By Our Correspondent in February 24, 2015

Odisha government has decided not scrap joint venture agreements with Rio Titno, Sesa Sterlite and Hindalco Industries for mining iron ore and bauxite, which is expected to upset the calculations of these corporate houses of having assured raw material supplies to run their plants.

The state government managed Odisha Mining Corporation [OMC] has recently conveyed the state government’s decision to scrap the JV agreements, sources in the steel and mines department said.

The cash surplus OMC had formed a JV with Anglo Australian JV Rio Tinto on February 24, 1995 to develop Gandhamardhan and Malangtoli iron ore deposits in Keonjhar and Sundergarh districts with a mining capacity of 25 million ton per annum.

Similarly, the state PSU had formed South West Bauxite Mining Company (Pvt) Ltd, a JV with 26% equity of Sterlite Industries India Limited (SIIL) in 2009 for supply of bauxite from deposits in Kalahandi and Rayagada districts to feed the aluminium refinery of Vedanta Aluminium Ltd (now Sesa Sterlite).

Besides, it had formed a JV with Hindalco named East Coast Bauxite Mining Company (Pvt) Ltd in 2005 with 26:74 equity holding for development of Kodingamali bauxite mine, having estimated reserve of 85 million tons, in Koraput district and supplying it to the alumina refinery of Hindalco.

Officials attributed the changed dynamics in mining law as the reason for scrapping of three JV projects. With the changed market scenario in both the iron ore and bauxite mining, the OMC now has decided to position to play the role of a standalone and long-term iron ore and bauxite supplier, officials said.

As far as Rio Tinto is concerned the JV project never really took off the ground with the mining major announcing not to go ahead with the project some two years back. More ever, both the JV partners had been at loggerheads over the issue of sharing of the iron ore.

While Rio Tinto insisted to export half of the iron ore mined, OMC was keen on meeting raw material needs of local industries. Later OMC sought winding up of the $ one billion JV project as per advice of the Solicitor General of India billed as one of the biggest foreign direct investment in mining sector.

This led a protracted legal battle between the two parties. While approached the Odisha High Court in 2003 to wind up the JV agreement, Rio Tinto had knocked the door of the Company Law Board of India to contest OMC’s claim.

In between, there had been attempts to patch up and revive the JV, but with a boom in the iron ore prices and flooding of steel plant proposals with the state government, the OMC did not make any further move.

While OMC already has scrapped the JV agreement with Rio Tinto, it has just initiated the process to annul JVs with Sesa Sterlite and Hindalco by issuing show cause notices to Hindalco and Sea Sterlite, officials added.