’s portal of low grade fines from Jajang. Based on these prices it sold ore from Nuagaon, including to related parties, some of whom resold these to its own company Bhushan Power & Steel Ltd.

The company was show caused for this by the IBM, which simultaneously decided to exclude JSW Steel’s lower than market rate transactions while arriving at an ASP for the state of Odisha and those specific grades. The ASP, often published months later, determines the royalty, premium and other mineral levies that the state collects.

JSW Steel challenged this decision claiming the transactions, even with related parties, had been carried out at “arm’s length”. That the drop in prices – from Rs 4204 in August 2021, to 1358.76 in September 2021, then Rs 575.3 in October 2021 and Rs 767.38 in November of last year, of iron ore from Nuagoan for example — reflected a slide in international and domestic prices. It was selling despite the market condition because it had to, to meet its minimum dispatch target and avoid being penalised.

The court declined to consider JSW Steel’s argument that IBM had “artificially created illusion of high price” by excluding its prices, even though it accounted for 70 per cent of low grade production during the time, in view of the documents provided by the bureau detailing “related party” transactions had taken place, the prices other lessees had sold ore at, and in view of the fact that no other lessees, except the petitioner-company (JSW Steel), had challenged the ASP.

Defending its earning the state of Odisha had pointed that while JSW Steel claimed these were at arm’s length, the traders it sold ore to, sold the material back to, in effect the “very same person” in detriment of the state’s interest. It cited a dispatch of fines of Fe 55-58% to Seven Hills Minerals Private, sold at Rs 1336.70 a tonne, later sold to JSW’s Bhushan Power & Steel Ltd at 1354.18 a tonne. A similar transaction of Fe 58-60 % had been made through the related party, Brahmani River Pellets Limited.

The court though found IBM had not followed principles of natural justice by sending the steelmaker a show cause notice, recommending on the very same day that its transactions be excluded, and still not having taken a decision on JSW Steel’s replies sent in December.

“As a matter of fact, the authorities should take a decision on the show cause replies submitted by the petitioner company, in response to the notice of show cause issued on 16 December 2021, in consonance with the principle of natural justice.”