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Why a gold mine failed to rake in megabucks

B KSarkar in New Delhi

Faulty decisions by the government and its lax attitude towards implementing reports by committees to suggest ways on improving health led to Bharat Gold Mines Limited becoming a sick public sector undertaking, according to sources.

The Karnataka-based company engaged in the production of gold, and silver and zinc as byproducts, was not allowed to dispose of its gold at the prevailing domestic market prices. Nor did the government offer it the London Metal Exchange price, they point out.

The entire gold product of BGML was supposed to go to the Reserve Bank of India, which in turn would pay the PSU the controlled price of the bullion. This used to be several times lower than the domestic market price as well as the prevailing LME price, eventually making the company sick by early '90s.

At this, BMGL was referred to the Board for Industrial and Financial Reconstruction for revival.

The subsequent years saw the government setting up as many as three parliamentary committees to suggest ways to better its condition. Also set up were two committees headed by former secretaries and three others by the Industrial Credit and Investment Corporation of India -- in 1994, 1996 and 1997.

All these committees, while concluding that the company was viable, suggested that BGML should undertake gold exploration, intensify diversification, be provided with subsidised power by the government and that its royalty should be waived, capacity utilisation enhanced and workshops modernised.

The reports also suggested phasing out of exhausted and uneconomical mines and asked the government to permit the company to sell its products in the open market.

The government implemented the phasing-out of exhausted and uneconomical mines but took no action on the other recommendations.

The sources said that what went almost incorrigibly wrong with the firm was as a fallout of a 1989 government decision to sell its product in the open market.

Apart from this, the central government never approved exploration of gold beyond a seven to eight kilometre stretch of length out of a total strike length of 80 kilometre and width of two to six kilometres.

UNI

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