EGoM accepts demands for value-addition clause, competitive bidding

The empowered Group of Ministers (EGoM) of the Government of India headed by Union finance minister Pranab Mukherjee, which is finalizing the proposed Mines & Minerals (Development & Regulation) Bill-2010, is understood to have given its in-principle approval to two of the key demands of the Orissa government.

These demands include incorporation of a 'value-addition clause in the new Bill and introduction of a competitive bidding system for grant of mineral concessions.

"The EGoM has given its in-principle approval to our demands relating to the introduction of a competitive bidding system for grant of mineral concessions and incorporation of a 'value-addition' clause in the new MMDR Bill", a highly placed source in the Orissa government told Business Standard.

It may be noted that the demand for value addition was made by the Orissa Chief Minister Naveen Patnaik during his meeting with the Union finance minister in New Delhi on December 24, 2010.

"Value addition should be recognized as the main consideration for grant of mineral concessions for direct applications. Competitive bidding should be the general methodology for grant of limited natural resources since this will ensure a transparent mechanism and maximum gains to the state and the community", Patnaik had said during the meeting.

The financial bid component of competitive offers should provide due consideration for the value of mineral property to the advantage of the state. In addition, the state government should have the power to restrict grant of concessions keeping in view the total availability and future utilization", he had suggested.

The state had argued that bulk mineral resources like iron ore, bauxite and chrome ore need to be leased out on the basis of a competitive bidding system which is in conformity with international practices.

In the petroleum sector, allocation is done through competitive global bidding and the Government of India is thinking of adopting the same system for allocation of coal blocks.

The state government was of the view that the same practice must be extended to precious mineral ores like iron ore, bauxite and chrome ore.

This apart, the state government has suggested that the Royalty Commission should be empowered to fix royalty rates for different minerals instead of making mere recommendations to the Government of India.

For Scheduled Areas, predominantly inhabited by tribals, the state government had called for a special provision for their rapid development as these areas paradoxically continue to remain the most backward in spite of the presence of abundant mineral resources.

It was also in favour of reservation of mineral bearing areas for state PSUs to meet the needs of the mineral based industries in the state.

While welcoming the proposal in the MMDR Bill-2010 which would make it mandatory for the miners to share 26 per cent of their profits with the affected people, the state government has suggested that a Local Community Development Fund can be constituted for this purpose.

It was also open to the setting up of the National Mineral Regulatory Authority (NMRA) on the condition that while the regulator can adjudicate on cases pertaining to mineral concessions and recommendations of prospecting license, it should not be allowed to override on the powers of the state governments.