Supreme Court-appointed panel raps Jindals, 13 other firms for flouting mining rules

Sunday, 19 October 2014 - 6:00am IST | Place: Mumbai | Agency: DNA

• DNA Correspondent
  

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The central empowered committee (CEC), constituted by the Supreme Court, has called the relationship between Sharda Mines (P) Ltd (SMPL) and Jindal Steel and Power Ltd (JSPL) unholy and illegal.
In a report to the SC on Friday, it recommended continued suspension of SMPL's mining operations. The CEC also asked Odisha to take immediate corrective measures and action against Sharda mines for transferring control rights to Jindals.
The CEC also recommended the reassessment of income tax, VAT and sales tax paid by the Sharda Mines and Jindals. It, however, stopped short of delivering a final verdict on the unholy relationship, citing a Supreme Court order dated January 13, 2014.
Sharda Mines ranks second in the list of 14 lessees, which have produced iron and manganese above 50 lakh metric ton without environmental clearances. Other violators are state-owned OMC Ltd, Tata group's Tisco and the Aditya Birla Group company. The total loss is pegged at Rs 17,500 crore.
The CEC has recommended recovery of at least 30% of the notional value of the loss from these lessees within three months. Their mining operations may be suspended in case of non-payment. Action against senior officers of the state government, from chief secretary downwards, has also been recommended.
What exactly is Jindal Steel's offence?
Jindals allegedly control Sharda Mines through its business associates, ex-employees and current employees and even through employees of associate companies. The Sharda family holds only 1 percent equity shares. Ninety nine per cent shares are directly and indirectly with the Jindals. This relationship between the two is ``brazenly illegal and highly objectionable,'' the CEC report said.
How did Jindals benefit?
No miner is allowed to have more than 1,000 hectares to mine. JSPL has one iron ore lease – Tantra Raikela mining lease – with an area of 298 hectares. By clandestinely controlling Sharda Mines, Jindals got 947 hectares more to mine. Not only that. SMPLwas selling iron ore to JSPL at a fraction of the market value. This prima facie indicates the transfer of control/interest by the lessee in favour of a third party, violating Rule, 37, MCR, 1960, the CEC report said.
How did JSPL control SMPL?
Sharda Mines has a screening and crushing plant, a washing plant as well as a conveyor pipe system in its premises. All statutory approvals are in the name of Sharda mines, but the infrastructure is owned by JSPL. The presence of such infrastructure and selling wholesale to Jindals is perhaps the "root cause of all the subsequent illegalities and irregularities,'' the CEC report said.
Is there any tax evasion involved?
JSPL and SMPL had contended that they are two independent entities and their relationship is only that of a buyer and seller. The CEC rubbished it and stated the duo have made such arrangements to evade VAT, sales tax, income tax and royalty at prescribed rates. This would run into crores of rupees. SMPL, one of the top 10 iron ore-producing mine, sold ore at Rs 400 per metric ton to JSPL, while other companies were selling at Rs 5,500 per metric ton in 2008-2009.
What is Odisha's role in the episode?
Though the state government acted against other companies for selling iron ore at lower rates, it spared Sharda mines, says the CEC report. Even the chief secretary had noted in the files as far back as 2002 that "it is well known that the mine (Sharda) is being operated by the Jindals. Would this not amount to a fraud?''