CAG blows the lid off major irregularities in Odisha mining sector

CAG uncovers ₹22,392.51 crore loss in Odisha's mining sector due to irregularities in production reporting and royalty charges.

The Comptroller and Auditor General of India has blown the lid off major irregularities in Odisha’s mining sector, estimating the loss of mining revenue and value of minerals at a whopping ₹22,392.51 crore.

The CAG arrived at the loss figure by accounting for reports of lower grade iron ore and iron ore fines as screened fines, non-utilisation of sub-grade iron ore, short assessment of royalty, production exceeding approved in mining plan and environmental clearance and production of chromite without forest clearance.

The apex audit agency pointed out an interesting loophole in auction regime which was adopted after massive mining irregularities reported across the country.

“It was observed after auction that in case of selected mines, there was an abrupt and abnormal decline in the grade of iron-ore and its classification reported by the new lessees. Though more than 83% production was reported in the grade of 62-65% Fe in the pre-auction period, the same came down to approximately 16% in the two years after auction (2020-2022),” the report finds.

“Similarly, share of grades 60% Fe and below went up from approximately 11% of total production to more than 60% of total production in the two years after auction (2020-2022),” it adds.

Stating that a similar trend was also noticed in the case of production of fines, the CAG points out that in the case of one iron-ore mine under the Joda Circle, the average production of lumps of grades above 60% Fe was about 77% before the auction, which drastically reduced to a mere 9.88% within one year, in 2020-21 and further reduced to 0% during 2021-22 after new lessee started operating the mine.

“It is highly improbable that the grades of mineral reserves, produced from the auctioned mines, would witness an abrupt decline within a short period of one or two years. Such a significant and sharp decline in the grade of iron-ore indicated a significant risk that the new lessees were misreporting the grade of iron-ore produced, in order to avoid higher royalty and premium payable on higher grades,” CAG reported.