States likely to get power in mineral auction rules

The central government is likely to give states discretionary powers in the final mineral auction rules due later this week for reserving the end-use of mines to be auctioned with composite licences.

"The central government is thinking of giving state governments such powers after factoring in their demands," a government official said.

According to proposed mineral auction rules that follow the Mines and Minerals (Development and Regulation) Amendment (MMDRA) Act, 2015, a state government "may at its discretion identify a specific end use" as a prerequisite for auction of a mining licence only.

However, no such discretionary powers were provided to state governments in auctions of composite licences.

Any bauxite, iron ore or limestone mine up for an auction of a mining licence can be reserved for an alumina plant, steel plant or cement plant, respectively.

The concept of a composite licence, a combination of a prospecting licence and a mining licence for an area where there is inadequate evidence of mineral content, has been introduced in the recent law.

A reconnaissance permit is granted for preliminary prospecting through regional, aerial, geophysical or geochemical surveys and geological mapping. A prospecting licence is granted for exploring, locating and proving mineral deposits. A mining licence, which can be auctioned by a state government only when there is adequate evidence of mineral content, is required to extract minerals.

As reported by Business Standard earlier, the Centre is willing to reserve the end-use for composite licence auctions if state governments ask for it. The Centre is in consultations with state governments to thrash out the final rules. The rules are due this week.

Steel companies, which want the end-use provision for composite licences, are worried that merchant miners, who are in much better shape, will bid aggressively in auctions.

Most of the iron ore mines of Odisha, the state which has the majority of India's iron ore, will be put up for auction for composite licences, considering the state government extended the 26 remaining iron ore mining licences a few weeks ago.

Before the enactment of the law, state governments had discretionary powers to issue these licences. Between 2002 and 2008, Odisha signed 49 memorandums of understanding with steel companies, asking them to build steel plants and assuring them mines or ore supply.

Most of these companies are yet to be handed over mines for their operational steel plants. These companies will have to participate in auctions if they want a mine.