The tussle between the Orissa government and the Union ministry of mines over the fixation of iron ore prices for levy of royalty has deepened further with the Orissa government deciding to contest the Union minister?s statement that the prices have been fixed after consultations with the Orissa government.

?We are going to write to the Union ministry of mines that fixation of prices by Indian Bureau of Mines is faulty,? the state?s chief secretary told FE.

Orissa chief minister Naveen Patnaik in May 2011 had written a letter to the Union minister for mines, Dinsha J Patel, pointing out that the procedure of fixing the sale value of iron ore by IBM (Indian Bureau of Mines) is ?flawed?. He had asked the Centre to revise the price to match the prevailing market rate.

The state chief secretary, BK Patnaik, had also written a letter suggesting that the market value be fixed as per the prevailing prices.

IBM publishes the sale value of iron ore on a monthly basis, over which royalty is calculated. Currently, the sale value is fixed by IBM on the basis of pit mouth value. And, the state believes the iron ore rates to be underestimated as a result of which the state government is incurring losses in terms of royalty.

The Union minister has replied to the Orissa chief minister recently that IBM is fixing the prices after consultations with the Orissa government.

A top state government official alleged that prices have been fixed after consultations with private mine owners. The official said even the the Orissa government-owned Orissa Mining Corporation(OMC) and the Central-sector Orissa Minerals Development Corporation and captive mine owners have not been consulted for the fixation of the iron ore prices.

Following the switch over to levy of royalty on iron ore on ad-valorem basis, the Orissa government’s collections from mine royalty has increased. While in 2010-11, it had a target of mopping up R2,500 crore, it collected R3,000 crore. This year the government is expecting R4,500 crore royalty against the target of R4,000 crore.