The fate of the $2 billion (Rs 11,000 crore) joint venture between Odisha Mining Corporation (OMC) and Anglo Australian mining major Rio Tinto is almost sealed, dealing a blow to one of the biggest FDIs proposed in the mining sector.
Seventeen years after it inked a joint venture pact with the Anglo Australian mining major, OMC said it is no longer keen to revive the project that hardly showed any sign of taking off the ground.
“The JV pact with Rio Tinto presently stands null and void and OMC is no longer willing to revive the project. We have already informed the state government regarding our intent. It is now going to be the government’s call whether it wants to renew the project or not,” said Saswat Mishra, chairman and managing director, OMC.
Rio Tinto had entered into a JV with OMC on February 24, 1995 to develop Gandhamardhan and Malangtoli iron ore deposits in Keonjhar and Sundergarh districts in Odisha with a mining capacity of 25 million tonnes per annum.
“The circumstances were very different when OMC had signed the pact with Rio Tinto in 1995. The demand for iron ore in the domestic market was tepid at that time and OMC was also cash strapped. But the scenario has drastically changed now with OMC in possession of a cash surplus of around Rs 5,000 crore. Also, there is growing demand for the mineral ore within the country as well as local industries in Odisha. Our mandate is to cater to the raw material need of such industries,” Mishra explained.
The ambitious mining project had run into rough weather due to intractable differences between the partners. While Rio Tinto was keen to export half of the iron ore mined, OMC emphasised on meeting raw material needs of local industries, prompting the OMC later to seek winding up of the JV as per advice of the Solicitor General of India.
This sparked off a legal battle between the two parties. While OMC had filed a case in the Odisha High Court in 2003 to wind up the JV agreement, Rio Tinto had approached the Company Law Board of India to contest OMC's claim.
As per the original pact, Rio Tinto was to hold 51 per cent equity in the JV while OMC would own the balance 49 per cent.
However, the state owned National Mineral Development Corporation (NMDC) which originally got lease over Malangtoli mines Keonjhar-Sundargarh belt in 1977, raised objection seeking its share in the JV.
The Centre had allocated Malangtoli mines in favour of OMC in 1992 after NMDC failed to explore the iron ore from the reserve. Considering NMDC’s claim that it had undertaken drilling and other activities at Malangtoli mines, it was given five per cent share from the OMC’s 49 per cent following which a tripartite agreement was signed between the OMC, NMDC and Rio Tinto in 2000.