Bid parameters for mining auction at Centre's discretion

The new mining law empowers the Union government to prescribe any relevant parameter for bidding of mineral concessions. According to the recently promulgated ordinance, this could be a share in production or a payment linked to the royalty or any other parameter the Centre wants to prescribe.

While auctions would be the only way forward for state governments to award mineral concessions, the Union would prescribe the terms, conditions, procedures and, bidding parameters for different categories. Such a methodology could differ according to the type of minerals, size and area of the deposits, a state or a combination of states.

The government promulgated the Mining & Mineral Development Regulatory Amendment Ordinance, 2015, on January 12 with the stated aim of a fillip to a stagnated sector. This auction process will not apply to coal, lignite and atomic mineral mines.

"This is a wonderful piece of legislation. The company can always say no to bidding if it is not comfortable with the set parameters," said Dinesh Kumar Singhi, managing director, BMM, a leading mining company in Karnataka.

Agreeing, a leading miner from Goa said the main concern is there should be comprehensive information available for bidders. "The government should keep in mind that the more the information available for the mine being auctioned will fetch them more of a price," he added.

Singhi supported the provision of having different bidding parameters for different minerals, locations etc. He said these have different mining costs and requirements.

The Federation of Indian Mineral Industries says it is keeping its fingers crossed till the parameters are set for auction. "I don't know how the government proposes to go ahead. A production sharing mechanism is not correct, as minerals are not oil," said R K Sharma, secretary-general.

"Indian miners are already paying the highest amount of royalties. Mineral prices are going down all over the world. Now the government is thinking of putting the bidding parameter of payment linked to royalty, in addition to the money that miners will shell out for the District Mineral Foundation and the government exploration trust."

According to the mining ordinance, in the case of notified minerals - bauxite, iron ore, limestone and manganese ore - the normal process will be direct auction of a mining lease (ML). However, when mineralisation has not been established and prospecting is required, the auction of a prospecting licence-cum-ML can be done, with prior approval of the central government.