Non-coal mineral auction to use production-linked model

Two-stage forward auction process introduced

The government has decided to use the production-linked revenue sharing model for non-coal mineral auction. Bidders would quote a per cent of revenue as the bidding parameter.

Moreover, a two-stage forward auction process for mineral concessions was introduced on Wednesday for the state governments, in The Mineral (Auction) Rules, 2015. The rules have been made according to the concession provisions of the recent Mines and Minerals (Development and Regulation) Amendment Act, 2015.

A bidder who is successful and is awarded a mining lease would have to pay an amount equal to the multiple of the actual production from the mine, average price of the mineral of average grade as published by Indian Bureau of Mines (IBM) and a percentage quoted by the successful bidder.

For example, if the annual production of the mine concerned is around two million tonnes, average price of the mineral of average grade, as published by IBM, is Rs 4,000 a tonne and the per cent share quoted by the successful bidder is 10 per cent, the amount payable by the holder of the mining lease would be around Rs 80 crore (2,000,000x4,000x10 per cent).

In case an area has more than one mineral (including associated minerals), the same bidding parameters and percentage of revenue quoted by the bidder would be applicable for each mineral. While the auction rules have been set by the central government, the bidding procedures would be executed by the state government.

The auction would be an ascending, forward electronic auction; the first round would consist of submission of technical bids and initial price offers (percentage of revenue).

Consequently, technically qualified bidders would be ranked on the basis of the descending initial offer submitted by them. The highest initial offer submitted by a technically qualified bidder would be the floor price for the second round of the electronic auction.

In the second round, the qualified bidders can submit their final price offers, which must be greater than the floor price. Qualified bidder submitting the highest final offer would be declared successful immediately at the conclusion of the auction.