India: JSW wages legal battle with IBM over exclusion from iron ore price calculation

JSW Steel has taken the Indian Bureau of Mines (IBM) to court over the latter's decision to leave out some of the iron ore transactions of the steel major for computation of the average sales price (ASP).

In a writ filed before the High Court of Orissa, the steelmaker has challenged the IBM's 12 January decision of revising the sales price, which forms the basis of royalty, premium and other mining-related taxes, issued for the months of September, October, November and December, 2021 by excluding iron ore sales from the steelmakers' mines in Odisha.

IBM's ASP, arrived at as an average sales price of mines of the area, decides how much royalty, premium, and other taxes are to be paid.

JSW Steel had won rights to Jajang, Nuagaon, Narayanposhi and the Gonua in 2020. It has since decided to surrender Gonua, but continues to operate the other three.

From August to December last year, JSW held 11 auctions, conducted by Central government agency MSTC, of iron ore from Jajang deducing a "market price" from these auctions of ore from its Nuagaon mine too.

The company had been served notices by the IBM, which found these sales to be 30% cheaper than its ASP for August.

The IBM's suggestion that these were lower than average sales prices and related to party transactions has already been challenged by JSW in the High Court of Delhi. The steelmaker has since moved the HC of Orissa claiming that the IBM's decision to exclude its sales from ASP computation was a violation of Article 14 of the Constitution and in contravention of Rule 45 (8) (Ill) of the MCDR.

'Related parties' and 'arm's length basis' are not defined under the MCR, 2016 or MCDR, 2017. In any case, the transactions, conducted by the Ministry of Steel's MSTC through e-auctions open to both related and unrelated parties, were both transparent and at arm's length since, argues the petition.

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It says, "in view of the plummeting demand of iron ore in the international market, and the consequent fall in international prices," JSW was compelled to undertake sale of its production at the price discovered at e-auction to achieve its MDPA targets."

In three of the 11 auctions, it found no takers for iron ore of less than Fe 55% grade, even with a floor price of INR 400/t, and only half of the Fe 55%-Fe 57% ore it auctioned in November, was picked up, despite a floor price of INR 500/t.

IBM, which never raised any question on the propriety of the auctions, can't possibly exclude these transactions, the petition claims.

JSW is learnt to have kept a sum of over INR 1,000 crore towards payment of disputed mining premium and royalties separately for the case.

Incidentally, the steelmaker had scheduled an auction for 900,600 t of iron ore fines (Fe 55-58%) on 24 Jan'22 from the Jajang mine in Odisha, with the base price being set at INR 600/t ex-mines.

As per the latest update received, the company has deferred the auction, rescheduling it on 28 Jan.