Mysore Minerals Limited (MML), the government-owned mining company, suffered grave financial loss owing to several flaws in the execution of its joint venture with JSW Steel Ltd, according to a report of the Comptroller and Auditor General of India (CAG) tabled in the Legislative Assembly on Thursday.
The company lost Rs. 61.54 crore due to delay in raising the premium charged on iron ore sold to JSW between 2000-01 and 2009-10, says the report for the year ending March 2012.
The company had formed a joint venture company, Vijayanagar Minerals Private Limited (VMPL), with JSW Steel in 1998 for joint exploitation of iron ore. As per the memorandum of understanding, MML was to hold equity of 30 per cent in VMPL, while the balance 70 per cent equity was to be held by JSW.
The cost of development work done by MML in Thimmappanagudi Iron Ore Mine (TIOM) was treated as contribution of the company towards equity capital, which was agreed to be at Rs 1.74 crore. The MoU stipulated that the JSW was to bring in such mining leases as might be granted to it by the government. Against the annual capacity of eight million tonnes, JSW would purchase 3.5 million tonnes of iron ore fines and MML would have a share of 1.5 million tonne of iron ore lumps at the transfer price (lower than the market price) to be decided by VMPL.
However, JSW had not brought its own mines to VMPL as its contribution and ore was extracted only from TIOM till September 2012. The CAG Report pointed out that the proposed shareholders’ agreement, which could have created an obligation for fulfilment of the provisions of the MoU had not been signed yet (till September 2012).
During 2000-01 to 2009-10, 9.25 million tonnes of iron ore fines valued at Rs 1,052.89 crore was mined from TIOM, for which the company got Rs. 63.17 crore by way of premium at the rate of 6 per cent on the market price. However, JSW got a benefit to the tune of Rs. 876.90 crore, because ore was supplied to them at transfer price.
“The non-availability of a matching mine from JSW had resulted in sole exploitation of the mines of MML, coupled with a low premium of 6 per cent on iron ore fines and MML was also deprived of the lumps it was entitled from the JSW mines. The one-sided agreement put the company to grave financial loss,” the CAG report said.