India: Tata Steel Mining faces a INR 613.57 crore penalty for MDPA shortfall

Tata Steel Mining has been informed it needs to pay INR 613.57 crore as penalty for falling short of its target under the Mine Development and Production Agreement(MDPA) of its Sukinda Chromite Block.

In a letter addressed to the Tata Steel subsidiary last week, the Deputy Director Mines, Jajpur informed the company that the shortfall in despatches of 0.61mn t(million tonnes) at the Sukinda chrome mine for the period 23 July 2020 to 22 July 2021, against a target of 1.36 mn t amounted to a penalty of INR 613.57 crores.

This comes even as the department is in the process of assessing shortfalls of companies that bagged iron ore mines in 2019. An MDPA agreement was introduced to protect against squatting to ensure the state actually sees the revenue it was promised as premium.

Many of the new lessees have struggled to meet their respective targets in a transition year where they shared the mine with the ex -lessee for a part of the year. Some of them have lobbied unsuccessfully to be assessed on their production and not what their despatches.

In the case of TSM's Sukinda Chromite Block the despatch target (at 80 per cent of its earlier average production of 1.7mn t) was 1.36 mn t. With despatches of 0.75, TSML has fallen short by about 0.61 mn t. This has been multiplied by a weighted average sale price of INR 9147.51 for each tonne despatched to arrive at a value of the shortfall quantity, which is INR 556.32crore. To this has been applied the premium committed by TSML, of 93.75%, and proportionately royalty of 15% and DMF of 10% and NMET of 2% to arrive at the final figure of INR 613.57 crore.

Prices as on 9:00 IST, 12 Aug. d-o-d changes indicated against closing price of 11 Aug.