The new Mines and Minerals (Development and Regulation) Amendment Act, 2015 (MMDR Act) ushered in a transparent system of auctions for all mines. This was a welcome step as the true value of the natural resourcea would be deciphered, and the State Government would benefit immensely from the revenue stream. Soon thereafter, the complex interplay of policy advocacy began, with the major industrial houses in steel and other infrastructure industries setting eyes of making profits by securing the essential raw materials. The mining industry dominated by merchant miners could not realize that the major industrial houses were strategizing methods to gain immensely from the new changes as the Government was also experiencing the impact of auctions for the first time.
Historically, mining has been dominated by merchant miners, and rightfully so, as most industries in mid-size and MSME categories did not wish to mine themselves when the ore could have been easily procured from the market. The major States like Odisha, Goa, Chhattisgarh and Jharkhand had been prospering and also witnessing a boom in economic activities as many industrial houses, downstream, and upstream industries were coming to these States.
The auctions changed the paradigm as the policymakers diluted the true intent, and all industries, whether big or small, were made to compete for the mines. The maximum area section in the Act was skillfully diluted by shrewd policy advocacy so that a few big industrial houses could make significant gains at the expense of the mid-size and the SME sectors. There was no reservation of blocks for the smaller players, and they were left to compete with the more prominent players who were plush with funds and had various means to influence the policymakers. The advocacy process of going through associations was well understood, and all significant industry associations had promoters as their presidents or chairmen. The very fact that these associations require funding for running makes them vulnerable to financial pressures, a need which could be met by only a few big corporate houses.
Furthermore, the auctions at Odisha, Chhattisgarh, Karnataka, etc., witnessed very high auction premiums, which are unsustainable from the very beginning. For example, iron ore mines fetched premiums as high as 150%. This can be understood best by an example; if 100-tonne ore is mined, then the auction winner has to give 150 tonnes or pay equivalent in cash to the Government. If the mining cost, royalty, DMF, and NMET is added, then this payment becomes costlier by another 30%, i.e., they have to pay for 180 tons for every 100 tonne mined. As expected, the big corporates jumped in the fray and secured most of the mines tilting the ratio of the captive to merchant mines to 70:30 from 30:70. Adding to this, all mid-size corporates and MSMEs were getting no mines.
The policy makers can easily analyse that no business can run on losses, and these auction winners can only make money by means other than those prescribed as per law, even a layman can understand this.
Odisha is the State wherein most auctions have been concluded at exorbitant premiums, which currently is making the Government smile. However, this happiness would be very short-lived if they do not intervene at present and put across their view at the Center wherein most laws are enacted. The State themselves have to find ways to stop the various tactics which are being and will be adopted by these corporates to become profitable in a situation where they were unprofitable from the day they won the auctions.
The big corporates are now lobbying with the Government to reduce royality and attempts to change the existing law of GST on premium . They are lobbying to drop prices to lower the APS determined by IBM, change the ASP ( Average Sales Price) system, reduce logistics costs so that land cost is reduced, Mixing grades to lower-grade so that lower royalty, DMF, NMET, premium are payable , manipulation in stacking, sampling and manipulation in Stamp Duty and registration .
Therefore, the stark reality is that these corporates will recover the unsustainable high premium from the Government and also make profits. The loss, therefore, would be of the general public to whom these assets belong and are managed by the Government.
The systematic game of these corporates will seriously affect the economy . The Government needs to understand that most employment comes from mid-size companies and MSMEs who would starve for raw material and get that at very high prices. In contrast, the steel companies and others will continue to profiteer as they are not regulated sectors.
In the above background, Dr Sudhi Ranjan Dash, secretary "JANMAT”, said the National Mineral Index (NMI) should only include prices of arm lengths transactions, mostly of merchant miners. The forum demanded that strict guidelines should be issued, and the Ministry of Enviornment, Forests and Climate Change should necessarily have them appraised as per EIA 2006.
Even, forest approvals should not be automatic. Water being supplied should be appropriately priced so that cost per ton from slurry should be between Rs 3.5-Rs 4.0 per ton/km. This will ensure the survival of railways and road transportation.
The GST on premium has to be charged, and the law should not be tinkered in any way. The State Government should ensure that the stacking and sampling manipulation are stopped by innovative measures, and some elementary methods.
The State Government should have a stringent rule on systematic fraud due to grade mixing. This should have both criminal and civil consequences for mining officials and miners. The mine should be cancelled on even the first instance of intentional fraud. Stamp duty and registration rules should not be manipulated.The new miners have to ensure 80 percent monthly dispatchof the ore in the ratio of lumps and fines. Else they will only produce fines to deprive the State of revenues.
Again, mines should be reserved for mid-size and MSME else this sector would be killed.
Let us avoid an Iron Gate Scam before it is in full bloom, and again the Central Government is declared at fault just as was done with coal gate
(The writer is a journalist having expertise on mines/industry-related investigation. E-mail: bijaymishrabijaymishra@gmail.com)