IBM pours cold water on Orissa`s iron ore pricing formula

In a blow to the state steel & mines department, the Indian Bureau of Mines (IBM) has turned down the department's proposal to calculate average sale price of iron ore based on top 10 mines as per Mining Plan.

The IBM, has instead, insisted on continuing with the existing procedure of price calculation wherein average sale price is computed on the basis of production of top 10 non-captive producers.

IBM has held that calculation of average sale price based on top 10 mines as per mining plan may not be a better alternative as it does not represent all grades and for certain cases, the rates calculated as per mining plan are very low.

The rift between the state government and IBM had deepened over iron ore pricing with the state seeking the intervention of the Department of Mines, Government of India, to arrest the disturbing trend.

Holding the IBM responsible for its faulty procedures adopted in fixing sale value of iron ore, the state Chief Secretary B K Patnaik had in August this year urged the Union mines secretary to take appropriate remedial measures so that the state government does not suffer revenue loss.

He had suggested that the IBM may revise the average sale value retrospectively from August 2009 to enable the state government to collect the differential royalty for the past months also. Underscoring the need for initiating action against unscrupulous lessees who are found to suppress facts or submit erroneous figures, Patnaik had stressed on conducting an audit of statistical figures on price of iron ore to avoid wide variation in price of iron ores of identical nature and grade.

“It would be fair to consider the highest price reported by a lessee rather than the average of the prices reported by lessees for a particular grade and type of ore for the purpose of calculation of royalty in a region. Besides, the pit mouth value (PMV) and sale values submitted by the lessees and which have been considered for calculation for the IBM price should be made transparent and put in public domain,” the Chief Secretary had said in his letter to the Union mines secretary.

Referring to the report on 'Issues of Royalty and Forest Development Tax' of the Lokayukta of Karnataka, Patnaik stated that the sale price of iron ore by IBM, is calculated as the weighted average price per tonne of PMV of the ore as reported by the top ten non-captive producers or actual number of non-captive producers whichever is less in monthly returns under Mineral Concession & Development Rules-1988. This method, he argued, is flawed as it does not accurately reflect the market price of the iron ore.

Earlier, the state steel & mines secretary Manoj Ahuja had written to the Controller General of Mines-IBM on the issue.