Lokayukta report on illegal mining indicts Adani, NMDC

The Lokayukta report on illegal mining in Karnataka is starting to engulf almost all major corporates involved in the mining sector. After dedicating an entire chapter to how JSW Steel was involved in a Rs 325 crore loss to the state exchequer, the report names National Mineral Development Corporation (NMDC) and Adani Enterprises for not exactly playing by the book.

While NMDC, a public sector undertaking under the Government of India, has been accused of avoiding customs duty by under-invoicing, Adani Enterprises has been named as having shipped out iron ore beyond permitted limits.

Hegde, in his report, said NMDC exports high grade (65/63 Fe) iron ore and it was observed that in some exports, the NMDC sale rates were very low compared to the sale rates of other exporters and the prevailing market rates during 2006-2010.

“During the period, when the average rates of iron ore of all grades were fluctuating between $116 -168 per MT, the rates charged by NMDC were between $50-63 per MT. It is computed that the amount earned by NMDC for these shipments was a mere 40 per cent of the possible earnings, had NMDC exported the same quantity at the average of sale rates charged by other exporters. In effect, the PSU’s iron ore export realisation is far less than the potential earnings," Hegde said under a chapter which discusses evasion of custom duties by under-invoicing.

According to the report, there are 174 suspected cases of custom duty evasion through export under invoicing of Iron Ore Fines and NMDC has been pulled up for this along with others. “There are 478 suspected cases of under invoiced export during the period 2006-07 and 2010. The total under invoiced portion of sales is approximately Rs 2,222 crore,” said Hegde. He urged the authorities to take appropriate action against the company.

Hedge said Adani Enterprises along with Mallikarjuna Enterprises and two more private port operators were part of a play which allowed as much as 7.7 million MT of illegal export of iron ore. Adani Enterprises, Shree Mallikarjuna Enterprises, Salgaonkar Mining Industries and Raj Mahal Silks are the four port service providers to whom the government had leased out certain areas at Belekeri ‘s fair weather port in the South of Karwar in Dakshin Kannada district.

NMDC clarifies
NMDC has in the meanwhile clarified that the FOB prices quoted by Karnataka Lokayukta were the spot prices which were carried during a pot market sale to China.

In the light of the Lokayukta accusing it of avoiding customs duty by under-invoicing, NMDC stated the pricing mechanism of the international trade of iron ore was based upon the outcome of the negotiations between Japanese steel mills, Korea, etc. and large suppliers from Autralia and Brazil and that the FOB prices were fixed for each country.