March 31 –April 6, 2014

Pushpa Iyengar

Parrikar pleased, other stakeholders not so

Mining oreAfter the two e-auctions on February 17 and March 5, the total ore that was auctioned  by the Directorate of Mines and Geology (DMG) was about 1.62 million metric tons that brought in Rs. 260.68 crore (1 crore = 1,00,00,000) approximately. About 5,36,000  metric tons of iro

How it went down

Out of the 61 stacks, only the ore lying at Mormugoa Port Trust (MPT) was not auctioned. Those who took part in the auction included Fomento, Durga Mines, Sesa Goa, Chowgule and Panduronga Timblo Industries, while bidders from outside the state included Bagadiya Brothers and Royal Line. Sources close to the e-auction said Sesa Goa bought one-third of its own ore for the Amona pig iron plant. The Bagadiya Brothers of Raipur bought a massive quantity of V M Salgaoncar’s stock (more in the next part about how they have been caught out last week trying to export to China when they had the NOC to export to Singapore).

In the first and second e-auctions (12,00,000 metric tons went under the hammer), the DMG had offered 4,90,000 metric tons of ore lying at Vagus, Sarmanas and Amona jetties of which 4,87,000 metric tons has already been snapped up. The total ore auctioned from the Amona jetty was 94,509 metric tons, Vagus 1,92,850 metric tons  and Sarmanas 1,30,395. The ore was purchased by Sesa Sterlite, VM Salgaocar, Agarwal mining companies (Goa), Kineta Global (Andhra Pradesh), Sudar Industries Ltd and Royalline Resources Ltd (Maharashtra) and Bagadiya Ltd (Chhattisgarh).

Domestic steel mills JSW, Jindal, Ispat, Mohit Steel, Bharti Steel and some of the 14 other bidders,kept away from the first e-auction. Steel mills – though many had registered – stayed away from the first round of iron ore that went on the chopping block.  An inkling of why the stakeholders were not so enthusiastic came from industry sources which claimed that the local steel industry was not benefited in any way and local traders came “in new clothes”. In both auctions, only traders and exporters took part. Experts surmise that there could have been many reasons like low grade of the ore, excess moisture in it after being unattended for 18 months, and the inability to move the ore to their plants. However, they will participate in future auctions, it is learnt.

The naysayers

 In the election season, it was bound to happen. Congress general secretary, Digvijay Singh, after the first auction, alleged under-pricing of iron ore by companies.  “The bidding price of the ore was Rs. 1,700 per ton whereas the market price is USD 80 (approximately Rs. 5,000) per ton,” Singh said here.

Another negative was brought up before the first auction. In fact something that Singh echoed later was what some bidders had alleged before the first round. According to them, the e-auction did not reveal the highest price bid and therefore, they alleged, “transparency is at stake unless the software is modified”.

The bidders also said that if the intention was to find the best price, then overseas buyers should have been allowed to participate. “The e- auction appears to have been tailored to permit a few big sharks to participate and share the profit. The terms of the e-auction are loaded against the participation of local consumers,” prospective bidders said. 
They also said that the sale of illegal ore could be used by the government to pay the loans of truck and barge owners. Around 20,000 families could benefit from it, felt some bidders.

Who benefited, who lost

Claude Alvares of the Goa Foundation, which opened up the can of worms in the mining sector in the last few decades, echoed the sentiments. Speaking at a gathering last month, Alvares said, “The auction of the illegal ore (four million metric tons by his estimate) would mean that the state government will get a windfall of around Rs. 1,200 crore (1200,00,00,000). The loan liability of all the truckers and barge owners combined works out to Rs. 1,000 crore (1000,00,00,000). The government should buy the mortgages of the trucks and barges at 50 per cent discount rate, which most banks are willing to sell. This would give it Rs. 600 crore (600,00,00,000) worth assets overnight,” he said. “When mining resumes on the scale recommended, the trucks and barges can be re-employed,” he pointed out. 

He also underlined how the major investments in the mining industry had been made by the truck and barge owners, while the profits had been raked in by the mine owners. Quoting figures that mine owners themselves submitted before the Indian Bureau of Mines (IBM), Alvares said that owners had made an investment of only Rs. 620 crore (Rs. 620,00,00,000) as opposed to that made by truck and barge owners which stands at Rs. 2,400 crore (2400,00,00,000).  But when it came to profits, the reverse held true - mine owners made a total of Rs. 11,000 (11000,00,00,000) crore in just one year 2010-2011 (and Rs. 48,000 crore (48000,00,00,000) from 2004- 2009),  and most truck and barge owners went into humongous losses.

Good advice, but will someone listen

Alvares’ suggestion that the e-auction money should be collected in a fund (like in Norway, Alaska and Canada) and the interest should be used for the government’s social schemes like the DSS or housewife allowance which will support the state for generations to come. “The State must invest a sum equal to the value of the ore extracted in productive assets to compensate depletion/exhaustion of the natural asset over time and not dissipate mining revenues in consumption. The performance of these assets and investments must be monitored and reported on an annual basis to the Goan public,” Alvares said.

But then if the state really cared for its people and not for politicians involved in mining or the allied industry and mine owners, the mining sector would be chugging on not shutdown because greed had made brought devastation to the state. But that’s another story.