Rs 5800 Crore Dues: More Irregularities In Beach Sand Mining
The beaches of southern Tamil Nadu have been ravagedPic courtesy: Forbidden Stories 

Rs 5800 Crore Dues: More Irregularities In Beach Sand Mining

Part 2: Exports shown as domestic sales and a large quantum of illegally mined minerals

In Part 1, we saw how rules were bent, prompting a Rs 5800 crore loss to the Tamil Nadu state in royalties and illegally mined minerals.

The beaches of southern Tamil Nadu have been ravaged
Rs 5800 Crore Loss To TN Exchequer From Unpaid Royalties & Cost Of Illegally Mined Minerals

In Part 2, we look at some of the other tricks that the miners indulged in to deny due royalty to the state.

And this was done while district collectors, mining department officials and other government staff looked the other way.

Whether deliberate or without application of mind, this amounts to dereliction of duty.

Local Sales Versus Exports

The Amicus Curiae’s third report on beach sand mining, which is before the Madras High Court, finds that the beach sand miners have managed to fudge exports by labelling them as domestic sales, thereby availing of lower sale price and thus, lower royalty.

As discussed in Part 1, Rule 64(D) of the Mineral Concession Rules, 1960, earlier provided the method of calculation of royalty depending on whether the sale was in India or abroad.

Here’s how the tweak on sale price of the minerals was done when the miners were faced with Rule 64(D).

The miners have shown the beach sand minerals mined as having been sold locally, within India, before the Royalty Settlement Proceedings. But before the Taluka Committee proceedings as well as before the court, they have claimed that they are a 100% Export Oriented Unit.

Why was this misleading statement made? To what end?

The only reason that would explain this conscious and deliberate act of providing misleading information about sales being largely local, is that it would therefore help the company to show lower sale value of the BSMs in the local market as contrasted to a huge sale value which will be actually realised if shown as export sales. Since sale price and therefore sale value, is lower for local sales as contrasted to export sales, the determination of royalty which is based on ‘sale value at ad valorem basis’ will be much lesser compared to the royalty which will be leviable on exports,” states the report.

The Amicus Curiae props up a telling example of the above. Remember, all figures are provided to the different committees by the miners themselves.

Below is a table of the figures of sales provided by VV Mineral to two different government committees.

VV Mineral data of mineral sales
VV Mineral data of mineral sales Source: Amicus Curiae 3rd Report

As one can see, the total quantity of beach sand minerals exported by VV Mineral was declared by them in the Royalty Settlement Proceedings as being 1765 metric tonnes. However, before the Taluka Committee, they have claimed to have exported 8.83 lakh metric tonnes of minerals.

The Amicus has also correlated the figures in the above two documents with data from the Thoothukudi port.

Curiously, while the firm makes a claim of having exported five metric tonnes of ilmenite in 2005-06, data from the Thoothukudi port shows that the company exported five lakh metric tonnes in just two years of that period.

The data is compared in the table below.

VV Mineral ilmenite sales figures
VV Mineral ilmenite sales figuresSource: Amicus Curiae 3rd Report

Non-Disclosure of Sale Of Minerals

Large amounts of minerals exported have also not been disclosed by the miners during the Royalty Settlement Proceedings. This is another route through which royalty has been evaded, according to the Amicus Curiae’s report.

The report cites Vetrivel Minerals, a firm that does not have a mining lease and is situated in the AMRL SEZ in Nanguneri, Tirunelveli.

Data with the Customs department of the Thoothukudi port shows that they have exported a mere 23,260 metric tonnes of beach sand minerals between 2012 and 2014.

However, in a Special Leave Petition filed before the Supreme Court, Vetrivel Minerals stated that they have exported 5,96,741 metric tonnes of minerals between 2013-14 to December 2016. In effect, these exports took place from ports other than Thoothukudi, concludes the Amicus Curiae.

“Vetrivel Minerals is duty bound to report the quantum of each of the BSMs, viz., Garnet, Silimanite, Ilmenite, Rutile, Leucoxene and Zircon exported annually from other ports for the same period, and their sale price per consignment of BSM so that royalty on the same may be calculated as per rules,” states the report.

The Amicus Curiae also observes that Vetrivel Minerals had not disclosed the large amount of exports totalling Rs 467 crore before the Madras High Court in the ongoing PIL.

Supreme Court & Illegal Mining

In a landmark judgement by Justice Madan B Lokur in Common Cause vs Union Of India dated 02 August 2017, the Supreme Court extended the scope of defining illegal mining.

Relying on the Mineral Concession Rules of 1960, the Central Empowered Committee had submitted to the Supreme Court, its definition of illegal mining as being any mining conducted outside of the area which had been leased to a miner.

Illegal mining has been defined as mining operations undertaken by any person in any area without holding a mining lease. It does not include violation of any rules within the mining lease area except the Rules made under Section 23C of the MMDR Act, 1957. The mining lease area shall be considered as an area held with lawful authority by the lessee (refer Rule 2(iia), MCR, 1960).

However, Justice Lokur ruled that this was a narrow definition of illegal mining.

“… the holder of a mining lease is required to adhere to the terms of the mining scheme, the mining plan and the mining lease as well as the statutes such as the EPA, the FCA, the Water (Prevention and Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981. If any mining operation is conducted in violation of any of these requirements, then that mining operation is illegal or unlawful. Any extraction of a mineral through an illegal or unlawful mining operation would become illegally or unlawfully extracted mineral.

It is not, as suggested by learned counsel, that illegal mining is confined only to mining operations outside a leased area. Such an activity is obviously illegal or unlawful mining. Illegal mining takes within its fold excess extraction of a mineral over the permissible limit even within the mining lease area which is held under lawful authority, if that excess extraction is contrary to the mining scheme, the mining plan, the mining lease or a statutory requirement. Even otherwise, it is not possible for us to accept the narrow interpretation sought to be canvassed by learned counsel for the mining lease holders particularly since we are dealing with a natural resource which is intended for the benefit of everyone and not only for the benefit of the mining lease holders,” ruled the judge.

Armed with this judgement, the Amicus Curiae goes on to detail the quantum of excessive mining beyond permissible limits and various other irregularities indulged in by the miners and to quantify the cost of the minerals unlawfully mined.

The total cost of unlawfully mined minerals was computed to be worth over Rs 5600 crore.

Cost of unlawfully mined minerals
Cost of unlawfully mined mineralsSource: Amicus Curiae 3rd Report

Worse, the report also observes that “the volume of exports was significantly high during the post-ban period after August/ September, 2013,” meaning that despite the ban on beach sand mining and exports imposed by the then Chief Minister J Jayalalithaa, the miners continued to export, and did so in much larger quantities than in previous years.

Reiterating his recommendation of a Special Investigation Team to probe all aspects of irregularities in beach sand mining, the Amicus Curiae not only asks for criminal prosecution of the miners but also of officials involved.

“… the officials of the District Geology and Mining Department, as also the District Collectors of each of the three districts Tirunelveli, Thoothukudi and Kanyakumari have not only acted in violation of the requirements of the provisions of Sec. 9 and the Second Schedule of the MMDR Act, 1957 and provisions of Rule 64D MCR, 1960, but have actually colluded and connived with the different mining companies to ensure beneficial fixation of royalty thereby reducing the royalty amount that the companies need to pay the government each year of the assessment period, but also to ensure that the mining companies gained financially by defrauding and cheating the government of just dues for the minerals sold by them. The government officials by their deliberate action to defeat the mandates of the law to ensure proper royalty fixation by subverting legal processes have thereby committed serious offences for which they need to be prosecuted under provisions of the Prevention of Corruption Act, Indian Penal Code, MMDR Act, 1957 and other economic laws of the land.

It is equally important to note that the officials who colluded with the mining companies have also ensured subversion and violation of ‘Conditions of Lease Granting Orders’ (GO or DGM Proceedings) and ‘Mining Lease Deed’ executed. In addition to criminal prosecution as prescribed in law, the officials should also be held liable for administrative action for such acts of omission and commission,” states the report.

Experts who understand the beach sand mining industry, agree.

“In a so-called effort to boost the economy, governments are rapidly racing to the bottom,” Managing Trustee of Environics Trust and former employee of the Atomic Minerals Division of the Government of India, R Sridhar told The Lede.

“Mineral royalty rates have not been revised as frequently as they should have been. Further for long and when we start investigating on a case to case basis, we find even the pittance that is given as royalty is cheated. We need a complete overhaul of our mineral resources administration recognising that the sector faces a total regulatory failure. Today, it only calls for scrutiny to know that almost all mining of beach sands containing valuable rare earths has been a massive illegal economic activity and has added to the environmental and social costs for the local communities. The saga of beach sand mining now completely exposed in Tamil Nadu is a clear case of callousness and collusion,” he said.

The Lede sent exhaustive questionnaires by email to the beach sand miners, the IBM, the Director, Department of Geology and Mining of the Tamil Nadu government as well as to the Chief Minister’s office and the Chief Secretary’s office.

Except for one miner, S Vaikundarajan of VV Mineral, no one else responded. The email response of Vaikundarajan is reproduced below.

Mrs.Sandya,

Given the history of biased reporting from you and the fact that these matters are sub-judice, we are not inclined to respond to any of your queries.

This report will be updated if further responses are received.

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