SAIL led consortium’s ambitious plan to mine iron ore in Afghanistan’s Bamiyan province has run into ifs and buts of the Hamid Karzai government.
The Afghan mines ministry has said that SAIL-led AFISCO (Afghan Iron and Steel Consortium) risks losing mining licences in the country if it fails to meet production targets or fail to commence mining within six months of the licence being granted. The ministry has also put a cap on iron ore exports to six million tonne per annum.
SAIL has reacted sharply to the decision, even as AFISCO, the ‘preferred bidder’ for blocks B, C and D of Hajigak mines, is currently negotiating the terms of the project contract with the Afghan mines ministry.
In a letter to India’s ambassador to Afghanistan Mr G Mukhopadhyaya on August 31, the Steel Authority of India opposed the terms and conditions proposed by the Afghan mines ministry before finalizing the agreement to allow the consortium to explore the Hajigak mines.
In the draft agreement, the Karzai government has said that it can terminate the exploration licence granted to AFISCO if it fails to commence mining within six months of being granted the licence by giving a 60 days notice to it. SAIL wants the draft agreement re-written, and said that “If the company has not commenced exploration within twelve months for reasons beyond the control of the company, it shall have the right to propose an extension of time which the state shall not unreasonably reject.”
SAIL argues that the Afghan mines ministry’s proposed clause on termination of contract may not be acceptable to the lenders. SAIL said that “In addition, the consortium can place orders for equipment only on the grant of exploratory licence and there is a lead time in receipt of equipment. While the equipment will have to be sourced from outside Afghanistan, the problem will compound as the country does not have adequate rail or road infrastructure.”
Another proposal of the Afghan government says that AFISCO’s contract could be terminated if it failed to meet the mine production targets for any six months period or a mutually agreed period.
SAIL said iron ore production is directly proportional to the demand and “if there is a prolonged slump in the market or the price of iron ore crashes and such a situation prolongs, it may not be viable to mine and sell ore.”
Opposing the six million tonne cap on iron ore export, SAIL has shot back saying that in the Request for Proposal issued by the mines ministry there was no such restriction specified.
SAIL pointed out that “The clauses proposed by the ministry are putting an arbitrary restriction on the consortium for production and sale of ore. The clause per se is against the provisions of RFP on the basis of which the consortium had submitted its bid.”
Afghan mines ministry says it can terminate exploration licence granted to AFISCO if it fails to commence mining within six months of being granted the licence
AFISCO’s contract could be terminated if it fails to meet the production targets for any six months or a mutually agreed period
Consortium cannot mine and export more than six million tonne of iron ore per annum from Hajigak mines
Source - Indian Express
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