Miners have ‘frustrated’ Rule 37, says Shah Commission

OST Bureau

New Delhi, Jan 9:

The Justice MB Shah Commission has said that mining companies with operations in Odisha have “frustrated” Rule-37 of Mineral Concession Rules (MCR) 1960, which bars them from assigning mines to other entities, by operating through contractors or middle-men.

The Rule has been sought to be frustrated by miners as “it serves the interest of few fortunate capitalists”, the Commission has said in its report submitted to the Union government in October last year.

Rule 37 debars any lessee from assigning, sub-letting, mortgaging or in any other manner transfering the mining lease or any right, title or interest therein without previous written consent of the state government.

As many as 84 mining lease holders, including big names like SAIL, Tata Steel and Aditya Birla group’s Essel Mining and Industries, have been found to be operating through “raising contractor”, the Commission has said. Other big firms such as Odisha Mining Corporation (OMC), Rungta Mines group, Sarda Mines, Orissa Mineral Development Corporation (OMDC) and Kalinga Mining Corporation are also on the list.

Violation of Rule-37 of MCR, 1960 has been a major issue in Odisha for the past 2-3 years and the state government had issued show cause notices to some of the firms on this score. Last year, a case of such violation had surfaced when Sarda Mines was found to be selling the entire iron ore produce from its Thakurani mine to Jindal Steel and Power (JSPL) without any agreement.

According to the Commission, most of the lessees have their main offices outside Odisha, where the mining operations are being carried out. Hence, “they keep a middle man after taking the lease” and hand over the mining operations to “so-called raising contractors”.

“What national interest would be served by keeping this middle man as lessee and permitting some other persons to operate and carry out mining operations?” the Commission asked in its report and then gone on to provide the answer saying “No national interest is served; but it serves the interest of a few fortunate capitalists who obtain the mining lease.”

The contractors are getting 36-42 percent of the actual value of the produced iron ore and even after that, the total cost of a lessee is not more than 50 percent of the sales, the Commission said, giving examples. Against this backdrop, the government needs to change the existing criteria of granting mining lease on fixed rate of royalty, it said, indicating that miners are exploiting loopholes in the present system.

According to the Commission, auction of the mining leases is a “must” and it should be on the basis of “sharing of annual production”, may be by 50:50 or thereabout. “This would be a better option than granting leasehold right only by way of auction on the basis of fixed amount for entire lease period,” it said, adding that market prices of iron ore keep changing every year and “this would be for the benefit of the society, state and country”.

The high powered panel has also recommended implementing the suggestion from the date of submission of its report (October, 2013) on all fresh leases, on mines running under deemed extension route and on the leases which are coming for first, second and third renewal.

Moreover, all extracted iron ore should be sold through e-auction only, it said in the 5-volume report. The government should also ensure that “only a few interested groups should not be permitted to corner mining leases” and preference should be given to captive users of iron ore, the Commission said.

It also criticised the mining lease holders and their raising contractors for not caring for nearly 40 lakh local population of Keonjhar and Sundergarh districts and pocketing entire income from the “national non-renewable assets”.

According to the Commission, in most of the mining firms, locals are not appointed as labourers and the miners do not have any “intention to pay fair wages”. It also recommended the use of half the amount received by the state government in the auction for development and welfare of the area, particularly on tribals, whose fundamental right of survival has been affected due to mining.