India: Chhattisgarh likely to seek 'premium' parity with NMDC's Donimalai mines renewal

Chhattisgarh which accounts for nearly 80% of NMDC's production is not amused at the Centre's special concessions to Karnataka which stands to see its revenues from Donimalai increased 150 percent.

The BJP government at the Centre has given in to the state's insistence that it be compensated for extending NMDC's rights to Donimalai which could have fetched it huge premiums had they been auctioned.

Only in December of 2019, Bhupesh Baghel led Congress government, which replaced the BJP government in Chhattisgarh, had renewed NMDC's leases without claiming its pound of flesh. The CM has himself pointed this out in Centre vs state, competing claims over NMDC's profits and CSR spends.

SteelMint has learned from sources that the Chhattisgarh state government has expressed its unhappiness to the Mines Ministry over the recent Karnataka development. The state government is putting its displeasures on record in a letter, say sources. They point out that if a similar premium of 22.5 percent (as agreed for Donimalai in Karnataka) was imposed on NMDC's output from Bailadila and Kirandul, Chhattisgarh would have earned an additional INR 1700 crore in the last year.

Caught between state and Centre

NMDC owes its dividends primarily to the Centre which holds the majority percent of shares of the listed company. However the Steel Ministry PSU has been a huge beneficiary of its grants - in the form of mining rights and land for a steel plant that the Narendra Modi government is in the process of privatising - that are being taken for granted.

The concept of premium - or a percentage of sale value in addition to royalty and other taxes - came with the 2015 amendment to mining laws introducing auctions. It didn't apply (retrospectively) to either subsisting leases or to mineral blocks reserved for state or central government entities like NMDC. "The MMDR Act cannot be applied differently to different states, that is not fair to Chhattisgarh," said a senior official.

NMDC is hoping the Mines Ministry can convince Baghel that the Donimalai arrangement, not covered by the MMDR Act, was between two parties and not the new law of the land.