India: JSW Steel seeks HC intervention against MDPA notice

JSW Steel, has moved the High Court of Orissa against the state's INR 696.32 crore notice for a shortfall in despatch from its Jajang iron ore mine.

The MCR 2016 that followed the new MMDR mandating auction introduced the idea of minimum production agreements set at 80 per cent of the average production of the previous lessee for two years. Rule 12A presumably was intended to make sure a lessee does not squat affecting mineral revenues expected from the mine or deposit's auction.

A year after they were auctioned, many of the mines in Odisha failed to meet their respective targets and were slapped with huge notices. JSW Steel, like Tata Steel, KN Ram, and Serajuddin has challenged these and the virus of application of the Rule. The High Court will on Thursday, 16 August 2021 hear JSW Steel's petition.

JSW claims it is being asked to meet a target of 9.235mt at Jajang based on the previous lessees performance who had permission to produce 16.5 mtpa out of which 3.7 mtpa was from dumps while being denied to touch the dumps. The steelmaker was asked to compensate its 1.4mt tonnes shortfall in despatches with Rs 696.32 crore The notice, says JSW Steel's petition, is "arbitrary, erroneous, illegal." It further argues that the government's insistence on setting MDPA to despatches and not production is ultra-virus since the rules themselves offer set production as an annual milestone. It also makes a fair point highlighting that the Geological Report that decided net worth or eligibility only considers the in-situ reserve.

The steelmaker only had four days to sign a lease deed and did not did not have the benefit of prior scrutiny of MDPA before executing it on 26 June 2020. When it set out to get a mining plan, it was told by IBM it could not touch dumps, that as per the law belonged to the previous lessee for six months and thereafter to the state. In January of this year it wrote to the Director of Mines seeking a revision of its MDPA, excluding the volume of dumps allowed to the previous. Eight months later it was told it could not be done, its request now was 'infructuous'.

On 13 August 2021 the company was first issued a demand notice, without show cause, of Rs 716.98 crore. This was revised to 659.89 crore on and corrected to Rs 696.32 crore the following day. It claims the state government in its letter dated 30 July 2021 acknowledges that JSW Steel beat production targets, producing 11.3 mt. Even if it failed to actually despatch 9.23 mt the target, it had applied for despatch permits and paid royalty etc for up to 9.31mt. The petition claims by insisting on despatches for MDPA targets the state government was "placing unreasonable restrictions on its fundamental right to equality, due process and to carry on trade and business in India".

The high court has already kept in abeyance the notice sent to Tata Steel's Sukinda Chrome mines and is scheduled to hear the matter again today. No stay or relief has been granted to Serajuddin and KN Ram who moved court before being slapped with demand notices.