JSW Steel has been slapped with a notice totaling to INR 717 crore for production shortfall at Jajang iron ore mine the steelmaker is considering surrendering back.
The notices, from the mining directorate, come as the state assesses the performance of mines a year after they were auctioned to new lessees. Sajjan Jindal led company has already conveyed to the state that it intends to surrender the Ganua iron ore mine. As SteelMint reported earlier, the company was also considering surrendering its rights to the Jajang iron ore block.
The demand issued to JSW Steel is for a shortfall of 1.4 million tonnes against its despatch target of 9.23 mn t of (Fe 58-60%) of despatch for the 12 months between 27 June 2020 to 26 June 2021. An average price of INR 4048,33 for each tonne of lumps (accounting for 13.08 % of total despatched ore) and INR 3296.58 of fines (86.92%) has been adopted to arrive at a differential amount of INR 523 crore taking into consideration the 110% premium committed for rights to this mine.
JSW Steel must also pay royalty, DMF, and NMET that it would have otherwise paid had it produced as per its Mine Development and Production Agreement. It also stands to have 24% of its performance security appropriated which takes the total to about INR 717 core. The 13 August 2021 notice gives the company 15 days to pay this amount.
SteelMint has learnt similar notices have been sent to others including a staggering one to Serajuddin and Co. It is likely that some others may consider returning their mines either because of their inability to compensate for the shortfall or because, quite simply, it is hard to sustain an operation that requires you to pay the government more than what you earn.
The auctions are decided on who offers to share the greatest share of its revenue. This was 132 % for mining rights to Ganua which JSW is now surrendering.
In INR
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