In June last year, various mineral-rich state governments presented a non-coal mineral auction plan to the central government. Unlike coal auction, it were the states who were going to conduct the auction for non-coal minerals. Showing their readiness, the state governments told the central government that 100 mines would be auctioned by December, 2015. However, it is November, 2016, and the states have been able to auction just 17 mines so far.
According to a presentation by Balvinder Kumar, Union mines secretary, to various stakeholders on October 8 in Vadodara, the state governments had to annul the auction of 37 mineral blocks due to insufficient number of applications of initial bids for blocks. Seeing the lukewarm response from the industry, many mines — out of the 100 that were listed before central government in June, 2015 — were not put up on auction altogether.
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The mines secretary then listed the reasons in front of the stakeholder: The quantity and grade of the ore, quality of exploration data, land ownership pattern, dull market scenario, end use conditions imposed by the states and apprehensions on average sale price notified by the Indian Bureau of Mines (IBM).
“Basically, the area was less for some mines. In some cases, the mineral quality or exploration data was not up to the mark. In some cases, the location was not right for the companies. For some mines, the states had put the condition that the mining lease (ML) would be awarded for captive uses only,” Kumar told The Indian Express last week. “For example, the Gujarat government was unable to auction limestone mines in Kutch district as the companies are not willing to set up a captive plant there. There are some issues propping up as the area is either a forest area or a naxal-infested area,” he added.
However, the secretary clarified that land acquisition has not been an issue as yet for non-coal mineral auctions. “The states keep acquiring the land as and when it is required. But we did not hear from the states that companies are not participating in auction due to any land acquisition issues,” he said.
According to the central government data, the auction of the first 16 non-coal mines is estimated to bring a total revenue of Rs 59,447 crore over the next 50-year period for the respective state governments. The 17th mine was auctioned on October 26 in Jharkhand.
Coal auction vs non-coal auction
As per the new mining law — Mines and Minerals (Development and Regulation) Amendment Act, 2015 — which came into effect from January 2015, the non-coal mines have to be auctioned by the respective state governments. Under the old mining law, the states had the powers to grant the mining lease to any company as per their discretion.
While the Union mines ministry was busy passing this mining law in the Parliament at the beginning of 2015, the coal ministry was busy preparing for the auction of few of the 214 coal mines that were de-allocated following the Supreme court order of September 24, 2014. The Supreme Court had explicitly stated that companies would have to return the coal blocks by March, 2015.
Therefore, as the coal ministry were working on a deadline, the first phase of coal auction was conducted in February, 2015. The three phases of the coal auction for close to 45 coal-producing blocks were conducted in the seven month period of February-August in 2015. As per coal ministry estimates, the auctioned mines are expected to fetch the mine-bearing states a cumulative revenue of Rs 3.5 lakh crore over a 30-year period. Both power and non-power sector participated in the same. For the government, it was a big success.
However, the coal ministry had to cancel the plans to conduct the fourth tranche of coal auctions, which were planned in January, 2016, as there was lack of demand from iron, steel and cement plants. The fourth tranche of coal auctions were for them only. This was the time when the state governments had begun the process of non-coal mineral auctions.
According to a senior coal sector expert, who spoke on the condition of anonymity, the two major things that made the coal auctions successful in comparison to non-coal auctions is the Supreme Court deadline and the fact that it was conducted by the central government itself. “It helped organising the things in an effective manner. Moreover, proper exploration data for auction of those coal mines was easily available as the companies were already mining them before the de-allocation by Supreme court,” he added.
The 2015 mining law clearly stated that if a company has already got the mining licence (ML) of a non-coal block for captive purposes, it can continue to mine it till the lease period ends. Once it ends, such a company will have the first right of refusal. Moreover, the law stated that if a company has the ML of a block for non-captive purposes, the company can keep the mine till 2020 or till the lease period ends, whichever comes earlier.
This naturally meant that the non-coal mines that were listed for auction were the ones where mining was not being done presently. “The exploration data and mineral quality data for such mines is more than likely to be old and inaccurate,” said a mining sector expert.
Therefore, the central government has now asked the states to update their data and re-invite the companies for the auction of the 37 mines which failed to attract any bidders. While the state governments have auctioned just 16 mines in last 11 months, the central government expects the states to learn their lessons and auction these 37 mines in the coming five months itself. It would be interesting to see if the states can get their act together and get it done within this time period.