By Our Correspondent
BHUBANSWAR/JODA/KOIRA: With leases of near about 40 running mines in Odisha are expiring by March 31, 2020 while the Naveen Patnaik led BJD Government continuing auction process, the Confederation of Indian Industry (CII) has apprehended for a supply disruption in the wake of delay of lease transfer.
In Odisha, the process of online auctions of 20 merchant leases- a mix of iron ore and manganese has taken off.The deadline for bid submission is January 3, 2020. The conduct of ascending forward electronic auctions and submission of final price offer on the auction platform will be done between January 31 and February 21, 2020 while the Letter of Intent (LoI) is to be issued from February 10 to February 29, 2020.The state government has inserted some additional conditions in the tenders for the expiring merchant mine leases.
A report by CII titled ‘Towards a Globally Competitive Minerals and Mining Industry’ said, “A number of leases are due to expire in 2020. With the auction process for these mines still under consideration and given that the process from auctioning a mine to actually commencing operations is long, significant disruption in supply is possible.”
“It may be noted that the mining leases for another set of mines will expire in 2030…leases for 329 merchant mines are due to expire on 31 March 2020. Of these, 281 mines are on-working,” the report said.
Another disruption to the industry being assessed by the industry is pertaining to the transfer of environment clearance (EC) and forest clearance (FC) to the new lease-holder.
“The Supreme Court has ruled that EC and FC granted earlier could be seamlessly transferred to the new lease holder; this would ensure continuity in operations.
State governments, however, have been insisting on the new lease-holder acquiring fresh clearances. In effect, the transition from the existing to the new lease-holder is not seamless resulting in potential disruption of supply,” the report said.
The report recommends reviewing and auction of non-working mines (expiring in 2020) immediately.
Auctioning non-working mines in clusters has also been suggested by the report. A cluster approach may need to be adopted for mines which are commercially unviable. Thereafter, auction the non-working mines immediately, the report said. Mandating seamless transfer of EC and FC clearances, if operating parameters are the same has also been recommended.
Auctions of 59 mineral blocks are set to be completed in FY20, making it the most successful year for online auctions since the enactment of the amended Mines and Minerals – Development & Regulation (MMDR), 2015.
In this fiscal, 16 blocks have already been auctioned. Notice Inviting Tenders (NITs) have been issued for 43 others and auction formalities in respect of these blocks are expected to be completed before the close of FY20.
Auctions first took off in 2015-16 after a recast MMDR killed the practice of discretionary allotments and mandated award of mineral resources through a transparent system of auctions. Auctions were slow to start with only six blocks offered in the inaugural year. Between 2015-16 and 2018-19, 54 blocks were auctioned online.
“In this fiscal, the tempo of auctions has accelerated as tenure of all merchant mining leases ends by March 31, 2020. These mines have to be readied for production again before their validity ends. The government is working on environment clearance, forestry clearance and an array of other approvals to ensure seamless transfer of ownership and continuity in operations,” said an official with a standalone mining company.
Since the promulgation of MMDR Act 2015 and framing of Mineral Auction Rules, 70 mineral blocks have been auctioned. The combined revenue to states from auctions of these blocks over the lease period spanning 50 years has been estimated at Rs 2.02 trillion, inclusive of royalty and contributions to the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET).
A successful bidder after obtaining all statutory clearances needs to produce in the first two years at least 80 per cent of what the mine actually produced in the preceding two years. This clause will be inserted in the Mine Development and Production Agreement (MDPA). Failure to achieve this production benchmark will debar the successful bidder from participating in future auctions for three years. And, in case of blocks reserved for end use, the consumption should be limited to the plant of the bidder located within the country.
