Odisha set to garner Rs 1 trn in 50 years from auction of 20 merchant mines

The auctions of 20 merchant mines initiated by Odisha is set to mop up Rs one trillion in revenue for the state government over the lease period of 50 years.

The lease validity of these iron and manganese ore blocks notified for auctions is expiring by March 31, 2020. Whilst five iron ore blocks are set aside for end user industries, the remaining 15 are earmarked for bidding by merchant miners. Steel players, sponge iron ore producers, pellet manufacturers and pig iron makers along with leading merchant miners are anticipated to bid aggressively for these blocks and place steep premiums to acquire these mines where production hopes to take off seamlessly.

Since a large number of iron ore blocks are concomitantly offered for auctions, the Odisha government has pegged the reserve price for bids on a higher side. And, higher floor price is expected to hike the cost of mine acquisition and bolster the state coffers.

“The floor price is fixed at 15 per cent for iron ore blocks with deposits of up to 10 million tonnes and 25 per cent for higher quantum of deposits. Higher reserve price will spur more revenue for the state government. Besides, all these mines are ready to operate with associated infrastructure for smooth movement of minerals. Amid all these congenial factors, both merchant mine producers and end users looking to grab mine for captive use are expected to pledge higher premiums. Our estimates suggest that over the 50 year lease period, Odisha could end up garnering Rs one trillion from these 20 blocks opened up for bids”, said a mining industry source.

Presently, Odisha has 17 operative merchant mines whose approved production capacity stands at 80 million tonnes. The leases whose tenure ceases by March 31, 2020 include the ones in the leasehold of major non-captive producers like Serajuddin, Essel Mining & Industries Ltd, KJS Ahluwalia and others.

Plans are afoot to extend the environment clearance of these mines by two more years to facilitate seamless transfer of ownership and unhindered production. Since forest clearance is co-terminus with the lease validity and cannot be extended as per existing statutes, an amendment is in the works on the Forest (Conservation) Act. The Union ministries of mines, law as well as environment, forest & climate change are holding mutual consultations in this connection.

In two phases, the state steel & mines department has issued Notice Inviting Tenders (NITs) to auction 20 blocks on October 4 and 14. After issue of NITs, the bids are set to be invited on November 18 and 28. Letters of Intent (LoIs) to the preferred bidders will be issued on January 3 and 15, 2020.