Posco needs to bid for mining lease; Khandadhar closed chapter

Odisha has promised Posco the Khandadhar iron ore mine, but allocation never happened due to delays in regulatory approvals

South Korean steel maker Posco will have to bid in the upcoming auction to get an iron ore mine for its $12 billion steel project in Odisha, Steel and Mines Minister Narendra Singh Tomar said today.

Posco was previously promised the Khandadhar iron ore mine by the state government for its mega steel plant but the actual allocation never happened due to delays in regulatory approvals.

Now, with the Centre deciding to use the auction route for allocation of all minerals, the South Korean firm will no longer have the first right on the mine and will have to bid for it.

When asked about the fate of the Khandadhar iron-ore mine given to Posco by the state on dispensation route, Tomar told reporters on the sidelines of an event here that all firms will have to participate in the auction process to get a mining lease.

"Even I will have to bid to get a mining lease," he said, putting a lid on Odisha's demand that commitments should be honoured under the new dispensation to avoid sending a wrong signal to international investor community by completely ignoring such commitments.

Posco has a memorandum of understanding with the Odisha government that assures allocation of mining leases. However, following the promulgation of the Ordinance which makes allocation of all mines through the auction route only, the MoU will not make any sense now.

Mines can be allocated even now through the dispensation route in case the Centre had already given concurrence or the state government issued a letter of intent "by whatever name it is called". This is not the case with Posco.

"Now, with the MMDR Amendment Ordinance 2015 is in public domain, it is not possible to offer the Khandadhar mine to Posco on preferential basis and this chapter is now closed. It will have to secure this mine by bidding," a source in the mines ministry told PTI.

"We are sympathetic toward the mega project and it is the Centre which is keen to facilitate the allocation as recommended by the state for sake of such large project. But, by the time they (read Odisha government) could send the proposal meeting the required technicalities, the Ordinance was already in public domain for feedback," he said.

"Now, Khandadhar iron-ore mine like any other mine has to go for bidding as we have decided to put all future allocation of minerals through auction route. Government can not compromise on transparency overlooking Supreme Court's observations on mine allocations in the past," the source said.