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  Leasing Iron Mines  

 

We are a Nation of Mute Millions. The Media, the so called Intellectuals and the Bureaucracy, besides others slept for years.

2010 hours, 7th July, 2011: CNBC TV 18:  Government is mulling a proposal that companies having lease on mines / national assets will have to spend on the local people, a sum roughly equal to the royalty that they pay for the lease to the Government. Lease amount is getting doubled - is that the right solution, after 65 years of sleep ? The amount, under Government control, will just leak

 

National Assets like Gas [ refer kg gas pages ]. iron ore mines, Coal, Lime stone quarries are all leased at very low fixed prices per kg - at say 25 paise per kg for iron ores. The companies do not pay more, when they raise the steel or Gas prices. The owners / public do not gain.

But if it is petrol, the Government charges ad valorem duty / a percentage of the Selling price as tax to the Public. With inflation going up, public always pay more. 

Read further to know how the National Assets are thrown away to make some people / companies rich

 

Government's company making a Profit ! is it true ? yes
 

NMDC is the largest exporter of Iron Ore from India

  Financial results of 2007 and 2008, advertised by NMDC: Business Standard 19-5-2008
   
  Sales have gone up from 4186 Crores to 5711 Crores - 40% increase in Sales. Profit before Tax increased from 3498 Crores to 4947 Crores. 
   
  For 2008, Profit after Tax is 3251 Crores on total sales, including other income, of 6381 Crores - just 50.9%. The earnings per share on Rs 10 Book Value share is only Rs. 246
   
  Iron Ore Sales and exports is 5705 Crores and other minerals account for 6 Crores. Sesa Goa, when I checked last, had 52% Profit after tax results

If a Government of India undertaking makes this much profit and issues bonus shares also, you have to study the contents below and think of all things - even rake off

 

 

Important Note 
   
  1] Sesa Goa - how do they make profit ? , I went into their Profit and Loss Account - was shocked by their dependable and increasing operating margin - just iron ore mining and exporting the ore. Then I found the Hidden Treasure - ore for only 2.5 paise per kg

2] Recently, NMDC, a Government of India concern gave 2 Bonus shares for each one share held. As on 7th August 2008, while Government is pressurising the Steel and Cement companies to hold the price, NMDC is asking for only 92% price rise for its Iron Ore ? No comments needed

3. Some poor people would routinely visit the steel / scrap iron companies, separate the iron from the sand with a magnet, pick useless iron bits and pieces and eke out a living, selling them. They do not get that for 2 or 3 paise per kg. The Steel barons do !

 

 

Cost of Ore and Selling Price of Steel
   
  Government is now charging Rs 25 per ton as the lease charges for the iron ore mines. They plan / threaten to raise it and you can bet that they would, to perhaps Rs 50 per ton, after Sail, Posco, Sesa Goa, Mittal, Jindal and Tisco have been awarded the lease at throwaway prices - when you and I apply for iron ore leases, we may be denied. Sail, NMDC, Sesa Goa and others export the iron ore.

 

 

Baseless justification for the loot and or the share
   
  The Chinese buy the Indian ore at around 170 Dollars per ton. China is the biggest producer and exporter of Steel - despite paying 270 times more for the ore compared to the Indian Steel makers

As of January 2009, the Government has imposed anti dumping duty on import of Steel from China. How do they sell steel at 90% of Indian market prices !

 

Gifts like the Iron Ore pricing are aplenty, if persons like Arun Shourie will  probe and expose others
  In 2006, I came across one company, which was going into or incurring loss and wanted some assistance to tide over. They had 250 plus employees. The total assistance they got from the Government through additional finance at nil interest, waived sales tax and other taxes for years - past and future, and some more. It was over 50% of the total planned expenditure for restructuring. Company, with its astute managerial skill, recovered within 18 months [ why the hell did it go bad in the first place ? was I the manager ? ] 

The poor and the needy, who needs such assistance, never get them. The rich beggars are showered with gifts that spills over 

               


How to become a Billionaire ?

Start a Steel Plant in India !

Iron Ore mines are National Property. The Government continues to gift them

 

Arcelor Mittal Investment - an example to illustrate the Gift
  ND TV Profit - 19th or 20th November 2007
   
  They are planning to invest 20 Billion Dollars - 20,000 Million Dollars - or 80000 Crores Rupees to produce 24 Million Tons steel. 

In return, the iron ore demanded is only 500 Million tons to last over 20 years. 

 

The likely benefit is over 85 Billions
   
  What is the current market value of 500 Million Tons of Iron Ore ?

500 x Million = 0.5 Billion; 0.5 Billion x 170 per ton, market price of iron ore = 85 Billion

500 Million tons, at even Rs 50 / ton, would only mean, purchase price 2500 Millions or 2.5 billion

85-2.5 Billion would be the potential gain

Let us knock Bill Gates out forever. If 20 Billions Dollar investment can fetch a potential benefit of 85 Billions in potential benefits, Mittal will easily become the richest person in the World -

India will continue to be a land of have nots to produce many richest men 

 

 
  Errors and Omissions exempted.  If there be any unwanted oversights, mistake in content or suggestions for improvements,  I will be thankful for your feedback  
  Personal website of R. Ranganathan M.Sc., [ MBA - IIMA]    Main / original content: 2006: last minor modification, June 5,  2011