Monday, July 24, 2006

 

Press release dated Oct 19,2004 by Orissa Mining Corporation Ltd.

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Press release dated Oct 19,2004 by Orissa Mining Corporation Ltd.

AGREEMENT OF OMC WITH M/S. VEDANTA ALUMINA
LIMITED IN THE BEST INTEREST OF THE STATE.

Govt. of Orissa decided in March, 1997 to develop the bauxite
deposits in Lanjigarh and Karlapat and a MoU with Sterlite Industries Ltd.
was executed during April, 1997 by OMC. After successful negotiation with
Sterlite for setting up an integrated aluminium project consisting of 1 million
tonne Alumina & 2.2 lakh tonne of Aluminium per year, the MoU was
converted into an agreement with M/s. Vedanta Alumina Ltd ( the arm of
M/s. Sterlite Industries for bauxite / Alumina Projects ) on October 5 , 2004
for the Lanjigarh deposit after obtaining due approvals. Govt. of India has
also approved the mining lease for the Lanjigarh bauxite deposits in favour
of OMC after being fully informed of the terms and conditions of the above
agreement.

In this regard a number of misleading, concocted and baseless news
reports have appeared in the press on which OMC wishes to clarify as under:
In order to set up an integrated aluminium project, a mining lease of
Bauxite is an essential requirement, grant of which is the normal practice in
the country which can be seen from the cases of NALCO in Orissa,
HINDALCO in U.P. and BALCO in Chhatisgarh. The MoU of 1997,
envisaged clearly the transfer of the mining lease to M/s. Sterlite. The
amendment to rule 37(2) of Mineral Concession Rules of the Govt of India,
prohibits a PSU to charge or accept any consideration on per tonne basis in
respect of a mining lease transferred to another party. Since the original
MoU was providing for payment of consideration money to OMC which
was not possible after the amendment to the Mineral Concession Rules,
OMC protected its interest by not transferring the lease to M/s.VAL as
required under the MoU and insisted upon by Vedanta. Had the transfer of
lease been done as per the 1997 MoU, OMC would not have received any
consideration on per tonne basis from Vedanta Alumina and thereby lost
around Rs.675 crores which has been checked as a result of this agreement.
The detailed factual position is placed below to clarify the issues
which have been highlighted in the recent media reports:


1) It has been reported that OMC will pay all legal obligations to all
statutory authorities such as sales tax, etc. However, as per the agreement,
OMC will recover such dues from Vedanta Alumina and will pass on to
the statutory authorities, as OMC is the lessee vide clause No.2.3.3(a).

2) It has been highlighted that Vedanta will transfer the bauxite so
raised from Lanjigarh to outside the State. In this regard, it is clarified
that the clause (b) of the preamble clearly brings out that Vedanta will
set up a 1 million tonne/annum alumina plant at Lanjigarh and a 2.2
lakh tonnes aluminium smelter at Bhukhamunda, Jharsuguda along
with 600 MW capacity of captive power plant. Hence question of
transferring bauxite to outside State does not arise. The agreement at
Sl.No.2.3.2 (e) clearly specifies that bauxite ore from the mines will be
utilized exclusively in the proposed refinery of Vedanta to be established
at Lanjigarh.

3) As regards the report that OMC will not share in the profit, it may be
noted that OMC holds 26% free equity share in the J.V.C. and is
entitled to get 26% of the declared dividend.

4) It is also claimed that in the name of testing purpose M/s .VAL will
take away35 lakh MT of bauxite from Lanjigarh to outside the State. We
wish to clarify that during prospecting period, the job of the lessee is to
ascertain the quantity and quality of the mineral. For that purpose,
maximum 5-10 tonne of mineral is required. Hence in the name of
testing, removal of 35 lakh tonnes of bauxite outside Orissa without
permission of OMC and Govt. of Orissa is a figment of imagination.

5) As regards the report that OMC cannot do anything if Vedanta fails in
achieving its target and that OMC Directors can not participate in their day
to day management in respect of the joint venture company, it is clarified
that adequate provisions have been kept in the agreement for protecting
the interest of the OMC by serving notice for termination of the
agreement for failure in achieving the milestones and the agreement
also provides for dispute resolution mechanism as per Indian
Arbitration Act.

6) It has also been reported that Lanjigarh Mines are worth more than
Rs. 80,000 crores and even in domestic market OMC will lose Rs.500/- per
tonne of bauxite. In this regard, the factual position is that Lanjigarh
bauxite reserve is about 75 million ton and not 125 million tonnes as
claimed in the Press reports. OMC had committed to supply upto
150 million tons. The allegation of OMC losing Rs.500/- per tonne of
bauxite is baseless when the cost price of bauxite is not more than
Rs.200/- per tonne. It is pertinent to mention here that bauxite is not
usually sold as raw material nor its market price quoted. It is normally
transferred at cost price to the alumina plant from the mines of the
alumina producer. Such transfer is made by NALCO from its mines at
a cost of around Rs. 168/- per tonne. Even if Rs. 200/- per tonne is
taken as a the price, the total cost of 150 million tonne will be Rs. 3000
crores, not Rs. 80,000 crores as alleged. As against this Rs. 3000 crores,
the investment on the integrated alluminium complex will be nearly 5
times besides employment opportunities and flow of revenue to the
State. It is indeed unfortunate that when the 1997 MoU has been vastly
improved upon under the Agreement and the interests of the OMC
have been protected by not transferring the lease of the mines, such
highly misleading and palpably untrue allegations have been made.

Comments:
It is good to hear of International Standard University atOrissa. My concern is that why the University in costal area and near by a developed (at least in terms of education) city like Bhubaneswar and Puri where as the western orissa is lagging behind. The fact is that the Vedanta Alumina project is based on Lanjigarh, Kalahandi (A tribal dominated district). If the moto is to bring development, then the University should have been proposed in the same or/ near by Lanjigarh or in any part of Kalahandi district.Establishing university in western orissa especially in tribal districgt will be a great contribution.
 
It is good to hear of International Standard University atOrissa. My concern is that why the University in costal area and near by a developed (at least in terms of education) city like Bhubaneswar and Puri where as the western orissa is lagging behind. The fact is that the Vedanta Alumina project is based on Lanjigarh, Kalahandi (A tribal dominated district). If the moto is to bring development, then the University should have been proposed in the same or/ near by Lanjigarh or in any part of Kalahandi district.Establishing university in western orissa especially in tribal districgt will be a great contribution.
 
If really they need to develop the backward part of Orissa then give more important to western orissa as these part is more backward part and specially Kalahandi don’t have any university nearer to it( More then 300KM). they can establish at least an extension of university in Kalahandi
 
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