Nine new mineral blocks at Odisha's auctions may draw lukewarm bids

Stakeholders feel these blocks may lose out to the lapsing merchant blocks where it will be easier to recommence mining and achieve seamless production and despatch

Nine new freehold mineral blocks notified for online auctions in Odisha may fail to evoked firm bidding interest.

The state steel & mines department has issued the Notice Inviting Tenders (NIT) and tender documents in respect of nine iron and manganese ore blocks - Purheibahal, Chandiposhi, Rengalaberha North-East, Gandhalpada, Netrabandh Pahar (West), Dholtapahar, Jumka Pathriposhi, Unchabali and Kalimati on October. Auction activity is set to begin towards the third week of November

Alongside these virgin resources, Odisha is also conducting auctions of 20 more merchant mine blocks whose lease validity ceases by March 31, 2020. Stakeholders feel that the freehold or new mineral blocks may lose out to the lapsing merchant blocks where it will be easier to recommence mining and achieve seamless production and despatch.

“Merchant mines are set to witness frenzied bids as both steel industries and non-captive players will be keen to grab them. The merchant mines boast of good quality deposits and are endowed with infrastructure to ensure seamless operations. Moreover, there is a buzz of these mines getting extension in environment clearances. All these are positives for the new owners. By contrast, bids for the virgin deposits may not be robust since starting any mining activity will run into three to five years”, said an official with a standalone player.

Odisha has hitherto successfully auctioned two lapsable merchant chromite mines- Misrilall Mines and Kamarda mine in the leasehold of B C Mohanty. Both leases were pocketed by T S Alloys, a fully owned Tata Steel subsidiary. T S Alloys placed steep bids for bagging both mines- 88.5 per cent (of the sale value of the block) for Misrilall Mines and 96.8 per cent for Kamarda.

If the initial outcome at these mines is any indication, the bidding momentum is likely for the other mines as well, especially some of the prized deposits in iron ore. To stave off lower bids, the state government has kept the reserve price of blocks a bit on the higher side. For iron ore blocks with resources up to 10 million tonnes (mt), the floor price is kept at 15 per cent of the sale value of the mineral asset. And, in case of blocks with deposits beyond 10 mt, the reserve price is 25 per cent. In case of the immense Gonua mine now held by big merchant player KJS Ahluwalia where the net estimated deposits are in excess of 700 mt, the reserve price is staggering at 50 per cent, a source in the know confirmed. For all manganese ore mines, the bid price is uniform at 15 per cent.

Key merchant mines now controlled by Serajuddin, KJS Ahluwalia, Aditya Birla owned Essel Mining & Industries Ltd and others have been notified for electronic auctions.

“Merchant mines are anyways going to be a safer bet for any bidder than the unopened freehold blocks. While any successful bidder can straightaway commence mining from an operative block, extraction from a new mine is fraught with delay as the new lessee has to go through the labyrinth of approvals before laying hands on the asset”, said an official with a steel company.

To ensure hassle-free operations after the merchant mines' validity lapses, the Ministry of Environment, Forest & Climate Change (MoEFCC) is contemplating to extend the existing environment clearances by two years. Since forest clearance is co-terminus with the mine lease validity, an amendment is in the works on Forest (Conservation) Act. The MoEF is believed to consulting the Ministries of mines and law on the amendment.