Karnataka to auction two C-category mines every month

To begin with, the state government plans to auction six mines by December and another nine mines next year

Eighteen months after the Supreme Court ordered for the reallotment of C-category mines through a transparent process, the Karnataka government has readied a roadmap for their auction to end-users. The department of mines and geology has submitted a plan to the Apex Court and sought approval for commencing auction of six mines from October this year.

"In our recent affidavit submitted to the Supreme Court, we have proposed two plans and waiting for their permission. As per one of the plans, we want to auction six mines starting between October and December. Once the court approves, we will notify the auction," Karnataka's Mines Secretary Tushar Girinath told Business Standard.

He said the government intends to put on auction two mines every month from October. There are 51 mines in the C-category, the leases of which were cancelled following the Supreme Court direction in April 2013.

In its order dated April 18, 2013, the Supreme Court had ordered for cancellation of 51 C-category mines on account of large-scale violation of mining rules and causing damage to environment. It had also ordered for reallotment of such leases through an open and transparent process.

"In our affidavit, we have explained to the court that we can conduct auction for only two mines in a month because the process depends on the report from Mineral Exploration Corporation Limited (MECL). MECL is assessing the extent of ore reserves left in those mines and will submit report for two mines every month," Girinath said.

The state government has identified 15 mines with potential reserves for auctioning. The government will ask MECL to assess the mineral reserves for another nine mines this month and they require another four months to complete the study. This means, the reports on those mines will be available from February onwards and the auction of those mines will go up to May next year, he said.

All this process, he said depends on the approval from the Apex Court. The Court is set to hear the matter in two weeks. At the previous hearing held on September 15, 2014, the Court directed the Central Empowered Committee (CEC) to discuss with the mines department and finalise the auction schedule.

"If the court accepts our proposal we will implement our first plan and issue the notification accordingly. Otherwise, we are ready to accept the Court's direction. We are ready to conduct the auction immediately," Girinath said.

According to state government's plan, the auction will be limited to the end users only. Since the 'end user' is not defined, the state government stated: "According to our understanding, an end user means any user who has the capacity to use the ore and at least reduce it through the chemical process of reduction and beyond. Hence, the final products may include pig iron, sponge iron and steel, but will exclude the production of pellets and the process of beneficiation."

The auctioning of mines is likely to benefit end users like JSW Steel, Kalyani Steel and BMM Ispat among others who are not having captive iron ore mines and depending on e-auction of iron ore for their raw material requirements.

It is estimated that the 51 C-category mines could produce an estimated 5-6 million tonnes of iron ore per annum. The Apex Court has capped the production of iron ore at 30 million tonnes per annum in the state of Karnataka as against the steel industry's annual requirement of 35-50 million tonnes. Till now, only 23 mines have started production with a combined production of 10 million tonnes per annum. Besides, NMDC Ltd is producing another 9 million tonnes per annum.