Bhubaneswar: The Comptroller and Auditor General of India (CAG) has raised concerns about a sharp decline in the quality of iron ore mined in Odisha following the auction of six iron-ore mines.
The CAG report, tabled in the Odisha Assembly on Wednesday, highlighted that the new lessees reported an “abrupt and abnormal decline in the grade of iron-ore and its classification,” resulting in significant revenue implications for the state.
According to the CAG’s audit (Report No. 6 of 2024), this decline led to a revenue loss of approximately Rs 4,162.77 crore in the financial years 2020-21 and 2021-22, primarily due to reduced royalty and premiums collected post-auction.
Before the auctions, over 83 percent of the production was classified as having an iron content (Fe) of 62-65 percent. However, in the two years following the auctions, this figure dropped to around 16 percent. Conversely, the share of lower-grade iron ore (60 percent Fe and below) increased from 11 percent to more than 60 percent during the same period.
The report also flagged a similar trend in the production of iron-ore fines. In one particular mine under the Joda Circle, the production of iron-ore lumps above 60 percent Fe fell from 77 percent before the auction to just 9.88 percent in 2020-21. By 2021-22, this dropped further to zero once a new lessee took over operations.
The CAG noted that such a steep decline in the reported grade of iron ore within a short span of one or two years is highly improbable, given the consistent production patterns under previous lessees for the past six years. The report suggested that new lessees may have misreported the quality of the ore to avoid paying higher royalties, which are calculated based on the grade of iron produced.
Despite the significant risk of misreporting, the state government had not investigated the reported decline in ore grades by the new lessees as of March 2022. However, a committee led by the director of mines and geology has since been formed to examine the discrepancies in ore grading and size reporting. The committee found downgrading of ore in three leases and size discrepancies in six leases, leading to a government demand of Rs 471.48 crore from the lessees involved.
The lessees have challenged these findings before the revision authority. The CAG report concluded by noting that the failure to detect and verify the actual grades of iron-ore production in a timely manner has resulted in a substantial revenue loss for the state.
