The Karnataka government is in the process of calling for fresh tenders of Donimali iron ore mines and may go in for auction in case the state-owned NMDC does not sign the contract agreeing for 80 per cent premium in the next three weeks, sources close to the development said. However, PR Tripathi, former CMD of NMDC says the imposition of 'heavy' premium on a public sector undertaking is not tenable as per law. NMDC has suspended iron ore mining from its Donimalai mine in Karnataka following the state governments decision to impose 80 per cent premium on ore sales from that minewhose lease hasbeen extended by the Karnataka government with effect from November 4 for a period of 20 years. "Based on the request by the CMD of NMDC (N Baijendra Kumar)the matterwas again referred to the Karnataka Advocate General.
When contacted, Karnataka Mining Secretary Rajendra Kumar Kataria justifying the premium, said the state Law Department gave its opinion and the state cabinet had also approved imposition of the premium. Tripathi alleged the state government became greedy and said the premium is applicable only in case of fresh auctions of mines but not for lease renewals. "The state government is blinded with the concept of revenue. The Karnataka government has become so greedy that they are looking attheshort-term revenues. If any company (PSU)pays 80per cent premium it cannot survive. According to him, the state in the recent past had auctioned 12 mines where the weighted average of the premium was more than 110 per cent and NMDC also participated for mines for which it offered 95 per cent and 105 per cent as premium. A senior official of NMDC said if the Karnataka government decides to stick to the 80 per cent premium, the miner would be losing Rs 1,348 per tonne and may result in a loss of Rs 944 crore per annum as it mines about seven million tonnes per annum from that mine.