Karnataka plans fresh tenders for Donimalai iron ore mines seeking 80% premium; NMDC suspends operations

Hyderabad: The Karnataka government is in the process of calling for fresh tenders of Donimalai iron ore mines and may go in for auction in case the state-owned NMDC does not sign the contract agreeing for 80 percent premium in the next three weeks, sources close to the development said.

However, PR Tripathi, former CMD of NMDC says the imposition of 'heavy' premium on a public sector undertaking is not tenable as per law.

NMDC has suspended iron ore mining from its Donimalai mine in Karnataka following the state governments decision to
impose 80 percent premium on ore sales from that mine whose lease has been extended by the Karnataka government with
effect from 4 November for a period of 20 years.

 Karnataka plans fresh tenders for Donimalai iron ore mines seeking 80% premium; NMDC suspends operations

Representational image. Reuters

"Based on the request by the CMD of NMDC (N Baijendra Kumar)the matter was again referred to the Karnataka advocate
general. But instructions have gone to the officials concerned to prepare fresh tender document for auction of mines allotted
to NMDC if they don't execute the lease documents in the next three weeks. Because the AG may not give a different opinion
than what he has already given," sources told PTI.

When contacted, Karnataka mining secretary Rajendra Kumar Kataria justifying the premium, said the state law department gave its opinion and the state cabinet had also approved imposition of the premium.

Tripathi alleged the state government became greedy and said the premium is applicable only in case of fresh auctions of mines but not for lease renewals.

"The state government is blinded with the concept of revenue. The Karnataka government has become so greedy that they are looking at the short-term revenues. If any company (PSU) pays 80 percent premium it cannot survive. This is legally not valid. It is valid only in case of auctions. This is not an auction but lease renewal. The issue has to be resolved at the level of the chief minister. The chief secretary should be sensible enough to understand the issue," Tripathi said.

The Karnataka cabinet has approved the mining lease of Donimalai till November 2038, on payment of 80 percent of the
average sale value as published by Indian Bureau of Mines, Kataria said.

According to him, the state in the recent past had auctioned 12 mines where the weighted average of the premium was more than 110 percent and NMDC also participated for mines for which it offered 95 percent and 105 percent as premium.

A senior official of NMDC said if the Karnataka government decides to stick to the 80 percent premium, the miner would be losing Rs 1,348 per tonne and may result in a loss of Rs 944 crore per annum as it mines about seven million tonnes per annum from that mine.

Updated Date: Nov 26, 2018 13:31:04 IST