The Odisha government has refused to abide by a clause of the Mineral Concession Rule (MCR), 1960, dealing with royalty charges on minerals, citing certain flaws in it.
According to Rule 64 B, sub-rule (1) of the MCR Rule 1960, the states can charge royalty on the minerals that has been processed within the leasehold area of a particular mine. But the Odisha government wants to collect royalty on the basis of mineral produced and not after it is processed within the mining lease area.
In its reply to a query from the Union mines ministry in May this year over the issue, the Odisha government said, “it is observed that the mineral extracted from the pit's mouth is in many cases subjected to processing within the leasehold (area) before its despatch. During the process, iron ore lumps are converted into iron ore fines along with CLO (Calibrated Lump Ore).”
It further said, processing is done to maximize profit as CLO prices are always higher than fines rates and miners get away with paying lower royalty, which is charged at 10 per cent of the selling price.
"Therefore, royalty needs to be assessed on the cost of the CLOs removed from the leased area,” it argued.
As per the Orissa Mining Corporation (OMC) rates for Apr-June quarter, CLO having 62 per cent iron content is traded at about Rs 6,000 to Rs 7,000 per tonne, while fines with similar iron presence are quoted at around Rs 2,000 to Rs 3,000 per tonne, including royalty at the mining sites.
Many steel companies, which are in the process of converting low grade fines into pellets, however, oppose the government’s move to assess royalty on fines at the same rate as the CLO.
Also Read
They pointed out that there was no way to know whether the fines were purposefully processed or were genuinely generated during the mining. So, in absence of proper mechanism to ascertain this, it is unfair to charge royalty on the fines not based on their selling prices of Rs 3,000 per tonne, but on the prices of same grade lumps which is double the rate.
"Low grade ore has no value at all and therefore needs to be value added before it becomes salable. It is unfortunate that the state government is adhering to such policies which will only discourage people to process the low grade ore, thereby increase its dump in the leasehold area posing threat to the environment,” said an industry source.
Companies such as Essar Steel and Bramhani River Pellet Ltd (BRPL) have shown interest to produce pellets in Odisha by using low grade iron ore as raw material. The company officials feel the stand of the state government would jacks up the prices of low grade ore and increase their cost of production.