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Odisha Mining Scam: the JSPL, SMPL and Odisha Government nexus

 

Bhubaneswar,

Last updated 06 Jul 2016 01:02 IST

  Jindal Steel, Navin Jindal, Sarda Mines, Odisha, Mining Scam

Outright violations of environmental and mining laws in connivance with the government led by Naveen Patnaik, which almost sincerely played its role to cover up all wrongs, not only caused huge loss of revenue for the state of Odisha but it converted the loss of the state into profit of JSPL that was the primary player in the loot but nowhere in records. And the government that claims itself to be the most effective, efficient and transparent just played like a puppet to benefit JSPL and, of course, to Navin Jindal - the face of the group.

 

The group of industries, one of India’s major steel producers, headed by industrialist turned parliamentarian Naveen Jindal is now found to have close links in the mega mining scam engineered in Odisha. An inquiry report submitted by a Supreme Court appointed committee lists several egregious violations and abuse of mining laws by Sarda Mines Pvt Ltd., which supplied iron ore to Jindal Steel and Power Ltd. (JSPL) for its Odisha and Raigarh steel production units.

The Central Empowered Committee, which had visited the mines, has cited several cases of violations of norms by Sarda Mines Pvt. Ltd. in the detailed report it has submitted to the Supreme Court. The report also points out how the benefit from the mining of iron ore from this mine was flowing to JSPL.

It has observed that JSPL had entered into a controversial tie up with the miner in 2000 when they installed an iron ore crusher inside the mines lease hold area in violation of the restrictions imposed under the state mining rules, which forbid the operation of any crusher or processing unit by a third party inside the lease area.

Sarda Mines Pvt. Ltd. (SMPL) operates the huge Thakurani Block B iron mines, in Keonjhar district of Odisha, with an estimated iron ore reserve worth 45,000 Cr. rupees (approximately). According to the CEC, the mining lease itself had been illegally renewed, w.e.f. 14.8.2001, in violation of the MMDR Act, 1957 and MC Rules, 1960.

According to section 19 of the MMDR Act, such renewal in contravention of the mining law becomes void ab initio and should have no effect. Thus the entire production from this mine which runs into thousands of crores of rupees since the last 12 years has been done illegally and the state government had powers to recover the value of all such productions, according to section 21 (5) of the MMDR Act, 1957. Incidentally, JSPL is the beneficiary of the operation of this mine since they procured the raw material from this mine for their steel mills in Odisha and Chhattisgarh.

It is clear from the CEC observations that Odisha government officials were aware about the need of preservation of 616 hectare of forest yet they recommended for diversion of 367 ha for mining. Though it clearly indicates their connivance with the lessee State Vigilance never investigated this. Therefore, CBI enquiry is required to fix culpability, the report suggests.

 

Quotation starts

Sarda Mines had produced 15 MMT based on the EC which could only come into effect if Forest Clearance was obtained. According to the CEC any production beyond the annual limit of 4.0 MMT prescribed in the earlier environmental clearance, dated 22nd September, 2004, was in excess of the valid clearance.

Quotation ends

The total lease area of Thakurani Iron ore Mine, Block B, is 947.06 ha out of which 941.49 ha is reserve forest. Of the 249.276 ha of forest land approved for mining and allied activities, 166.320 ha was permitted to be used for mining (for excavation of mineral from the mining pits), 20.351 ha was to store sub-grade mineral, 32.104 ha was for dumping over burden, 0.150 ha was for magazines, 11.650 ha was for infrastructure and 18.521 ha for construction of roads/ ropeway/ railway lines.

According to the CEC report, the State Government while recommending the above referred proposal highlighted detail of the non-forestry uses in violation of the Forest (Conservation) Act, 1980, undertaken in the lease area. The report also pointed out the construction of one huge washing plant.

As the recommendation made by the State Government for diversion of additional 367.832 hector of forest land was under consideration of the MoEF, the environmental clearance dated 29.10.2008 was not valid, CEC held the view.

However, Sarda Mines had produced 15 MMT based on the EC which could only come into effect if Forest Clearance was obtained. According to the CEC any production beyond the annual limit of 4.0 MMT prescribed in the earlier environmental clearance, dated 22nd September, 2004, was in excess of the valid clearance.

The state forest and environment officials were aware that the enhanced production of 15 MTPA would come into force only if forest clearance was obtained to work in virgin forest land. Yet they did not stop the over-production thereby indicating their connivance and culpability. The State Vigilance didn’t book such officers. Therefore CBI enquiry is required, CEC report reiterated.

JSPL crushed and screened the iron ore from the particular mine, after renewal of the lease on 14.8.2001, on job contract and then purchased the same from the lessee. However, since 27.3.2004, DDM Joda approved the sale of the mineral in ROM (Run of the Mines) form by the lessee to JSPL inter alia subject to the condition that the lessee had to pay the highest rate of royalty prescribed for lump iron ore containing 65 % Fe and above for the entire quantity of ROM supplied to JSPL. Since then the lessee has been selling its entire production of mineral in ROM form to JSPL.

The CEC team found that two crusher units of 3000 tonnes per hour and another crusher unit of 1000 tonnes capacity have been installed by JSPL within the mining lease area. Ironically, the consent to operate for both crusher units were granted to SMPL by the State Pollution Control Board. This was highly illegally but thanks to the enormous influence of JSPL on the state government that no action was even initiated by the Pollution Control Board against the company.

The sale prices of iron ore in ROM form, supplied to JSPL, ranged from Rs.239 per MT during 2007-08 to Rs.2113 per MT during 2012-13, which was much less than the market price. In 2007-08, Essel Mining had sold iron ore lumps @ Rs.4351 per MT while Rungta Mines had realized a price of Rs.4253.

Thus the sale of iron ore in the form of ROM was permitted by state officials who knew it was illegal. The state lost a considerable amount of royalty/VAT due to valuation of the output by ROM form instead of lumpy ore.

The CEC observed that “JSPL is the only purchaser, in the entire State, who has been permitted by the State Government to undertake crushing and screening  of iron ore mineral within the mining lease area of another entity. The applicable Rules do not permit establishment/ operations of  crushing units by a third party within the mining lease itself (the State of Odisha has stated that in none of the other cases the permissions for establishment/ operation of crushing plants have been granted within a distance of up to 25 kms of the mining leases).”

The CEC also held that “The permission granted by the State Government, (a) to the lessee for sale of the mineral in the ROM form and (b) for the use of the crushing and screening plant located within the lease area by third party, is the root cause of all the subsequent illegalities and irregularities.”

The CEC has made valuable observations regarding the need to re-calculate the royalty/VAT and recover the same from the lessee in this case. But, the state government is yet to act on this suggestion that would fetch the state thousands of crores of rupees of revenue.

In the first inquiry Report dated 9th November, 2011, of the Committee to inquire into the rule 37 violations, it was stated that the major benefit of the mining is flowing to JSPL. There were other adverse observations also made in the Report in regard to installation of crusher units by JSPL, lower VAT collection by the State Government and permission sought by SMPL to install pipe conveyor for transportation of iron ore when the entire production in the ROM form was sold to JSPL.

Since the govt. was not happy with the first inquiry report, it appointed a second committee that, in its report dated 30th July, 2012, certified that the mineral was sold by the lessee in ROM form after obtaining approval from the Director of Mines and all other arrangements were as per law. The Second inquiry Report also stated that there was no loss of royalty to the State Government. However, the second inquiry report concluded saying that overall prima facie violation of Rule 37 (1) could not be ruled out as no record on account of JSPL had been produced before the Committee.

The CEC grossly disagreed with the findings of the inquiry report since it did not consider the main issue - the sale of mineral at a fraction of the market price by the lessee and thereby the transfer of the interest in the mining lease in favour of a third party in violation of Rule 37, MCR, 1960.

It’s however clear from the formation of a second committee after a scathing report by the first one on the illegalities and violations committed by the lessee regarding Rule 37 of MCR, 1960, that the state government attempted to cover up the issue of violation of Rule 37 and allow the lessee to escape.

The whole issue of violation of Rule 37 can only be brought to a logical end after the ownership of the shareholders and beneficial owners of the Sarda Mines Pvt. Ltd. is thoroughly investigated and the real identities and their share values are properly ascertained. This aspect has not been carried out by the CEC because of the legal bar imposed by the Supreme Court, on 13.1.2014, asking the CEC to limit its scope of investigation to forest/ environment laws. Hence, this matter needs to be investigated to uncover the veil and find out the real owners of Sarda Mines Pvt. Ltd.

The CEC made a serious observation on basis of a note made by the Chief Secretary of Odisha. In his noting dated 13.4.2002, Chief Secretary, Odisha, while sensing its larger implications had recorded, “It is well known that the mine is being operated by the Jindals. Would this not amount to a fraud?”

In spite of legitimate objection voiced, in 2002, by none other than the Chief Secretary of the state, things were overruled and the illegal transfer of the lease was carried out in the name of SMPL just to favour JSPL.

Such violations were noted to attract serious consideration but, ironically, ignored during the time when Chief Minister Naveen Patnaik himself held the cabinet portfolio for forest and environment. Outright violations of environmental and mining laws in connivance with the government led by Naveen Patnaik, which almost sincerely played its role to cover up all wrongs, not only caused huge loss of revenue for the state of Odisha but it converted the loss of the state into profit of JSPL that was the primary player in the loot but nowhere in records. And the government that claims itself to be the most effective, efficient and transparent just played like a puppet to benefit JSPL and, of course, to Navin Jindal - the face of the group.

In view of the hugeness of the whole mining scam in the state, this particular case may just be a tip of the iceberg but it certainly narrates how the government sacrificed the interests of the state and its people in all unlawful manners.

Now, as the CEC report is submitted, all eyes are set on the Supreme Court which is expected to pass final orders based on the report.

[Author is Senior Associate Editor of HotnHitNews.Com]

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