In view of the fact that the current iron ore shortage in the country is a direct fallout of the non-operationalisation of auctioned leases in Odisha and/or failure to meet stipulated production levels from those mines, the Union Ministry of Mines has sought public/stakeholder comments on a proposed amendment to the Mineral Concession Rules, 2016. SteelMint highlights the key points in the draft proposal floated by the Mines Ministry:
To strengthen the norms of minimum production/dispatch the Mines Ministry proposes to amend Rule 12A of the MCR Rules, 1960.
In case of non-fulfillment of minimum dispatch criterion, the existing Rule 12A states that “appropriate action” shall be taken against the new lessee as per MDPA. The proposed amendment is that the successful bidder has to make a payment equivalent to the revenue share and other statutory levies that would have been payable at the level of minimum dispatch target on a quarterly basis – i.e. 80% of the annual production of the last couple of years calculated on a pro-rata basis.
The government has mooted this financial penalty for non-fulfillment of minimum dispatch on a quarterly basis along with the provision that if the successful bidder fails to meet the minimum dispatch requirement for 3 quarters in a row, the government may terminate the mining lease.
Inserting a penalty clause in Rule 12A of MCR, 2016 was an immediate need, as the Mines Ministry draft states that production of iron ore in India till Sept’19 in FY20 was 110.95 mn t whereas production till Sept’20 in FY21 stands at 76.01 mn t – a decline of over 31.5%.
In Odisha where 19 iron ore mines were auctioned in Jan’20, the production and dispatch of iron ore from Apr-Nov’19 were 90.28 mn t and 102.81 mn t respectively. These figures dwindled to 60.46 mn t and 91.58 mn t respectively in the Apr-Nov’20 period.
Shortfall in supply of iron ore is on account of non-operationalisation of mines or insufficient production even 7-8 months after the auctions and long after the successful bidders received the vesting orders. This is a “matter of grave concern” that the Central government has taken up with the Odisha government many times in recent months.
The Ministry of Mines amendment proposal arrives a month after the Odisha government sought departmental approval to slap the successful bidders with penalty, charged at 24% of IBM’s average sales price on monthly shortfall in dispatch, to be deducted from their performance security.
Leave a Reply