India: Most of the Odisha auctioned iron ore mines meet despatch target in second year

Mines in Odisha seem to have fared much better in their second year of operation, largely meeting their despatch targets under MDPA (Mine Development and Production Agreement) rules with the exception of six players. Serajuddin and co, which was slapped with a penalty of INR 6028 crore for producing only 16% of its MDPA target for the Balada iron ore mine last year, faces another huge fine having despatched a mere 6.82% of its target in its second year of production.

Writing to the Principal Secretary, Steel and Mines in Odisha on 26 July 2022, Odisha’s Director of Mines has sought permission to issue notices and also suggested termination of defaulting leases quoting provisions under amended MC Rules 2016.

What is the MDPA rule?

Mines acquired through auction must despatch 80 per cent of their pre-auction annual rate of production to ensure the government doesn’t lose promised revenues. Meeting these targets was a huge challenge in the first year with almost everyone, including JSW Steel, Tata Steel and AMNS falling short and paying huge differentials as penalty. While they have fared better this year, some more than others, merchant miners like Jagat Janani, Ghanshyam Mishra and GM Iron and Steel seem to continue to struggle.

Bigger companies perform better

JSW Steel’s Narayanposhi and Jajang mines have exceeded their targets by more than fifty percent, as has Agrasen Sponge at its manganese mine, Katasahi. An earlier SteelMint story had wrongly suggested Tata’s chrome mines had fallen short. The steelmaker has managed to meet its despatch targets at all its three chromite blocks. Serajuddin’s sister concern Yazdani which operates the Kolmong Iron ore block is just two percent short of its despatch target.

Meeting the MDPA and paying the necessary royalty and premium for the same will be a challenge when iron ore prices are volatile or there isn’t a viable market for chrome for example. The industry however is yet to convince the government to be more flexible on its MDPA position considering its very direct relation to state revenues.