In Tamil Nadu, Sixteen Years Of Sand Mining Loot Officially Termed 'Illegal'

Despite political turmoil, Tamil Nadu is cracking down hard on beach sand mining baron S. Vaikundarajan and others as a crucial hearing in the Madras high court nears.

(Originally published in The Wire on 20 Feb 2017

Link: https://thewire.in/business/tamil-nadu-sand-mining)




Last month, The Wire had reported in detail about large-scale violations in beach sand mining in the southernmost corner of Tamil Nadu. That report detailed the findings of the Tirunelveli district administration and the state’s mining department on illegal mining and exports continuing to take place despite a ban on the same issued by the state government since September 2013.

Now the district administration as well as the mining department has found that these same miners have indulged in illegal mining since – and they have documented the data in the period between 2000-2001 and 2007-2008. The findings are part of the minutes of the district level committee meeting on the prevention of illegal beach sand mining and transportation of beach sand minerals. This meeting was held at the Tirunelveli collectorate on February 14 this year.

The data has been culled out painstakingly by officials who matched the actual quantum of exports of beach sand minerals by these companies with the quantum permitted to be mined. “In an effort to hide the illegalities, the miners tried to show waste sand as raw sand,” said one senior official who did not wish to be named. “But we are on to them now. We know exactly how they are operating and hiding illegal mining and exports.”

The committee has pointed out that an excess of almost 34 lakh metric tonnes (MT) of raw sand has been mined by a group of miners including VV Mineral, Transworld Garnet India – both owned by S. Vaikundarajan – as well as by Beach Minerals Company, Beach Minerals (Sands) Company and M. Ramesh and K. Thangaraj during the period spanning 2000-01 to 2007-08. In the same period, close to 9 lakh MT of garnet, around 8 lakh MT of ilmenite, 3,500 MT of zircon and 1,350 MT of rutile have also been mined, transported and stored. According to the committee, these figures are over and above the legal amount allowed to be mined by miners.

The committee goes on to declare this entire quantum illegal – “… the aforesaid entire quantum of raw sand (ROM) kept with them at the end of each financial year for the period from 2000-2001 to 2007-2008 as reported by VV Mineral are to be treated as illegally mined, illegally transported and illegally stored one by contravening the provisions of section 4(1) and 4(1A) of the Mines and Minerals (Development and Regulations) Act, 1957.”

The miners, as per the committee, had argued that this quantum was the amount of raw sand left over in their factories from the previous financial year. But the committee was not convinced. “The alleged run of mines kept with Tvl VV Mineral at the end of each financial year from 2001-2002 to 2007-2008 could be waste only and it could not be either raw sand or semi-processed minerals or processed minerals,” it stated.

Beach sand scooped up from the shores of Tirunelveli, Tuticorin and Kanyakumari in Tamil Nadu comprises a mixture of minerals like garnet, ilmenite, rutile, sillimanite and zircon and is known as raw sand. This raw sand then heads to a pre-concentration plant, where this mineral mixture is removed from the rest of the sand in a concentrated manner. What is thrown out is referred to as waste sand – devoid of the precious minerals. The concentrated mixture of minerals finally heads to a mineral separation plant where it is separated into different materials like garnet.

Royalty loot?

The committee has also pointed to alarming instances of evasion of royalties over the years. This, according to sources in government, has been carried out in a manner so ingenious that authorities investigating illegal mining have only recently stumbled upon it.

“According to a very conservative estimate by our department, the miners owe the state government royalties to the tune of at least Rs 100 crores,” said the official. “The funny thing is that they claim instead to have paid around Rs 7 crores more than what is required of them in advance royalties and they are claiming it back from the government!”

Royalties are mired in a complicated set of rules involving a number of departments, perhaps making it easier for those wanting to evade it to flummox well meaning officials.

When the beach sand mining sector was still in a nascent stage in the 1990s, the Centre’s ministry of mines had adhered to what is called the ‘tonnage basis regime’. Simply put, the miner had to pay a flat rate to the government towards royalties – for beach sand minerals, this was fixed at Rs 45 per tonne.

In 1997 though, an amendment was made to Schedule II of the Mines and Minerals (Regulation and Development) Act of 1957. With this amendment, the royalty calculation changed from a tonnage basis to what is called an ad valorem basis. Royalty on an ad valorem basis is calculated as a percentage of the market price of the mineral rather than fixing a flat rate. This change in royalty calculations was to ensure that the government coffers did not lose out as private miners of a variety of minerals got fat on profits. Royalties on ad valorem basis is the procedure adopted widely internationally.

But market prices fluctuate and to counter this, the Centre had also stated that the Indian Bureau of Mines (IBM) would publish a handbook every year, giving an average market price for each mineral in order to calculate royalties due to the state. The IBM value was to be the base for market price – as per Section 64D of the Mineral Concession Rules of 1960, royalty is equal to sale price of mineral (grade-wise and state-wise) published by IBM X Rate of royalty (in percentage) X Total quantity of mineral grade produced/dispatched.

Curiously, for beach sand minerals in Tamil Nadu though, the ad valorem calculation was not applied. For many royalty payments, the miners were given the benefit of paying a paltry Rs 45 per tonne as royalty, as existed in the pre-1997 era. As the country lurched into the new millennium, ad valorem slowly began to be applied. But here too was a twist.

The IBM’s sale prices published every year was much lower than the existing market price. “It is only in the past couple of years that IBM is actually reflecting the real market value of these beach sand minerals,” explained the official. “Today garnet is sold locally at Rs 8,000 per MT and ilmenite at Rs 50,000 per MT. But until a few years ago, IBM was publishing rates like Rs 471, Rs 607 and Rs 615 per MT. It was atrocious. There was a complete mismatch between actual market prices and what IBM was putting out,” he said.

Another issue with IBM’s rates were that the prices of these minerals in India were taken into account. But the market in India is poor and the bulk of these minerals are exported abroad. “Royalties on ad valorem basis should have taken export prices into account. That was not done. Export prices are at least 10 to 15 times higher than the local market value,” stated the official.

With flawed market rates to begin with, the miners then went on to create a conducive atmosphere at the district level in order to pay as little royalty as they possibly could.

Raw sand mined, when taken out to the pre-concentration plant, can only be moved once a tentative advance royalty is paid by the miner to the district authorities. Once the minerals are ready for export, royalty has to be finalised based on the mineral being exported as well as the quantity of that mineral.

Authorities at the district level, over decades, appear to have colluded with the miners to ensure that since 2000-01, royalties were only paid for the raw sand mined – a paltry 3% was paid and in fact, as per the District Level Committee’s report, the miners have even claimed that they have paid an additional Rs 7.3 crores in royalties over and above what they owe to government.

What they have relied upon to get away with this for close to three decades, according to the committee, is a specific section under the Mineral Concession Rules. Rule 64B (2) states, “In case run-of-mine mineral is removed from the leased area to a processing plant which is located outside the leased area, then, royalty shall be chargeable on the unprocessed run-of-mine mineral and not on the processed product.”

In reality though, Rule 64D is the one applicable to beach sand minerals – this section deals with those minerals for which royalties have to be calculated on an ad valorem basis. The district level committee picked up on this and termed the calculation of royalty between 2000-01 and 2007-08 as “totally erroneous”.

“In view of the large scale violations detected in the beach sand mining and transportation of raw sand, garnet, ilmenite, rutile and zircon for the period from 2000-01 to 2007-08, the royalty accounts settled, if any, early in respect of Tvl VV Mineral for the said period are to be treated as null and void,” states the committee.

Cracking down on exports

The Wire had reported in the first part of the series about how ports in Tamil Nadu had finally shut their doors to illegal exports of beach minerals in late 2016. VV Mineral owner S. Vaikundarajan, unable to meet his export obligations from Tamil Nadu’s ports, set his sights on neighbouring Kerala’s Cochin port. About 3,107 MT of garnet was moved to Cochin and out of this, 140 MT was exported on December 17, 2016, by VV Mineral’s own admission.

When the Tirunelveli collector M. Karunagaran got wind of this, he shot off a notice to the Cochin port authorities dated December 21, 2016, stating that “it is learnt that Tvl VV Mineral and other lessees from the state of Tamil Nadu are making their attempts for export of beach sand minerals… from the ports situated outside the state of Tamil Nadu. It is hereby informed that, the lessees cum illegal miners have no locus standi to export beach sand minerals without valid transport permits issued by the deputy director/assistant director of geology and mining concerned and no export of beach sand minerals can be allowed in the absence of such permits by any authority.”

Cochin port authorities stopped the exports. And Vaikundarajan moved the Kerala high court, asking that the port be directed to allow his goods to go abroad. In the petition filed in the first week of January, VV Mineral states that the district collector of Tirunelveli “has naively assumed that if any stocks of minerals are found, which are beyond the projected reserves set forth in the mining plans, then, such stocks are “illegally mined”. Such assumption will not withstand even a moment’s scrutiny, and the petitioner (VV Mineral) states that such unscientific and legally untenable order is void ab initio.”

VV Mineral also goes on to quote the Customs Act of 1962 and the foreign trade policy framed under the Foreign Trade Development and Regulation Act of 1992. The company makes the argument that garnet is not a “specified good” as listed under Section 11H(e) and that there are no restrictions in law for garnet exports.

“…it is quite obvious that the 1st and 2nd respondents (Cochin’s Assistant Commissioner of Customs and Commissioner of Customs respectively) have acted at the behest of a letter issued by the 3rd respondent district collector who has absolutely no jurisdiction to issue such a direction pertaining to exports and any such direction cannot even be looked into leave alone implemented by the 1st and 2nd respondents…”

The customs department sought to implead the Tirunelveli district collector in January when the case came up for hearing in the Kerala high court. Subsequently the collector’s counsel argued that the court should not pass orders on this petition and that this case should be transferred to the first bench of the Madras high court which is already hearing a bunch of petitions along with the suo motu PIL. The court refused to allow VV Mineral’s plea for a stay on the ban on exports from Cochin port. The next hearing is scheduled for the end of February.

WhatsApp wars

A miner frustrated is not likely to remain silent for very long. With the Kerala high court adjourning the case, the miner is in a fix as he simply cannot export.

A series of defamatory posts on social media platforms like Facebook and Twitter and WhatsApp began doing the rounds. The messages, in Tamil, some of which are available with this reporter, make allegations of huge sums of unaccounted wealth – to the tune of Rs 6,000 crores – allegedly amassed by the Tirunelveli collector. The posts also allege that the collector was taking action against Vaikundarajan because of his proximity (some messages say relation) to T.T.V. Dhinakaran, a nephew of V.K. Sasikala and current deputy general secretary of the ruling All India Anna Dravida Munnetra Kazhagam.

Activists and environmentalists in Tirunelveli who received these messages countered them with another set of messages on WhatsApp, kindling a war of words over the messaging app.

The Tirunelveli collector, on February 16, filed a complaint against Vaikundarajan and unknown persons with the cyber crime wing of the police regarding the defamatory messages, asking for action to be taken against them.

When contacted about the defamatory messages, collector M. Karunagaran told The Wire, “These allegations are 100% false. Mr Vaikundarajan has tried to spoil my courage and threatened the entire official machinery involved in preventing illegal mining. He is known to use these kinds of tactics to achieve his illegal aims. His allegations are totally false and I am now more confident and my vigour has been spirited by Mr Vaikundarajan’s false criticisms. Therefore my drive against illegal mining will be continued with greater efforts and dedication to the benefits of the state and the nation.”

In turn, VV Mineral’s managing director, Vaikundarajan responded to the allegations via email on February 20, “Regarding your cut paste mail para 8, I don’t want to make such type of campaign.  I have sufficient evident to initiate criminal action against the district collector for not following the procedure and for making false report. I am waiting for some other reports. After collecting all the documentary evidences, I will take legal action through court of law, as taken against Mr Ashishkumar.”