"Why I think leasing out any mines at this time without linking it to ad valerom, International Market price is a give away, a loot and a scam rolled into one?" - Sandeep Dasverma, who once worked as an engineer in Orissa, writes on the scam with POSCO.

Related Links
Orissa Govt Needs to Be Held Accountable
Orissa Readies Force to Displace Farmers
Kalinganagar Mutilation of Tribal Bodies Alleged
Revisiting Orissa Development Plans

I will give the reason below. First please read below the very interesting news article below about SAIL(Steel Authority of India Limited) plans. This gives me an opportunity to demonstrate to the informed citizen why I am saying that we are missing out on focusing on the main points of the deals.

Fresh Techies Make Way for SAIL Unit
Pinaki Majumdar
Jamshedpur, Nov. 7: Public sector undertaking Steel Authority of India Limited (SAIL) has taken 41 fresh graduate engineers as management trainee in its mining outfit.

This was the first time since its inception that the steel major?s raw material division (RMD) has decided to take in so many management people exclusively for its mining division. With the fresh recruitment, the strength of engineers in executive and non-executive categories would be around 5,550. SAIL officials said the public sector giant had recruited management trainees at various corporate levels.

At present, SAIL operates seven mines at Kiriburu, Megahataburu, Gua, Chiria, Bolani, Barsua and Kalta. The steel company is soon going to start mining operations at another iron-ore mines at Taldhi, between Barsua and Kalta.

A spokesperson of SAIL told The Telegraph that along with the 41 trainees, SAIL has also made recruitment at the middle management level ? consisting of project engineers to meet the growing manpower requirement at its mining division. Moreover, the company is also planning to appoint geologists to fill up important positions.

The newly recruited engineers will fulfil the vital human resource requirement in the present mines as well as in the mines that are coming up at Chiria and Taldih,? he said. SAIL has fixed a target to produce over 25 million tonnes (MT) of steel by 2011, for which iron ore requirement would be over 40MT. The raw material division would source about 30MT of iron ore from its seven mines in Jharkhand and Orissa.
To increase output, SAIL has adopted a multi-pronged strategy, which include increasing production in mines, opening mines and adopting world-class technology.
M. Roy, the executive director in-charge of RMD, said the PSU is going to expand to retain its domestic market share of 30 per cent.

Congratulating the new trainees, Roy said the company would try to provide a conducive atmosphere for optimisation of their potential.

Talking about Royalty, it being fixed at ridiculous $0.50/tonne by center ( by Govt
of India) as an issue, which should be addressed fore most. In an independent country its Member of Parliament, dictate the policies which the bureaucracy implements. But not here we are in the middle of a scam. After all where does the MPs allegiance lie? Should not it be People of their states?

Let us take this case of SAIL, who are a public sector undertaking and the profits are likely to be plowed back to the economy of the country if not the state. But if we want to plow it back to the economy of Orissa, we have to raise the Royalty to the international market price of $100 for the high grades of Orissa, less the raising costs. What will be the profit of Orissa Govt?

Let us consider that we asked for higher Royalty at the ad valorem, 50% of the international Market price to SAIL of $100 per Tonne. This will enrich the state of Orissa, @ $50/Tonne 50*40million =$2000 million or $2 billion or 8000 crores? We don't have to go every year begging to the GOI. That 8000 crores will give us:
1. 8 IITs / year with our own money.
2. 15 times the present total Railway investment in the state.
3. 2 times the total annual revenue, so we can abolish all sales taxes, octori taxes etc.
4. and yet give back the same amount to our people from this one deal alone. (Alaska did that in early 80s, I don't know if they still do)
5. We can give any student who wants to study loans, all the loan they want.
6. We can give loan to our entrepreneurs the money to invest
etc etc etc

And that only from earnings of one year. So why not?

Because there is a written and a signed contract with SAIL. Similarly with NALCO. TATA and Bhusan Steel/ Jinadal Steel etc. But it can be done in case of TATAs, Mittals or POSCO. Only if we do not sign the contract in the same terms of the MOUs. But in the later cases GOO has not yet signed the contract.

So I think the R&R (relief & rehabilitation) issues are diversionary and a SIDE SHOW. We are fighting the wrong battle for better rehabilitation benefits, while all of the above companies (TATAs, Mittals or POSCO ) are going to laugh their way to the bank.

Because the money that they will pay for rehabilitation and land, they can save in 3 months on savings in cost of Iron Ore, alone. So what if they a higher price for the land? If I were the CEO of POSCO I would create a problem in R & R area in the beginning to divert attention away from the deal where there is most of the money. I will demo that below illustrating with POSCO numbers.

Similar is the case of VEDANTA but it has different numbers but equally bad, which I can give you later. To reiterate let us run the same numbers through the POSCO deal/MOU.

Now take for example POSCO who will produce 12 million tonnes, thus will need approx 20 million Tons of Ore/year.

They will save $100*20 million = $2 billion per year based on current international Market price. Or 8000 crores & at current exchange rate. ($1= Rs. 40). Even if they agree to give 20 lakhs / acre (2 times the current highest price of 10 lakhs per acre offered by any Govt.) their pay out for 4000 acres, will be about Rs. 8 billions (Rs. 20*4000 lakhs =Rs 8 billion) or $508 million only, for the whole land deal.

And land deal is one time only.

In other words even ignoring free water, free disposal of waste, low Royalty price of coal etc and SEZ advantages, POSCO will make a profit of 6000 crores in the first year and 8000 crores for the rest of their working plant life in Orissa from Ore alone. Other benefits will add up at least up to a similar amount, if not more.

If Govt of Orissa(GOO) gives POSCO, 600 million tonne mines on lease, GOO will give away $60 billion to POSCO, at current prices for iron Ore. This ignores the international Market price rise which is expected to double in less than 5 years.

Shipping out 30% or 180 million Tonnes of high quality Ore, will be like giving away $18 billion to POSCO without any indemnity. Because POSCO’s whole plant is to be a $12 billion investment. Do you friends think that GOO has where withal to get back this Ore, from an MNC?

I can take the risk it in writing they will pay at 50cents/ Tonne ($90 million) and a penalty of $10 million or so. Because they don't have ore, they buy it at $100 plus which will cost them probably Whopping 20 to 30 billion Dollars, and $40 billion if prices escalate as projected in next 5 years.(include transport)

So bribe a $ million or two to the those who need to be bought and buy an arbitrator and fix a deal like I have said above. It will cost may be another $100 million a saving of $25 billions to $40 billion for POSCO.

600 milllion * $100 at today's price =$60 billion dollars ignoring all other savings (the International price of Iron Ore is expected by the futures market to go up 30% in the coming year of 2008 alone) they will make or costs they don't have to pay compared to other locations. Similar is the case with the others - Tatas, Mittals, POSCO, Vedanta.

I think the public should put pressure on the Government to rethink their role in such deals - their policies result in enormous losses for the public. The solution I see:  fix the royalty at 60% of the ad valorem international market price. Otherwise, giving mining lease to a company without asking for international market price is pillaging the people.