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CBI Unravels Wrongdoing in Atomic Minerals Mining Licensing

The Delhi High Court that it had taken a policy decision not to auction or re-grant the offshore blocks

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5G-powered tramcars went into service in a coal mine in north China's Inner Mongolia Autonomous Region. Pixabay

The Central Bureau of Investigation (CBI) has uncovered large-scale irregularities in the ownership pattern, financial resources and technical ability of five companies granted mining licences for offshore blocks bearing rare and atomic minerals.

The companies, while applying for mining licence in June 2010, had a common director, the Central government has told the Supreme Court.

The Centre has argued that the five companies were registered after the government called private parties for mining licences in June 2010, says a CBI document.

At that time, the government was unaware that these minerals had strategic and defence value.

CBI, Atomic Minerals, Mining
The companies, while applying for mining licence in June 2010, had a common director. Pixabay

The administering authority of these licences did not obtain mandatory clearances from various ministries, especially the Home Ministry, according to the CBI.

The Delhi High Court, in an order dated April 25, directed the Centre to execute the exploration licence of the companies as per the procedure within four weeks from the date of receipt of the order.

The verdict came even after the Centre, in an affidavit dated April 16, told the Delhi High Court that it had taken a policy decision not to auction or re-grant the offshore blocks, bearing atomic minerals, to private parties.

Moving the Supreme Court against the High Court ruling, the Centre accused the companies of not submitting the proper supporting documents on the basis of which the marking was done in the evaluation sheet.

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The companies were charged with not providing any document indicating the sanctioned line of credit from any financial institution or bank.

One of the companies approached a leading financial services company seeking finance to carry out mining.

“This document was accepted as a document in support of the financial capability of the applicant company. Accordingly, a MoU was signed on September 23, 2010, which was received by Indian Bureau of Mines (IBM) in October 2010, after the date of submission of application for grant of licences on September 14, 2010,” said an internal CBI document.

Therefore, the Centre believed that the company had not confirmed the sanctioned credit limit as per the revised guidelines.

CBI, Atomic Minerals, Mining
The Centre has argued that the five companies were registered after the government called private parties for mining licences in June 2010. Pixabay

“The above MoU was valid only till March 31, 2011. Thus, on the date of issue of grant order by IBM on April 5, 2011, the MoU was null and void,” said the document.

According to information from the Ministry of Corporate Affairs (MCA), the authorised share capital of this company and its sister concerns was Rs 25 lakh each whereas the paid up share capital of each of the companies was Rs 1 lakh.

The net worth was negative for each company during fiscal 2016-17. The companies, even as of now, are not financially capable of undertaking any activities or business operations, said the document.

The companies stated that they were sister companies of 12 other companies engaged in different business sectors.

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“The worth of the companies and their directors are more than Rs 300 crore. If the exploration licence is granted to the applicant companies, expenses up to Rs 50 crore can be spent easily and can be further increased up to Rs 100 crore, if required,” says a petition in the Supreme Court.

“However, this is not acceptable since the company has been incorporated as Limited Liability Company and therefore the financial commitments by the sister companies had no relevance in the absence of resolution passed by the Board of Directors of the sister companies,” it added.

Despite the inadequate documents in support of their financial strength, the companies got 25 marks by the screening committee which shortlisted applications for mining licence.

“These private companies failed to produce satisfactory documentation for the requisite technical ability and financial resources to undertake exploration operation”, said an officer familiar with the investigation.

The CBI has charge-sheeted the government officials who in November 2017 signed in haste two licence deeds with one of the companies without following the due process.

The CBI, which has started preliminary enquiry after a gap of six years following a go-ahead from the apex court, favours a full-fledged investigation against everyone linked to the grant of licences. (IANS)

Next Story

Government Plans Slew of Reforms in Mining Sector

This would be a major reform that would allow companies such as Tata, Vedanta, JSW to commercially sell out

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Government, Reforms, Mining
Instead, a new hybrid mining lease agreement would be framed under which companies would be free to use extracted mineral both for captive use. Pixabay

The government plans a slew of reforms in the mining sector, including giving a big push to commercial mining to help attract investment and improve mineral production in the country.

As part of this, highly placed sources said the government would discontinue the practice of offering mining rights for mineral resources, including coal, to companies for captive use. Instead, a new hybrid mining lease agreement would be framed under which companies would be free to use extracted mineral both for captive use of end use plants (power, steel, cement etc) and commercial sale in the open market.

This would be a major reform that would allow companies such as Tata, Vedanta, JSW to commercially sell out from their captive iron ore mines for higher gains. State-owned SAIL has already been permitted to commercially sell iron ore from its captive mines.

A high level committee headed by NITI Aayog vice chairman and having top representation from ministries of finance, mines, coal and environment, has suggested that all mines hence forth be auctioned for commercial production. For companies taking mines largely for captive use, 50 per cent of production from those mines would be permitted to be sold in the open market under the new hybrid lease agreement.

Government, Reforms, Mining
As part of this, highly placed sources said the government would discontinue the practice of offering mining rights for mineral resources, including coal, to companies for captive use. Pixabay

Sources said the government has accepted these recommendations and necessary changes in mineral laws would be made to allow the reform measures to take shape.

“Captive mining rights do not result in optimal extraction of mineral resources, making the activity uneconomic. Often companies with captive leases are forced to contain production as extra production would cause loss of revenue to them in the absence of commercial selling right for surplus production. Thus, a hybrid agreement will allow full potential of mineral block to be realised and also help both the Centre and the state to increase their earnings,” said a former head of Coal India Ltd asking not to be named.

The high level committee has suggested that changes in grant of mineral rights with the option to do both captive and commercial mining may be applied prospectively for all exploration and mining activities. In addition to extraction of main mineral, the hybrid model will also allow leaseholders to extract other minerals found in their mine lease area on payment of 10 per cent of the quoted revenue share for the main mineral.

For existing captive mines allocated before the auction mechanism was made mandatory for grant of mineral leases, the high level committee has suggested the companies can use surplus mineral in their new end-use units formed under a joint venture agreement with a minimum 26 per cent shareholding.

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Mining has been identified as a critical activity that needs a big push to help other capital intensive and employment generating industries. The sector is braving a slowdown that has seen declining investment and production. (IANS)