Row between NMDC, customers over foundation fees
State-run iron ore miner NMDC has asked customers such as JSW Steel, SKS Ispat and Geradu, among others, in Karnataka to bear the cost of contributions to the District Mineral Foundation and National Mineral Exploration Trust (NMET).
NMDC runs mines in Chhattisgarh and Karnataka with an annual production capacity of a little over 30 million tonne (MT), to which the Donimalai sector in Karnataka contributes around one-third of its annual production. JSW Steel buys the lion’s share of the produce from NMDC’S Donimali mines to feed its plant in Bellary. NMDC sells all its produce from Karnataka through the auction route, but the base price it sets for its produce is exclusive of all statutory dues like royalty, taxes, DMF, duties, levies etc. The company sells its produce from Chhattisgarh directly in the open market, but here also, it has been charging the same levies without any hue and cry from its customers, including Essar Steel, so far.
However, the Karnataka buyers recently created a storm insisting that since they get the raw material through the auction route, they were not supposed to pay the levies and taxes like their counterparts in Chhattisgarh. The problem started brewing here resulting in stopping of despatches by the miners to its local customers for two days starting from February 2.
“As per sections 9(B) and 9(C) of MMDR Amendment Act 2015, it is the holder of the mining lease who has to pay the DMF. The DMF has been instituted for the development of the mining area. The Central Empowered Committee (CEC) had also clarified that DMF is to be paid by the lessee and not the buyer,” said JSW Steel’s commercial director Jayant Acharya.
Following a government notification in September last year, which stated miners who were awarded leases before January 12, 2015 will have to contribute 30% of the royalty to the DMF, NMDC had requested the CEC, which conducts the auctions on behalf of the company, to collect DMF and NMET from all customers in Karnataka since it was required to pay that amount, on demand, to the state government.
On the CEC’S refusal, NMDC decided to collect DMF and NMET from the customers along with loading charges at the point of despatch. Since the customers refused to bear the cost of contribution towards DMF and NMET, NMDC stopped despatches from the Donimalai sector.
“However, considering the inconvenience caused to steel producers, we have decided to discuss the issue in the forthcoming board meeting. In the interim period, we have started despatches from today,” a senior NMDC official said.