COVID-19 effect: Auctioned mines face lease deed hurdle in Odisha

As per the agreement, the new lessees will have to produce 80 pc of the rated capacity in the first year which comes around 48 MT, sources in the mining industry said.

Published: 06th November 2020 11:33 AM  |   Last Updated: 06th November 2020 11:33 AM   |  A+A-

Iron Ore

For representational purposes

Express News Service

BHUBANESWAR: The State may not get the desired revenue from the 20 working iron ore and manganese mines auctioned before March this year with the COVID-19 pandemic playing the spoil sport.

With the State fetching an unexpected higher premium averaging at 106 per cent in a frenetic bidding, the highest offer being 154 per cent for Siljora-Kalimati Iron Ore and Manganese block, the expected revenue from these mines at 80 per cent production over the rated production capacity last year was around Rs 5,000 crore.

The mineral production from these mines in 2019-20 was about 60 million tonnes (MT). As per the agreement, the new lessees will have to produce 80 pc of the rated capacity in the first year which comes around 48 MT, sources in the mining industry said.

Three successful bidders - Socied De Fomento Industrial Private Limited, winner of Nadidih iron ore block, Vishal LPG Industries (Nadidih iron ore and manganese block), Tarama Apartment Pvt Ltd (Teherai iron ore and manganese block) - surrendered their blocks by forfeiting security deposits as they found it unsustainable.

Jindal Steel and Power (JSPL) and Shyam Ores Jharkhand Private Limited, winners of Guali and Jilling-Langalota iron ore blocks respectively, have not executed the lease deed with the State government yet. Of the 15 mines, 12 lessees including JWS Steel, ArcelorMittal and Kashvi International have filed returns to the State government reporting that they have started production.

JSW Steel with four mines and ArcelorMittal with one are reported to have produced 30 pc of the rated production capacity by the end of October. The entire production is for captive consumption. Despite having four mines, JSW Steel is buying iron ore from the open market to meet its captive demand, informed sources. ArcelorMittal too has a similar story.

The remaining six lease holders of merchant mines have not yet started sale of minerals despite huge demand both from domestic and export markets, sources added. Attributing the low production of iron ore to disruptions made by COVID pandemic, a merchant miner said execution of lease deeds were completed in some cases in July and August. 

“In such a force majeure situation, the government understands the difficulties of lease holders to operate new mines. A clear trend of production will emerge by the end of December,” a miner said.

With production of steel picking up, demand for raw materials from sponge iron, pellet, and pig iron manufacturers are also steadily increasing. The new lease holders will try to make up for their shortfall in production in the next four five months.

The State government will not lose much as the old stocks of the previous mines owners are removed from their stockyard on which royalty will be earned, the sources said.

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