Truckers’ demand for enhanced rate for mineral transport is just

The Goa Foundation is releasing this press note on the repercussions of the recent order of the Supreme Court permitting additional time till January 31, 2021 for transporting ore extracted before March 15, 2018.

The Chief Minister has publicly stated that around 4 million tons of ore would become eligible for payment of royalty and transport for sale, considering the Supreme Court’s order dated 13.10.2020 (copy enclosed).

From the facts and figures provided below, it is crystal clear that Goa, Goa’s exchequer, and its public would gain almost nothing from this particular transaction.

Prices of iron ore have risen in the international export market. For the calculations below, we are assuming that all the 4 million tons are of average 54% FE iron ore.

If we assume mine pit head price of $35 / ton, or Rs. 2,555 / ton (using an exchange rate of Rs. 73 / USD, 35 x 73), the following scenario emerges:

If the state had auctioned off all 4 mt (which was the Goa Foundation’s position in the apex court) it would have receive Rs. 1,022 crore (4 million tons x Rs. 2,555 / ton) at today’s prices.

From this amount, it would have had to set aside Rs. 151 crore (GIOPF – Rs. 102 crore, DMF – Rs. 46 crore, NMET – Rs. 3 crore). So the State of Goa would have received Rs. 871 crore from auction of this 4 million tons.

Instead, as the State has eagerly handed over the minerals without a fight to its friends and cronies in the mining industry, it will only receive royalty of Rs. 153 crore (15% of Rs. 1,022 crore) from the disposal of the 4 million tons.

Loss to Goans, and Goa’s exchequer which is a gift to illegal miners: Rs. 717 crore (Rs. 871 crore – Rs. 153 crore).

It is important to recall that the State is selling securities every month worth Rs.100 crores to pay salaries of its staff. The rental/interest on this amount is being paid by the Goan public in the form of enhanced taxes and rates.

Even if we assume a lower pithead price of $30 per ton (instead of $35), the Goan public loses badly. If Goa govt auctioned the ore at that price, it would have received Rs.876 crores. After paying dues, it would have received Rs.746 crore from the auction.

Instead, the state would receive royalty of Rs. 131 crore (15% of Rs. 876 crore).
Loss to Goans and Goa’s exchequer which is a gift to illegal miners: Rs. 615 crore (Rs. 746 crore – Rs. 131 crore).

Obviously, the government of the State of Goa does not understand either business or economics. The public (and public interest) is the loser.

This brings us to the demand of the truckers for enhanced compensation for mineral transport till January 31, 2021. The transport of 4 million tons (average distance of 20 km) at the present rate of Rs.12 per ton km, would be 240 per ton km and this would amount to a transfer to the truckers of Rs.96 crores. If they are paid Rs.25 per ton km – which is their demand – they would get Rs.200 crores.

It appears that all that the truckers are demanding is a share of the “gift” given by the Goa government to the miners, which we have seen works out to Rs.717 crores. Thus instead of getting Rs.96 crores, the truckers would get an additional Rs.104 crores. Surely the miners can part with that?