A murky deal

The Hindu, Prafulla Das in Bhubaneswar

December 4 2004

The Orissa High Court's order quashing a mining deal between the State-owned IDCOL and Jindal Strips puts the Naveen Patnaik government in an embarrassing situation.

A political storm is raging in Orissa over the utilisation of the State's rich mineral resources, with the Opposition parties demanding a review of all the mining agreements signed by the Biju Janata Dal-Bharatiya Janata Party government.

The Opposition's campaign gained momentum following a High Court order quashing the decision of the State-owned Industrial Development Corporation of Orissa Limited (IDCOL) to select Jindal Strips Limited as a joint venture partner to explore, develop and operate the chromite deposit at Tangarpada in Dhenkanal district. A Division Bench comprising Chief Justice Sujit Barman Roy and Justice A.S. Naidu delivered the judgment on November 18.

The BJD-BJP alliance, which won a second term in office earlier this year, is now faced with a difficult situation with the Opposition alleging that the mining agreements were aimed at favouring various private companies. Last year, Chief Minister and BJD president Naveen Patnaik successfully countered the Opposition's charges about a mining deal between IDCOL and Jindal Strips.

The Opposition's latest offensive started in October after the Orissa Mining Corporation (OMC) entered into a joint venture agreement with Vedanta Alumina Ltd., a Sterlite Group company, to develop bauxite mines in Rayagada and Kalahandi districts. The extracted bauxite was to be used in the one-million-tonne alumina refinery that Vedanta Alumina was setting up at Lanjigarh in Kalahandi district.

The Opposition parties, including the Congress, submitted a memorandum to the Governor alleging that the OMC-Vedanta agreement was signed in violation of the environment and forest laws and was not in the best interest of the State. The Congress took up the issue with the Centre, demanding a review of all the mining agreements signed by the Naveen Patnaik government after it assumed power in March 2000. The Vedanta controversy dominated the proceedings of a short session of the Assembly in November.

Further, Opposition parties such as the Communist Party of India (Marxist), the Communist Party of India (CPI), the Orissa Gana Parishad, the Janata Dal(S) and the Jharkhand Mukti Morcha (JMM) have decided to intensify their campaign against the alliance government over the mining issue. Alleging that huge kickbacks were involved in the Tangarpada deal, the Opposition has demanded the resignation of Naveen Patnaik.

"The Naveen Patnaik government is out to finish the mineral resources of the State during its tenure, by handing over our mines to private companies in violation of forest laws," said Janardan Pati, secretary of the Orissa unit of the CPI(M). "Jungles can be created in 20 years, but it takes lakhs of years for minerals to form. What would happen to the future generations?" he said.

"While signing mining agreements with different companies, the alliance government is not only indulging in corruption, but also encouraging privatisation in the State. Why did the government not make efforts to set up steel and aluminium industries through joint ventures, instead of handing over the mines to private companies?" he asked. "The High Court order striking down the Tangarpada mines deal has proved the Opposition's allegations right and exposed the Chief Minister's claim of transparency," said Pati.

The two-Judge Bench observed that the State was very rich in terms of mineral resources and that it was quite possible to set up a stainless steel industry as envisaged by the State government. "It will generate not only huge revenue for the State but employment opportunities for the unemployed youth of the State," the Judges observed.

The court further said that if IDCOL was serious about setting up a stainless steel industry in the State, it should issue fresh tenders calling upon interested parties to apply for the selection as a joint venture partner with the approval of the State government. The court added that IDCOL should state in clear terms whether it wanted a stainless steel industry or any other industry to be set up in the State where chrome can be used as an ingredient.

Tata Iron and Steel Company (TISCO) and VISA Industries had challenged in court IDCOL's decision to select Jindal Strips; their bids for the venture were rejected on the grounds that "they were found to be not acceptable".

The Orissa government had granted lease of the Tangarpada mines to IDCOL and subsequently IDCOL issued an advertisement in October 2002 stating that it was looking for a joint venture partner who was financially sound to develop the chromite mines and take up mineral exploration, mining, mineral processing, value addition and marketing of the product.

The prospective parties were invited to apply latest by November 25, 2002. IDCOL also specified that the selection of the joint venture partner would be done in a transparent manner with due approval of the State government. After the selection was made, a joint venture company was to be formed to exploit the deposits. Bids were invited in two separate parts, technical and financial.

Though several parties had applied, only VISA Industries, TISCO and Jindal Strips were serious bidders. The bidders were invited to make a presentation before IDCOL's Technical Committee on December 9, 2002. After the representatives of the bidding companies made their presentations, the Committee that opened the technical bids recommended that Jindal's bid be accepted. Accordingly, by a letter dated January 15, 2003, IDCOL asked for the State government's approval regarding Jindal's bid to form a joint venture company and the proposal was approved on January 18, 2003.

Surprisingly, TISCO and VISA Industries were not officially informed by IDCOL about the rejection of their bids. After the Opposition raised the issue in the previous Assembly, a House Committee was formed to look into the allegations of corruption in the deal. The committee scrutinised the financial bids of the bidders, which had remained unopened until then. However, before the House Committee could complete its inquiry, the Assembly was dissolved.

The High Court in its order observed that IDCOL's Technical Committee had not made any attempt to deal with the important issue of the eligibility of Jindal Strips. The committee also did not consider the aspect that Jindal Strips did not have any experience in the exploration of chromite ore.

The Court further said that the IDCOL authorities did not consider the effect of the incentives and exemptions as claimed by Jindal Strips on the State exchequer and the public interest. "The State government also acted in a matter of granting its approval to Jindal's bid in an equally lackadaisical manner if not deliberately with a view to show undue favour to Jindal Strips," it said.

"If exemption is granted to Jindal Strips for 20 years in respect of sales tax, Central sales tax, entry tax alone as demanded by them, Central and State governments will lose revenue to the extent of Rs. 20,000 crores over a period of 20 years on this score alone," the court said. "It seems that the IDCOL authorities as well as the State government were completely oblivious of their responsibility towards public interest and State exchequer."

The State government has decided to challenge the High Court order in the Supreme Court. IDCOL and Jindal Strips too are contemplating approaching the apex court.

Apart from having sufficient reserves of iron ore, bauxite, gemstone and coal, Orissa has 98 per cent of the entire chromite resources of the country. The State government, which is now encouraging private companies to set up industries, needs to tread with caution if it wants to protect the interests of the State and avoid strictures from the court of law.