Home Mining CAG Raps OMC


Bhubaneswar: Inappropriate costing of bauxite floor price by the State own Odisha Mining Corporation (OMC) has resulted a loss of Rs 61.07crore to State exchequer, CAG said in its latest report on Performance and Compliance Audit laid before Assembly on Monday.   

Government of Odisha allotted mining lease of bauxite block of 428.075 hectares at Kodingamali in the districts of Koraput and Rayagada to the OMC for a period of 50 years on execution of lease agreement on January 2017 for raising and sale of bauxite to the aluminium industries.

The Indian Bureau of Mines (IBM) approved Mining Plan for the lease area holding approximately 611 lakh tonnes of bauxite reserves. It is also approved for mining over a period of 21 years, with 15 lakh tonnes for the first year and 30 lakh tonnes per annum for the balance period, said the CAG.

The OMC awarded (September 2017) the work for excavation and raising of bauxite to a contractor. The agreement between OMC and the contractor stated that the raising contractor would be paid 61 per cent of the escalated/deescalated rate per cubic metre of backfilling of mined-out area.

Similarly, OMC included 10 per cent of capital employed in the cost estimates for raising of iron ore towards interest on capital employed. The Corporation also included the cost of Sustainable Development Framework, which was 10 per cent of royalty in the third tender.

Hence, in such a cost plus scenario, the estimate for cost of production must have included all the elements of cost viz., cost of backfilling of the mined out area, interest on capital employed, SDF among others for raising and sale of bauxite to the aluminium industries.

As per Government notification, OMC determined the floor price of Bauxite for the last three e-auctions at Rs 462, Rs 547.50 and Rs 672.65 per tonne. The price finalised after these three e-auctions were Rs 465, Rs 553 and Rs 673 per tonne respectively.

OMC sold 31,86,27750 tonnes of bauxite during April 2018 to July 2019 in three e-auctions.

The audit observed that OMC failed to work out its cost properly leading to underassessment of cost.

As per the report, the floor prices for e-auctions should have been calculated at Rs 563.13, Rs 778.33 and Rs 867.67 per tonne for first, second and third e-auctions against the price determined by OMC at Rs 462, Rs 547.50 and Rs 672.65 per tonne respectively. Thus, due to this inappropriate calculation of bauxite cost price, lower sale prices were finalised. This led to loss of Rs 61.07 crore by OMC, it said.

Thus, due to inappropriate costing and downward fixation of floor price of bauxite, OMC failed to safeguard its financial interests and lost Rs 61.07 crore and consequently failed to make the supply of bauxite sustainable as envisaged by the Government.