Parliament passes bills to allow mine auctions

NEW DELHI (Reuters) - Parliament passed two bills on Friday to auction mines that produce minerals such as coal, iron ore and bauxite, in a boost for Prime Minister Narendra Modi's bid to kickstart an industry that has languished for years.

The Mines and Minerals Development and Regulation, and Coal Mines Special Provisions bills were seen as a test of the government's ability to secure support from opposition parties in the upper house of parliament where the ruling Bharatiya Janata Party (BJP) lacks a majority.

BJP has an overwhelming hold over the lower chamber, Lok Sabha, due to Modi's resounding election victory 10 months ago.

The bills have to be approved by President Pranab Mukherjee for them to become law - likely to be a formality.

India's mining sector has been mired in controversy over the illegal allocation of resources, causing a near standstill in granting permits to open new mines, including an iron ore exploration licence for South Korean steel giant POSCO that wants to set up a steel plant in India.

Asia's third largest economy was once the world's third-largest exporter of iron ore but now has to import heavily due to court action on illegal mining. The Supreme Court has eased some of the curbs, but state officials have been slow to renew mining licences, fearing charges of corruption.

The government hopes auctions will reduce the risk of wrongdoing, helping to put the mining industry back on track. But it is unlikely to lead to a sudden surge in iron ore output at a time when there is a global glut and prices have crashed.

The coal bill, however, will allow the government to continue auctioning off mines under a process that began last month after the Supreme Court cancelled more than 204 mines calling a previous method of selective allocation illegal.

The government has already auctioned 33 mines under an executive decree first passed in October and then reissued in December.

India, the world's third-largest coal importer, is initially auctioning mines for companies' own use. The government may later allow private companies to mine commercially, an activity currently dominated by state-run Coal India Ltd .

($1 = 62.5200 rupees)

(Reporting by Krishna N. Das and Nigam Prusty; Editing by Joseph Radford and David Evans)