India: Serajuddin asks for exemption from iron ore stacking rule, seeks clarity on premium payment

Requesting for exemption from existing iron ore stacking and sampling rules, merchant miner Serajuddin & Co has sought a clarification from the Odisha government about the mode of payment of premium as per the company's final price offer of 118.05% for the Balda iron ore block in Odisha's Keonjhar district.

Exemption from stacking

The block, covering 343.981ha, has an EC limit of 15.15 mn t per annum granted in 2013, while Serajuddin has to guarantee despatch of at least 8 mn t for the first two years, as per the mine development & production agreement (MDPA). The company has written to the Director of Mines, Odisha to convey the "tremendous practical difficulties" it is facing in handling "such a large volume of annual despatch through the stacking mechanism". Serajuddin started operations at the block from Oct'20 since the auctions earlier last year.

Mines in Odisha must offer 4,000 t of rectangular stacks for sampling before the ore is despatched that require space within the leasehold and cost about INR 45/t. A field inspection by a government official is a must before ore can be trucked out. However, this procedure may be waived if a lessee offers to pay royalty on the highest grade of ore thereby directly benefitting the state government.

Exemption from stacking and sampling would require payment of royalty at the highest rate of the mineral, as prescribed under the Second Schedule of the Orissa Minerals (Prevention of Theft, Smuggling & Illegal Mining and Regulation of Possession, Storage, Trading and Transportation) Rules, 2007 (OMPTS Rules, 2007). But, as Serajuddin has pointed out, the rule does not provide any clarification on the rate at which the premium shall be paid by the lessee.

Legal proviso & premium

The mining company, therefore, is seeking a clarification "as to the manner in which the applicable amount (premium) will be payable by us, in case we avail exemption from stacking and sampling."

The OMPTS Rules, 2007 has a proviso for exemption from stacking which also provides for maintenance of records in respect of quality and quantity of mineral despatched. "Average blast holes samples data in terms of quality and quantity of each blast representing the average run of mines grade shall be submitted to the concerned Deputy Director of Mines or Mining Officer, as the case may be, for record and verification... the lessee shall be required to submit a monthly average analysis report for quality and grade", the proviso to rule 10 (7) of OMPTS Rules states.

Serajuddin has sought clarification about whether the premium will be levied on the basis of the highest grade of iron ore or on the basis of the blast hole samples data reflecting the quality and quantity of run of mine (ROM) ore. The miner is supposed to submit the relevant data to the Deputy Director of Mines, Joda circle.

Many iron ore miners sought exemption from stacking previously as they could afford to pass on the extra cost incurred by way of royalty to end-users. But with the successful bidders at the auctions before Mar'20 quoting very high premiums (Serajuddin retained the Balda block by promising to pay a final price value of over 118%) margins are expected to shrink sharply for most iron ore miners in Odisha.