The Odisha government’s Directorate of Mines has shot off show cause notices to new lessees who have fallen foul of Sec. 12 (A) of MCR2016, read with para 8.1 and Schedule D of the Mine Development & Production Agreement (MDPA), in not being able to ensure the minimum requirement of 80% despatches of the “average of the annual production of two immediately preceding years”.
The notices, as accessed by SteelMint, were sent to all new lessees of iron ore, manganese as well as chromite mines who have flouted the legal agreement.
Shortfall in actual despatches is, in fact, alarming: Till Aug’20, JSW Steel has a cumulative despatch shortfall of 597,990 t and 454,333 t respectively from its newly won Nuagaon and Narayanposhi iron ore mines.
In fact, 1371,982 t is the actual shortfall in despatches from the steel major’s Jajang iron ore mine, while from Serajuddin’s Balda block – which the merchant producer retained with over 118% premium at the auctions – the shortfall is pegged at 1,417,591 t.
The Odisha government’s show cause notices, it is assumed, are intended to nudge the new lessees to ramp up mining operations.
With new production not coming online, the state government is losing out on precious revenues that looked to be receiving a great boost with frenzied premiums being quoted at the auctions earlier this year.
It is pertinent to mention that except the two integrated steel producers – JSW Steel and AM/NS India – all the other new mine lessees scored ‘nil ’despatches.
In Ganua block, JSW has dispatched 34,683.17 t which is 78,419.83 t short of the prescribed target of despatch. In case of the Nuagaon block, the steel-maker dispatched 2,56,718.98 t which is 7,53,081.02 t short of the prescribed target of despatch.
In Jajang block, it dispatched 3,07,173.48 t which is 17,70,736.08 t short of the prescribed target of dispatch.
Similarly, the cumulative shortfall by AM/NS India from the Thakurani iron ore mine is 696,974 t till Aug’20.
Narbheram Steel & Power Pvt. Ltd., which won the Roida-II iron ore block is yet to start mining operations. Despatch shortfall till Aug’20 stands at 379,376 t.
With the average rate of premiums for new merchant lessees being quite high, not to forget GST, DMF, NMET, etc. production is undoubtedly a costly prospect, especially considering the fact that merchant producers have no option for downstream value addition.
Similar commercial considerations weigh with the captive producers too. Ore despatches ultimately depend on demand, capacity utilisation, prices, etc., and also, of course, ore transportation costs and logistical issues.
Meanwhile, the Odisha government has warned of appropriate action as per different clauses of MDPA for violation of minimum despatch requirements.
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