India: JSPL issued show-cause notice over Guali mine

Jindal Steel and Power Ltd (JSPL) has been issued a show cause notice for its reluctance to proceed towards a lease for mining rights to the Guali iron ore mine in Odisha.

A Steel and Mines department letter dated 15 October 2020 has given the company seven days to explain why its bid security of INR 39.87 crore should not be forfeited and why JSPL should not be barred for the next five years from participating in auctions conducted by Odisha Government.

On 18 March 2020, the Naveen Jindal-led steelmaker offered a very steep 144% (as premium) to emerge as the highest bidder for this 198.74 mn t reserve. However, since then it has only exchanged a flurry of mails with the state government casting doubts on the fate of this block. It had concerns regarding the reserves and boundary of the deposit. The state responded addressing these doubts and reminding the steelmaker of its obligations under The Mineral (Auction) Rules 2015.

Declared preferred bidder on 1 September 2020, JSPL had five working days or until 7 September 2020 to deposit INR 19.93 crore as the first instalment of 10 % of an upfront payment. Writing to the department on 1 October 2020, the steelmaker had sought another 15-20 days to deposit this amount.

Citing provisions of the Mineral (Auction) Rules 2015 and the tender document, the Odisha government on Thursday warned JSPL that it is "in violation of Rule-10(1) read with Rule 15 and hence liable for action as per clause 13.7 read with clause 14.6 sub-clause (d) of the tender document." The company may make its case in person to SK Popli, the Special Secretary, Steel and Mines Department on 03 November 2020 at 4.00 PM.

Guali, earlier operated by RP Sao, has an Environmental Clearance of 5.7 mn t and must be mined at a minimum of 5 mn t by the next lessee. The mine is not perceived as immediately critical to the steelmaker's raw material requirement of about 16 mn t annually. Material already paid for and future supply from Sarda Mines, for as long as it is allowed to do so, can cover for the JSPL's immediate needs.