NMDC on defensive after Karnataka Lokayukta's report

The same Lokayukta report that led to Karnataka Chief Minister BS Yeddyurappa's resignation late last week, now has officials from the Hyderabad-headquartered public sector major National Mineral Development Corporation (NMDC) on the defensive.  

Page 63 of the 460-odd page Karnataka State Lokayukta report, submitted to the government of Karnataka on July 27, quotes a report by Lokayukta investigative head U V Singh, which says the NMDC has exported high grade iron ore at a rate much below the prevailing one and has thus incurred a huge loss.

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"NMDC strongly denies and refutes all the allegations made in the report of Karnataka State Lokayukta in respect of under-invoicing of its exports between the period from 2006-07 to 2009-10," said Rana Som, the PSU's chairman-cum-managing director, who apparently was angry initially, but now upset and a bit surprised at the report and its findings.

"The confusion which is seen through the report appears to be the result of not understanding the clear difference between mechanism of spot pricing viz-a-viz long-term prices," he said.

NMDC exports on the basis of long-term prices, Som explained, while small miners generally participate in spot prices that are fixed on a day-to-day basis or even ship-to-ship basis.

The formula has now changed globally under long-term pricing.
 
Yes, he said, the spot prices for sometime in 2007-08 were much higher than the long-term prices, but the situation was exactly the reverse in 2008-09, when the spot prices were much lower than the long-term prices. "Therefore, comparison of long-term prices with spot prices cannot give accurate results."

Defending the PSU against the allegations that it indulged in under invoicing for the 2006-07 to 2009-10 period, Som said: "After the middle of 2008-09, the company did not carry out any exports from Donimalai mine in Karnataka and during the 2006-07 to 2007-08 period, when it did effect exports from its Donimalai mines, the prices charged had been at par with equivalent long-term prices applicable from Australian and Brazilian mines."

"And for the price negotiations, there is always a high-powered delegation. The Indian delegation includes senior officials from the ministry of commerce and ministry of steel, apart from top officials from MMTC (the canalizing agency of the government of India) and NMDC," he added.

Som also refuted some media reports which suggested that money had been parked abroad.

"The export value is collected in India and deposited in India...The allegation of siphoning the money and parking the same outside the country is absolutely unacceptable," he said.

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Arguing that there has been no wrong-doing on the part of NMDC, Som said: "While large-scale allegations are made about illegal mining and violation of environmental norms by mining companies in Karnataka, the Central Empowered Committee in its report to the Supreme Court not only appreciated the efforts made by NMDC in carrying out scientific mining, but also clearly mentioned that the company is not involved in illegal mining."

He attributed the Lokayukta claims to an "understanding gap" (on the part of the Lokayukta) and said the Lokayukta did not seek data or clarification from NDMC.

When asked what the steel ministry has to say to his explanations, he laughed and said: "They have only told me: let the facts be known."

But then again, if what he says are the facts, then an institution meant to fight corruption has got its facts wrong - something definitely not to feel happy about!