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Letters of Intent for mines won't add to asset value for Essar & Bhushan

Mining leases can be transferred, in case of change of ownership of the company, but LoIs can't

Dillip Satapathy  |  Bhubaneswar 

steel, iron, Essar, Bhushan

The iron ore blocks bagged in auctions by Essar Steel, Bhushan Steel, and Bhushan Power & Steel — all now facing proceedings — are unlikely to augment their asset values.

These had successfully bid for three iron ore blocks located in Odisha over the past one year, following which, they had been issued (LoIs) for allotment of lease by the state government.

As the LoIs have not been converted into leases yet, these cannot be shown in the asset list of the companies, an official of the state department said.

The official said that in the event of any change in the management of the companies, following the proceedings, the LoIs cannot be transferred in the name of the new owners of the firms, if any.

According to the rule, leases can be transferred, in case of change of ownership of the company, but LoIs can’t be transferred, he said.

had bagged the Ghoraburhani-Sagasahi block in Odisha — having a reserve of 100 million tonne — last year through an auction, quoting a premium of 44.35 per cent above the reserve price. Earlier this year, and Bhushan Power & Steel won the bid for Kalamang West and Netrabandh Pahar mines in Odisha, with quotes of 100.05 per cent and 87.15 per cent revenue sharing with the state government, respectively. In the process, they had outbid strong contenders such as Tata Steel and Jindal Steel & Power.

With all that won iron ore blocks in the state facing proceedings, the Odisha government is worried about the future development of the blocks.

According to the procedure, LoIs would be converted into leases after the successful bidders get all statutory clearances, like forest and environment clearances.

With the net worth of these loan-defaulting severely eroded, that might also infringe the conditions of allotment of lease to them, sources said.

In case, the are declared bankrupt following the proceedings and sold to other promoters, the iron ore blocks may go back to the government for rebidding, they added.

First Published: Fri, August 25 2017. 00:59 IST
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