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Orissa probes Sarda Mines’ Jindal Steel link

Investigation to determine if mid-size miner broke any rules while allegedly forging a financial relationship
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First Published: Mon, Nov 12 2012. 10 59 PM IST
Navin Jindal, managing director of JSPL. To be sure, the investigation is only against Sarda, although there is a chance that JSPL may be asked to explain. Photo: Arvind Yadav/Hindustan Times
Navin Jindal, managing director of JSPL. To be sure, the investigation is only against Sarda, although there is a chance that JSPL may be asked to explain. Photo: Arvind Yadav/Hindustan Times
Updated: Wed, Nov 14 2012. 01 49 PM IST
New Delhi: The Orissa government is investigating mid-size iron ore miner Sarda Mines Pvt. Ltd’s links with Jindal Steel and Power Ltd (JSPL) to determine if it had broken any rules while allegedly forging a financial relationship with JSPL that involved sharing a mine allotted to Sarda.
JSPL may have invested in Sarda, which is tantamount to sharing the latter’s Thakurani B iron ore mine in Keonjhar district in Orissa, but the state government was not informed about the deal nor was its permission sought, said D.K. Mohanty, mines director in the Orissa government’s department of steel and mines.
“Sarda has shown Jindal Steel as a contractor for crushing (ore). Jindal Steel apparently invested substantially in Sarda,” Mohanty said. “This has yet to be established as investigation is still on.”
To be sure, the investigation is only against Sarda, Mohanty said, although there is a chance that JSPL may be asked to explain.
A JSPL spokesman denied his company had any stake in Sarda. He said the company was a client of Sarda.
“JSPL does not have any stake in Sarda Mines in Orissa. JSPL has not been appointed a contractor in Sarda Mines,” the JSPL spokesman said in a written response to an email from Mint.
A.S. Sharma, director of Sarda Mines, couldn’t be reached on phone and didn’t respond to an email sent to him on Friday.
Mohanty added that the investigation concerns a possible violation of Rule 37 of the Mineral Concession Rules of 1960. This says: “The lessee shall not, without the previous consent in writing of the state government... (a) assign, sublet, mortgage, or in any other manner, transfer the mining lease, or any right, title or interest therein.
“(b) enter into or make any (bonafide) arrangement, contract, or understanding whereby the lessee will or may be directly or indirectly financed to a substantial extent by, or under which the lessee’s operations or undertakings will or may be substantially controlled by, any person or body of persons other than the lessee...,” it says.
An official in the Orissa government, who asked not to be identified, said JSPL possibly invested in Sarda and in return got iron ore at discounted prices.
The JSPL spokesman said in his email that the company’s terms were “commercial”.
“Iron ore is purchased from Sarda Mines on commercial terms, and we have a long-term agreement with them for supply of iron ore,” the spokesman said.
An analyst said the probe of Sarda must be seen against the backdrop of Orissa acting against hundreds of mines, charging them for various violations.
An official in the office of the Orissa steel and mines minister Rajani Kant Singh said a total of 104 companies, including Tata Steel Ltd and the Aditya Birla Group’s Essel Mining and Industries Ltd, had been asked to pay fines to the tune of Rs.37,900 crore for excessive mining and violation of statutory clearances.
“Some of the cases may be genuine violations, some not. The bigger theme is that every state is now realizing the true value of natural resources needs to be taken (from companies),” said Arun Kejriwal, director of Mumbai-based equity research firm KRIS.
“The moment litigation happens and some of the disruptions take place, shares will be hit.”
JSPL, India’s fifth largest steel maker, produced 2.27 million tonnes (mt) of steel in 2011-12. It has a steel plant in Raigarh in Chhattisgarh and is developing steel plants in Orissa and Jharkhand with a capacity of 12.5 mt and 12 mt, respectively. The company has its own captive iron ore mines in Tensa, Orissa, with a capacity of 900,000 tonnes.
The Shah Commission, formed in 2010 by the Union mines ministry under justice M.B. Shah and with a mandate to investigate illegal mining across India, also seems to be following up on the Sarda-
JSPL relationship. On 8 November, the Shah Commission, while visiting Orissa, summoned both companies, although the agenda for that interaction isn’t known.
JSPL’s spokesman said last week that the company would reply to the queries raised by the commission.
Orissa is ruled by the Biju Janata Dal, a rival of the Congress party that’s heading the United Progressive Alliance coalition at the Centre.
Navin Jindal, managing director of JSPL, is a representative of the Congress in the Lok Sabha.
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First Published: Mon, Nov 12 2012. 10 59 PM IST
More Topics: Orissa | mining | Jindal Steel | Sarda |
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