Amid MMDR row, CAG flags ₹1.2K crore mining irregularities in Odisha

Audit says 1.18 crore tonnes of coal produced beyond EC limits and without valid clearances

Amid a row over the Centre's amendments to the Mines and Minerals (Development and Regulation) Act, restricting states from imposing additional taxes, cess and other levies on mineral rights and mineral-bearing land, the Comptroller and Auditor General (CAG) of India has detected mining irregularities of ₹1,210.82 crore in Odisha.

 

The irregularities included unlawful coal production by Mahanadi Coalfields Ltd (MCL) beyond environmental clearance (EC) limits and after the expiry of EC, short levy of royalty and mining dues, non-recovery of additional amounts during extended lease tenures, failure to collect interest on delayed payments and mining without a valid consent to operate (CTO).

  

The audit found lapses in the assessment and monitoring of mineral production by the state's mining authorities, particularly in checking whether mining operations were carried out within the limits prescribed under environmental and other statutory clearances.

 

The CAG flagged irregularities involving more than 1.17 crore tonnes of coal produced from two MCL mines either beyond the environmental clearance limit or without a valid environmental clearance, for which the lessee was liable to pay the mineral's price amounting to ₹975.57 crore.

 

The violation was detected at MCL's Kalinga opencast project (OCP) in Talcher, where the EC for production of 8 million tonnes per annum (mtpa) of run-of-mine coal had been granted in October 1990. The CAG found that the deputy director of mines, Talcher, did not verify the EC's validity while assessing the mine's production.

 

Under the applicable EC provisions, the original clearance expired after 30 years on October 23, 2020. However, an exemption introduced by the Ministry of Environment, Forest and Climate Change in January 2021 excluded the period between April 1, 2020 and March 31, 2021 from the calculation of the validity period of previously granted ECs because of the Covid-19 pandemic. Consequently, the validity of the clearance effectively extended only up to October 23, 2021.

 

The CAG held that coal extraction from October 24, 2021 onwards was without a valid environmental clearance. MCL extracted 1,15,66,590 tonnes of coal between October 24, 2021 and March 31, 2023, for which the audit calculated the mineral's value at ₹956.56 crore.

 

Further examination of lease files, assessment records, production and dispatch statements and monthly returns showed that the production limit under the EC for MCL's Kulda OCP had been enhanced from 19.6 mtpa to 21 mtpa on May 24, 2022. Since the enhancement took effect during 2022-23, the annual production permissible on a pro-rata basis for that financial year was 20.77 million tonnes.

 

However, the mine produced 21 million tonnes during the year, exceeding the approved limit by 0.23 million tonnes. The CAG calculated the excess production's value at ₹19.02 crore, which it said was payable by the lessee.

 

The audit also found that the state had short-levied ₹92.39 crore in royalty and other mining dues because sizing charges were not included while determining the price of run-of-mine coal in nine MCL mines.

 

Scrutiny of assessment records and monthly returns of nine MCL coal mines under the Sambalpur and Talcher mining circles showed that the mines dispatched 5,74,61,682 tonnes of sized coal of less than 100 mm between April 2020 and September 2021. Although sizing charges of ₹87 per tonne were applicable, these charges were not included in the price of run-of-mine (ROM) coal for assessment purposes.

 

As a result, royalty, District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) contributions were calculated only on the ROM coal price and not on the price including sizing charges. The CAG estimated the resulting short levy at ₹92.39 crore, comprising ₹69.99 crore in royalty, ₹21 crore towards DMF and ₹1.4 crore towards NMET.

 

The audit has also questioned the state's failure to levy an additional ₹27.74 crore on two coal blocks of MCL during the extended tenure of their mining leases.

 

The state government had approved extension of the mining leases covering six coal blocks in the Orient area of Jharsuguda district for 20 years — from April 3, 2022 to April 2, 2042 — following MCL's application for renewal of the lease. Of the six blocks, two were operational and dispatched 6,21,299.44 tonnes of coal between April 2022 and September 2023.

 

According to the CAG, the lessee was liable to pay an additional amount equivalent to the royalty paid on the coal dispatched during this period. However, the additional amount was not levied or recovered in the assessments, resulting in a revenue implication of ₹27.74 crore.

 

The audit also separately flagged mining operations at the Mahulsukha iron and manganese ore mine in the Koira mining circle, where production continued for about one-and-a-half years without a valid CTO.

 

The mining lease was granted to a new lessee on June 29, 2020, while statutory clearances and approvals held by the previous lessee were vested in the new lessee by the state government on May 30, 2020.

 

However, the approved mining plan of the previous lessee had already expired on March 31, 2020. A fresh mining plan was approved for the new lessee only on October 1, 2020, with an annual production limit of 44,964 tonnes for 2020-21 and 2021-22.

 

The CTO vested from the previous lessee was also valid only up to March 31, 2020. A fresh CTO in favour of the new lessee was approved by the Odisha State Pollution Control Board (OSPCB) only on March 31, 2022, for 2022-23. Despite this, the new lessee commenced production in October 2020 and produced 39,985 tonnes of manganese ore in 2020-21 and another 39,550 tonnes in 2021-22.

 

The CAG termed the mineral extraction during the period without a valid CTO as unlawful and calculated the value at ₹45.59 crore, which it said was liable to be recovered from the lessee.

 

The Steel and Mines Department defended the mining operations, citing provisions of the Mineral Concession Rules, 2016, the MMDR Act and government orders under which rights, approvals, clearances and licences of the previous lessee had been vested in the new lessee. The department argued that the new lessee was entitled to commence and continue mining operations.

 

The CAG, however, did not accept the explanation, pointing out that the previous lessee's CTO was valid only up to March 31, 2020. It held that extraction after that date and until the fresh CTO was obtained constituted unlawful production.

 

In another case reflecting weaknesses in the recovery of statutory mining dues, the CAG found that 27 leaseholders had delayed payments totalling ₹1,452.55 crore, but the concerned mining authorities had failed to levy interest of ₹69.53 crore.

 

Scrutiny of assessment records of four deputy directors of mines for 2022-23 showed that the 27 leaseholders had paid royalty, premium/additional amount, DMF, NMET, dead rent and surface rent between May 2021 and August 2023. The payments were delayed by periods ranging from seven days to as much as 1,890 days.

 

An email sent to MCL and the Ministry of Coal seeking comments remained unanswered until the time of going to press.