Orissa's rift with IBM deepens over iron ore prices

Chief Secretary seeks intervention of Union mines secretary.

The spat between the Orissa government and Indian Bureau of Mines (IBM) over under-reporting of iron ore prices has intensified 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 has urged the Union mines secretary S Vijay Kumar to take appropriate remedial measures so that the state government does not suffer revenue loss.

Patnaik has 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 stressed for 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 valuesa 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 has said in his letter to the Union mines secretary.

The state Chief Secretary's letter comes close on the heels of a letter from the state steel & mines secretary Manoj Ahuja to the Controller General of Mines-IBM, pointing out glaring disparities between the sale value of iron ore sold in Orissa and Chhattisgarh. Earlier, the state Chief Minister Naveen Patnaik had also shot off a letter to the Union minister of state for mines, urging the latter to take action in connection with the under-reporting of iron ore prices.

Driving home the suggestions made by the Lokayukta of Karnataka on IBM sale prices, the Chief Secretary has said that the present system of fixing the sale price by utilizing the returns of top ten producers should be discarded.

Moreover, IBM, apart from factoring in the figures submitted by different lessees, should also take into consideration documents like FOB (free on board) price from customs, copy of sale invoices, copy of buyer/importer agreement cost of loading, unloading and transport from concerned lessees and benchmark prices of PSUs like National Mineral Development Corporation (NMDC) to arrive at the PMV prices.

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.

Moreover, there is no systematic check to cross verify data submitted by the lessees to IBM.