The CAG warns the Telugu Desam Government before reopening the Vishakhapatnam mines

The Comptroller and Auditor General (CAG) of India has issued a warning to the Telugu Desam Government who are planning to reopen the Vishakhapatnam bauxite mining, after studying the Memorandum of Understanding with Jinal South West Holding Ltd and Ras Al Khaimah in 2005-07 signed by the previous Congress government.

The agreement seemed to be nothing more than a method to steal the rich minerals of the Araku Valley. The mines were grossly undervalued and was handed to the two parties at a measly sum of INR 258 crore whereas its original valuation was somewhere around INR 11,400 crore.

The mining leases were cancelled thankfully in September 2012 by the Union tribal welfare ministry otherwise the state would have suffered a loss of thousands of crores of rupees. The CAG report creates a strong argument in favour of cancelling the previous MoU completely and draw up a fresh one taking in the new market prices of alumina and aluminium in consideration.

Besides the under valuation, the state government also made the mistake of agreeing to an equity stake of only 1.5% as stated in the MoU between the APMDC and the two companies – Jindal and Ras Al Khaimah for setting up smelters in refineries. This meant that APMDC had to mine and provide 240 million tonnes of bauxite to Jindal and 220 million tonnes to Ras Al Khaimah.

Moreover, the consultants of the companies recommended that the sale price of the bauxite be set according to the royalty method so that the profit could only be 1.25 times of royalty charged for bauxite, which was another loss for the government.