It’s CAG & CBI’s effort (not Rlys): Essar Steel arrange Suo motu payment of Rs.89 Cr to Rlys

It is because of the great effort by the Supreme Audit Institution viz.Comptroller and Auditor General of India (CAG) and Central Bureau of Investigation (CBI) in identifying the severe lapses in tariffs related to Iron ore consignments on Indian Railways.

The announcement of CAG and investigations by CBI resulted in Essar Steel re-check all its Books vis-a-vis Railways Tariff structures from time to time, and suo motu admits lapses in tariff, and announced on its own to pay Rs.89 crore back to Railways yesterday, including penalty after discovering it, and made a statement that the tariff paid was for domestic transportation of iron ore/pellets while the consignment was meant for exports.

Surprisingly, Railways didn’t raise a claim, as usual.

The company in a statement said, “The current issue is not part of any scam.” Essar Steel claimed of having a cordial and unblemished working relationship with the Railways for more than two decades.

Terming the issue as procedural lapse, sources said when the company discovered that it had paid the tariff meant for domestic transportation of ore and pellets, it informed the Railways and agreed to pay the actual value and penalty amounting to about Rs.89 crore.

The issue pertains to export of iron ore by the company from its plant at Paradip in Odisha, commissioned in February 2012.

The Railways had served a show-cause notice to the company for exporting pellets and said that at the time of loading, the company had made a declaration that the material will be used at company”s plant in Gujarat.

However, the company said it “suo motu informed the Railways of its plan to export pellets, before the actual exports shipment, in its letter dated August 13, 2013. This was necessitated due to the week economic and steel market condition in the country. There was no malafide intention to short pay the Railways.”

“Since commissioning, the Paradip plant has produced 1.9 MT pellets and of this, only 1 lakh tonnes have been exported so far. The exported quantity amounts to 0.5 per cent of total production and was done in the later half of August,” it said.

According to the company”s statement, after their suo motu letter seeking guidance on the issue, “the Railways vide their letter August 26, 2013, suspended movement of iron ore fines to our units affecting our production adversely”.

Subsequent discussions with the Railways in line with their rules and regulations, Essar Steel has agreed to pay the additional claim, so that production can be resumed to normal level as soon as possible, the company said.

Reports have said that many iron ore and pellets exporters are transporting their material through cheap domestic routes offered by the Railways, though they are meant for exports. This has resulted in loss of several thousand crores for the Railways and the issue is under investigation by a CBI-led multi-disciplinary group.

“Essar Steel believes its responsible and transparent actions need to be acknowledged in a positive way. The insinuation on our corporate behaviour is unjust and uncalled for, affecting our brand image and reputation,” the company said.

Now the question is “whom to blame”?  – Railways or its Customer (of course, customer is always God, right?).