India: HC Order on JSW-IBM dispute over iron ore average sale price soon

The High Court of Orissa has reserved its decision on the dispute between JSW Steel and the Indian Bureau of Mines (IBM). It is a case, as the Advocate general of Odisha explained, with "huge, huge public interest" with direct financial implications for the whole sector and the government alike. JSW Steel, as lessee of two non-captive iron ore mines in Odisha, chose to sell iron ore including to related parties BMM Ispat and Brahmani Pellets, through the months of August to November. According to IBM, the prices, albeit arrived at through auctions conducted by central government trading agency MSTC, were unusually lower with the potential to sharply drop the average sale price (ASP) based on which royalty, premium and other mineral taxes are collected by the government.

The bureau had responded by show-causing the miner while simultaneously excluding the transactions in its calculation of ASP for those grades, and those months.

The steelmaker told the court on Tuesday, the final day of hearing, that it hadn't been given time to respond to the notice and IBM's decision to exclude its sales, did not just hurt it the most since it was the largest producer of Fe 55 -58% fines in the state, but resulted in an artificially high ASP. There was no bar on related party sales if these were at arm's length, claimed the company. In fact, 'related party' and 'arm's length' are not defined under the rules (Mineral Conservation and Development Rules 2017 and Mineral Concession Rules 2016) it is being accused of violating.

The steep fall in the prices from August through December was defended as reflective of the global trend in iron ore which it was forced to sell, despite the market conditions, to meet its minimum despatch obligations. The tender document notably barred potential exporters from buying the ore.

The counter from IBM and the government of Odisha, which stands to lose huge amounts in royalty and premium, was that these transactions were carried out only to lower the ASP. The Assistant Solicitor General of India arguing for IBM, pointed out that some of the parties who bought this auctioned ore had sold the exact same volume back to JSW's own Bhushan Power and Steel Limited. The company told SteelMint that a direct sale wasn't possible because BPSL wanted to purchase on credit. Odisha's Advocate General, comparing the prices to the much higher rates ore fetched by ore from the state's Orissa Mining Corporation, said he was advising the government to adopt OMC prices as benchmark for royalty.

~ By Meera Mohanty/SteelMint Bureau