CAG report flags lapses in Hindustan Copper operations, highlights revenue loss
- The report also slammed the company's decision to award a ₹1,176.12 crore contract for underground mine development at Malanjkhand, Madhya Pradesh, to a blacklisted contractor, resulting in significant cost escalations.
The Comptroller and Auditor General (CAG) of India has raised serious concerns over the operational performance of state-run Hindustan Copper Ltd in its report tabled in parliament.
The audit report, tabled in parliament on Wednesday, points to significant lapses in exploration, mining capacity enhancement, and marketing strategies, which have impacted the company's contribution to copper production in India, the country's top audit institution said in a press release on Thursday.
Hindustan Copper, the sole copper mining company in the country, controls about 80% of India’s copper reserves. The audit assessed whether the company’s activities aligned with its objective to enhance the availability of copper by effectively utilizing domestic resources.
Exploration and project management issues
The national auditor’s report highlighted that the Kolkata-based company has not undertaken any greenfield exploration in over three decades. Despite being granted the status of a Notified Exploration Agency, the company has made only eight applications for greenfield projects since 2010, all of which are pending approval from the ministry of mines, it said.
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Hindustan Copper's operational lapses come at a time when India seeks to bolster domestic production of critical minerals, including copper, to reduce import dependence and support industrial growth.
Brownfield exploration was equally inadequate, with the company failing to conduct lateral and depth exploration of its existing mines within stipulated timelines. Further, the absence of a specific policy or time-bound targets for exploration has compounded delays, the report highlighted.
The report also slammed the company's decision to award a ₹1,176.12 crore contract for underground mine development at Malanjkhand, Madhya Pradesh, to a blacklisted contractor, resulting in significant cost escalations. Only 50% of the project has been completed after spending ₹606.83 crore, with another ₹1,107.73 crore required to finish the remaining work, it said.
Financial and operational setbacks
Delays in obtaining environmental clearances led to repeated suspensions of mining operations at Jharkhand's Surda mines, resulting in a loss of 1.19 million tonnes of copper ore between 2014 and 2022. Moreover, poor planning and contractor mobilization issues at the Malanjkhand mine caused a revenue loss of ₹1,051 crore.
At Khetri mines in Rajasthan, the company’s failure to improve copper concentrate quality forced it to sell at lower export prices, resulting in a revenue loss of ₹136.23 crore, it said.
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The smelting and refinery unit at Ghatsila, Jharkhand, operated at a loss of ₹296.06 crore, with under-recovery of metal worth ₹203.64 crore and higher fuel costs of ₹20.59 crore. The audit also noted that a lack of comprehensive renovation plans led to the suspension of the plant’s operations.
Efforts to establish new smelting and refining units proved futile, with ₹571.99 crore spent on unproductive projects. Hindustan Copper's financial constraints led to the dilution of the government's stake by 3.29% through equity sale.
Despite shifting its business focus to selling copper concentrate, the company lacks a dedicated marketing policy for larger lots, resulting in higher inventory costs. The absence of an optimised lot-sizing strategy further exacerbated the issue, the CAG said in its report.
The CAG has recommended urgent corrective measures to address deficiencies in exploration, mining, and operational efficiency. It also emphasized the need for robust planning and marketing policies to optimize resource utilization and revenue generation.
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The company's stock rose about 1% to ₹285.15 on the National Stock Exchange on Thursday.
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First Published:5 Dec 2024, 07:25 PM IST
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