BJP-Cong slams Naveen for withdrawing Mining Auction notice

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By Our Correspondent

BHUBANESWAR/ JODA/BARBIL/: The Oppositions BJP and Congress have came down heavily on Naveen Patnaik led BJD Government in Odisha for withdrawing mining auction notice for 20 mines, expiring by March 30, 2020. The BJP and Congress criticized the state government for withdrawing the auction notice in the middle of the bidding process.

“They might be doing this knowingly to favor any company. Why cannot the government prepare a faultless auction notice?” asked OPCC president Niranjan Patnaik.BJP State general secretary Prithwiraj Harichandan said, “There is a smell of corruption in the bidding process.”

Steel and Mines Minister Prafulla Mallick, however, said, “Where is corruption when the mines have not been auctioned at all? There should be logic behind any allegation.”

Sources meanwhile, revealed that B Prabhakaran, the De Facto boss of Odisha’s mining zone of Keonjhar-Sundargarh, played his card again with putting four big corporate houses like JSW Steel, ArcelorMittal, Adani Group and JSPL in hurry and forced the Naveen Patnaik led BJD Government to cancel the ongoing mining auction for 20 running mines , which are expiring by March 30, 2020.

The Odisha Government has now announced a new timeline for the auction, which will now take off from December 6. The bids have to be submitted by January 3, 2020. Technically qualified bidders will be announced by February 19, and the announcement of the preferred bidder will be made on February 21.

While JSW Steel declined to comment, according to media reports. For ArcelorMittal, the mines are important to bring down costs at Essar Steel, for which the world’s largest steelmaker put in a bid of Rs 42,000 crore.

It has already got a boost, in the form of the Odisha Slurry Pipeline Infrastructure (OSPL). The pipeline supplies iron ore to Essar Steel’s pellet plant in Odisha. The pellets are then taken to Hazira to be used in Essar Steel’s plants.

ArcelorMittal has emerged as the highest bidder, with a bid of Rs 2,300 crore bid. Though Thriveni Earthmovers, a dominant player in Odisha’s mining industry, has bid over Rs 3,000 crore, the offer comes with a few riders. Thriveni’s offer is conditional, has a low upfront cash payment, and plus the payment schedule is long-drawn.

“For lenders, who have been focused on realising maximum recovery in these insolvency cases, the upfront payment element is paramount. It is conditional on the outcome of an existing legal dispute around the title of the asset,” said a source.

The turn of events will be a relief for lenders too, as things had got complicated in 2018, when Numetal – which had also bid for Essar Steel – claimed to have bought OSPL from Srei Infrastructure Fund. But the sale was disputed by the company’s lenders, led by SBI, who claimed that SREI is not the rightful owner of the pipeline company.

The Odisha government had earlier this year called for bids for 20 mines, leases of which will lapse in March next year. The auction saw bids from the likes of Tata Steel, Vedanta, JSW Steel, ArcelorMittal and JSPL. Overall, more than 50 companies had shown interest. One of the mines alone has a deposit of about 800 million tonnes.

But now the government has been forced to call for fresh auctions, after some players, including ArcelorMittal pointed out ‘loopholes’ in the process. A report said that the Adani Group has also complained about the same.The fault policy allowed JSW Steel to put in several bids through its subsidiaries.  Subsequently, the Odisha government has brought about amendments in its tendering process.

Now, “a bidder shall submit only one bid for a particular mineral block. In case, a bidder submits more than one bid…through its affiliates, all such bids…will be rejected,” says a notification from the Odisha government.

Earlier, the Naveen Patnaik Government was hopeful that the auctions of 20 merchant mines initiated by Odisha is set to mop up Rs one trillion in revenue over the lease period of 50 years looks grim.

Whilst five iron ore blocks are set aside for end user industries, the remaining 15 are earmarked for bidding by merchant miners. Steel players, sponge iron ore producers, pellet manufacturers and pig iron makers along with leading merchant miners are anticipated to bid aggressively for these blocks and place steep premiums to acquire these mines where production hopes to take off seamlessly.

Since a large number of iron ore blocks are concomitantly offered for auctions, the Odisha government has pegged the reserve price for bids on a higher side. And, higher floor price is expected to hike the cost of mine acquisition and bolster the state coffers.

“The floor price is fixed at 15 per cent for iron ore blocks with deposits of up to 10 million tonnes and 25 per cent for higher quantum of deposits. Higher reserve price will spur more revenue for the state government. Besides, all these mines are ready to operate with associated infrastructure for smooth movement of minerals. Amid all these congenial factors, both merchant mine producers and end users looking to grab mine for captive use are expected to pledge higher premiums. Our estimates suggest that over the 50 year lease period, Odisha could end up garnering Rs one trillion from these 20 blocks opened up for bids”, said a mining industry source.

Presently, Odisha has 17 operative merchant mines whose approved production capacity stands at 80 million tonnes. The leases whose tenure ceases by March 31, 2020 include the ones in the leasehold of major non-captive producers like Serajuddin, Essel Mining & Industries Ltd, KJS Ahluwalia and others.

Plans are afoot to extend the environment clearance of these mines by two more years to facilitate seamless transfer of ownership and unhindered production. Since forest clearance is co-terminus with the lease validity and cannot be extended as per existing statutes, an amendment is in the works on the Forest (Conservation) Act. The Union ministries of mines, law as well as environment, forest & climate change are holding mutual consultations in this connection.

In two phases, the state steel & mines department has issued Notice Inviting Tenders (NITs) to auction 20 blocks on October 4 and 14. After issue of NITs, the bids are set to be invited on November 18 and 28. Letters of Intent (LoIs) to the preferred bidders will be issued on January 3 and 15, 2020.

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