Essar aims to steer clear of brewing iron ore scam

The Essar Group has claimed its disclosure to Indian Railways on paying low freight charges was voluntary, adding it has now paid all dues to the railways. However, the railways, has stopped transporting iron ore fines to its pellet plant in Paradip, hitting production at the plant.

The Comptroller and Auditor General (CAG) and the Central Bureau of Investigation are probing how several pellet makers paid low domestic freight rates to transport iron ore fines to their plants and, in the process, shortchanged the railways. For iron ore exports, the freight charges are four times higher than the freight on iron ore for domestic use. In recent times, the Ruias-led Essar Group has been taking caution to steer clear of the spotlight, as two group directors are facing trial in the 2G telecom spectrum scam. The group is also being probed in the coal block allocation scam. Now, the railway freight scam, which the CAG estimates cost the railways Rs 17,000, is threatening to engulf the Group.

Essar Steel officials say they had informed the railways of the low payments for transporting pellets in a letter dated August 13. "In response to our letter seeking guidance, the railways, on August 26, suspended the movement of iron ore fines to our units, affecting our production adversely," said an Essar Steel spokesperson. The company said following subsequent discussions with the railways, it had agreed to pay the additional claims so that production could be resumed. The company has paid dues of Rs 89 crore to the railways.

The company clarified since the Paradip pellet plant was commissioned in February 2012, only 100,000 tonnes of the total production of 1.9 million tonnes, or 0.5 per cent, had been exported so far.