TEAM HERALD
PANJIM: This is the report everybody was dreading, because it takes the entire debate of legal and illegal mining to a zone which is beyond Google maps, mining beyond permissible areas and pollution. It seeks to hit at the rawest nerve of the mining sector-wealth and the way it was gotten at the cost of the State exchequer by a star cast of characters starting from mining companies, to traders to importers.
The third part of the three-part interim report of the MB Shah Commission, reportedly accepted by the Union cabinet, is expected to be an untimely last nail in the State’s mining coffin. If the investigations indeed prove that traders and mining companies committed financial fraud and irregularities in their exports, there is very little possibility of the same players getting back to business. Herald spoke to some key players and sources to figure the direction the crucial final part of the interim report could have taken.
The final report looks at the money trail and the financial manipulations by all players at various stages of the export process till the closure of transactions. According to sources involved in the process of information gathering within the Commission, the Mines department and industry players the report covers the following areas:
a) Under Invoicing: Because of a staggering export duty of 30%, many traders, under invoiced exports, with the balance amount routed to offshore accounts or paid through the hawala mode. This was done mainly by middle level traders but also by mining companies.
In fact one particularly controversial mining company owned by a builder had taken this to a level of a fine art. He sold his own ore to his own companies set up in Hong Kong and Singapore at abysmally low prices which in turn sold to the end buyers at high end rates, beating the Indian tax and duty system.
For instance, the sales for first quarter of one of the largest mining company was Rs 5,000 crore during the peak of the boom. Some middle rung companies hit Rs 1,000 crore, with an export duty liability of Rs 300 crore in the quarter. This obviously was big enough to be avoided.
b) Payments to Commission agents: There was a breed of people who germinated during the mining boom called Commission agents. These were basically middle men who were supposedly legit entities in an export transaction who got anywhere between 1 to 5%. Very often they existed on paper and were proxies of mining companies themselves. The amount paid to commission agents were a direct saving since it came back to the exporter.
c) Fictitious claims on ore grades: Pre arranged settings were done between exporter and end buyer. After the consignment was delivered, the end buyer raised a claim of the ore grade being lower than what he was paying for. The claim would be raised and finally accepted by the exporter after a fictitious back and forth of communication and even arbitration. The claim would then be settled by the exporter showing it as an expense and claim relief on export duty.
While the third part of the interim report of the Shah Commission is not limited to the above, the core of illegalities is contained in the above.
Money Trail
Under invoicing: Many traders, due to staggering 30% export duty, under invoiced exports, with the balance amount routed to offshore accounts or paid through the hawala mode.
Commission agents: Commission agents who were supposedly legit entities in an export transaction got anywhere between 1 to 5%. Very often they existed on paper and were proxies of mining companies themselves and the amount paid to them were a direct saving since it came back to the exporter.
Fictitious claims on ore grades: After a consignment was delivered, the end buyer raised a claim of the ore grade being lower than what he was paying for. The claim would be raised and finally accepted by the exporter after a fictitious back and forth of communication and even arbitration. The claim would then be settled by the exporter showing it as an expense and claim relief on export duty.
Shah Commission: Status update
The Union government constituted the Commission of Inquiry in November 2010 to probe illegal mining of iron ore and manganese ore in the country.
Goa: First interim report submitted in three parts, of which the final part has been accepted by the Union Cabinet
Orissa: Two reports submitted
Jharkhand: Exhaustive four volume report. Yet to be tabled in Parliament along with the respective action taken reports
