Indian states to start auction of 200 mines next month

Beginning next month, eight mineral-rich states will start the e-auction of 200 mines with iron ore, limestone and bauxite deposits. The states have been empowered by the centre to auction mines with these three mineral resources.

These 200 mines are mainly concentrated in Rajasthan, Jharkhand, Madhya Pradesh, Chhattisgarh, Karnataka, Gujarat and Odisha.

In the second round, mines with seven other minerals will be put up for e-auctions.

The ministry of mines on Monday notified the rules for the e-auctions, the proceeds of which will accrue to the respective states. The e-auctions have been made mandatory to award unified prospecting and mining leases for bauxite, limestone and iron ore.

The centre has stipulated that only companies or individuals with networth of INR 25 crore and above are eligible to enter the fray. Alternatively, companies or individuals in the reckoning must have a networth of at least four per cent of the estimated value of the mineral resources in the mine.

The company’s or the individual’s networth must be at least two per cent of the value of the mineral deposits in such cases where the resources are valued at below INR 25 crore.

The centre has also limited the bidding to actual end users. Only companies having alumina refineries can bid for bauxite mines, while top steel companies having integrated facilities or those in the process of setting up factories can enter the auction ring for iron ore deposits. Similarly, bidding for limestone has been limited to cement companies.

The mines ministry officials said in the first round about 12 iron ore mines, 168 limestone blocks and 20 bauxite mines will be put up for e-auction. The e-auctions for limestone, iron ore and bauxite deposits will end the discretionary powers of states to make allocation of government mineral resources or strike ‘sweet heart deals’ without transparency.

Auctions for mineral deposits are being done after Parliament adopted major amendments to the mines and minerals (development & regulation) bill of 2015.

While the broad rules for the e-auctions have been set by centre, the states have been allowed to fix the reserve prices for the minerals and each of the mines depending on estimated output, demand, grade and access. The states will also fix the pre-bid amount in the two-stage auctions that will involve technical and price offers made by companies and individuals.

The centre has also given states the flexibility to reserve some of the mines for state-run companies. The government has roped in investment banker SBI Capital Markets to formulate the norms for the auctions as well as fixing the bidding parameters.