New draft pact being vetted by state government.
The revival of the $1 billion jinxed iron ore project of global mining giant Rio Tinto in joint venture with the Orissa Mining Corporation (OMC) continues to be shrouded in uncertainty.
Unable to take a decision on the project, the steel and mines department of the Orissa government has sent the proposal for renewal of a 1995 JV agreement with Rio Tinto for vetting of the state law and finance departments.
The move, according to the sources, is likely to cause further delay in finalizing the deal.
“The Orissa government had constituted a task force in 2007 under the chairmanship of the Chief Secretary to look into the renewal of JV agreement with Rio Tinto and the task forced had asked OMC to prepare a new draft agreement. The draft agreement is now being vetted by the law and finance departments”, said Raghunath Mohanty, the state minister for steel and mines
The government will take a final decision on a fresh agreement with Rio Tinto keeping in view the state's interest, he said.
“OMC and Rio Tinto had several rounds of negotiations on preparing a new draft agreement. The new draft, which has incorporated a few changes, was sent 2-3 months back to the state government. Now, the state government has to decide on whether it is still keen on reviving the iron ore project as Rio Tinto did not show adequate initiative to develop the project from 1995 till 2002-03”, a top OMC official told Business Standard.
Rio Tinto had entered into a JV with OMC on February 24, 1995 to develop Gandhamardan and Malangtoli iron ore deposits in Keonjhar and Sundergarh districts in Orissa with a mining capacity of 25 million tonnes per annum.
However, the project could not take off due to different reasons including slump in the iron ore market and proposal for direct export of iron ore, 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 Orissa High Court to wind up the JV agreement, Rio Tinto had approached the Company Law Board of India to contest OMC's claim.
Even as the petitions filed by OMC and Rio Tinto were still pending for disposal, both the parties seemed eager to settle the matter out of court, sources said.
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 NMDC which originally got lease over Malangtoli mines Keonjhar-Sundargarh belt in 1977, raised objection seeking its share in the JV.
The Centre 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 5 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.
The two JV partners had agreed to export 50 per cent of the mined iron ore while the remaining 50 per cent was to be set aside for domestic consumption.
The project was billed as Rio Tinto's first major foray into India's mining sector. Rio Tinto was to bring its state-of-the-art technology for the mining project.
