Odisha's renewed effort to auction 20 lapsing merchant mines has got rousing response from the participants.In all, the state government has received 255 bids for the blocks till January 3, the stipulated deadline for submitting technical and financial bids.
It may be noted that the state government had on December 3 last year annulled the auctions owing to some contentious clauses in the model tender documents. Both parent companies and their subsidiaries pitted against each other for the same block had elicited opposition from some bidders, leading to derailment of the bidding process midway. Within days of annulment, the Odisha government relaunched the online auctions by notifying the fresh Notice Inviting Tenders (NITs) on December 6 after tweaking some changes in the recast tender documents.
“The response to our call for online auctions is overwhelming. Technically, 19 out of 20 blocks can be auctioned as one of the leases has validity till May 26 this year and a case is sub-judice in the Orissa High Court. The next stage is the technical qualification of the bidders. After the technical scrutiny, the top 50 per cent of the IPOs (Initial Price Offers) made by bidders would make it to the next stage of electronic auctions. The evaluation is expected to be done by this month end”, said a government official privy to the development.
All top steel makers, secondary steel players, sponge iron producers, pellet manufacturers and merchant miners from Goa and Odisha are vying for the blocks on offer. Almost all leading steel producers- ArcelorMittal, Tata Steel, JSW Steel, Jindal Steel & Power Ltd (JSPL) and others are in the fray to acquire the lapsing leases.
The frenzied bidding is understandable since the merchant mines offer a congenial ecosystem for mining with attendant infrastructure to facilitate seamless extraction and transportation of minerals. All 20 blocks have their lease validity ceasing by March 31, 2020.
The conduct of ascending forward electronic auctions and submission of final price offer on the auction platform will be done between January 31 and February 21, 2020 while the Letter of Intent (LoI) is to be issued from February 10 to February 29, 2020.
Since the state government is concomitantly offering 20 mineral blocks for electronic auctions, the reserve price has been kept on the higher side. For exclusive manganese ore blocks, the reserve price is kept uniform at 15 per cent. In case of iron ore, the price is pegged at 15 per cent for blocks with reserves up to 10 million tonnes and 25 per cent for deposits beyond this mark. In case of Nuagaon iron ore mine with balance deposits of 734 mt and now under the leasehold of KJS Ahluwalia, the floor price for auctions is fixed at 50 per cent.
It may be noted that the state government on December 3 was forced to bite the bullet and annul the auctions process over unequal bidding for the coveted Nuagaon block whose current incumbent is merchant miner KJS Ahluwalia. Fifteen bidders were in the race in the last round of auctions including six companies of Sajjan Jindal led JSW group. Both Adani Enterprises and Vedanta were understood to have voice their reservations over alleged cartelisation and unfair bidding for this block by exploiting loopholes in the tender documents.
Later, the Odisha government came out with fresh Notice Inviting Tenders (NITs) on December 6. The state government has inserted some additional conditions in the tenders for the expiring merchant mine leases. A successful bidder after obtaining all statutory clearances needs to produce in the first two years at least 80 per cent of what the mine actually produced in the preceding two years. This clause will be inserted in the Mine Development and Production Agreement (MDPA). Failure to achieve this production benchmark will debar the successful bidder from participating in future auctions for three years. And, in case of blocks reserved for end use, the consumption should be limited to the plant of the bidder located within the country.