1. Coal auctions: Kindle investor interest, says Narendra Modi govt

Coal auctions: Kindle investor interest, says Narendra Modi govt

17 of the 24 auctions in the past were annulled for lack of bidders and competitive intensity — the mines ministry has advised states to assess market factors and try to resolve regional factors, such as land, to kindle investor interest.

By: | Published: August 12, 2016 7:26 AM
While auctioning has brought transparency in the allotment of leases, MMDR is silent on a state’s role in land acquisition. The Centre has also advised the states to keep the concession area adequate for the proposed mining area. (PTI) While auctioning has brought transparency in the allotment of leases, MMDR is silent on a state’s role in land acquisition. The Centre has also advised the states to keep the concession area adequate for the proposed mining area. (PTI)

Given the tepid response to the non-coal mines being auctioned —

17 of the 24 auctions in the past were annulled for lack of bidders and competitive intensity — the mines ministry has advised states to assess market factors and try to resolve regional factors, such as land, to kindle investor interest.
Mines ministry sources said the government was keen to ensure smooth sailing of the 33 leases for which notice inviting tenders (NITs) have already been issued and an additional 80 are scheduled to go under the hammer this fiscal.

Following amendment of the MMDR (amendment) Act in March 2015, just seven mines could be successfully auctioned by the states. Three of them were in Chhattisgarh, two in Jharkhand and one each in Andhra Pradesh and Odisha. Among the cancelled auctions, 13 were limestone blocks spread across Gujarat, Chhattisgarh, Maharashtra, Odisha and Rajasthan.

“Auctions are not simply process-driven, but strategy-driven. Many factors have a significant bearing on the outcome of the auctions. These include regional and market factors. States will have to keep them in mind to make auctions successful,” a mines ministry official told FE.

The official said providing detailed geological reports, geological and cadastral maps and other essential details are critical for successful auctions. The demarcation of the block is also equally important while emphasis should be on trying to minimise land-related issues as much as possible.

While auctioning has brought transparency in the allotment of leases, MMDR is silent on a state’s role in land acquisition. The Centre has also advised the states to keep the concession area adequate for the proposed mining area.

Market factors such as setting reasonable reserve price is also an extremely critical factor for successful auctioning, the official said, adding that in many cases, no interest parties evinced interest only because of the higher reserve price.

Apart from the demand-supply scenario, overall financial health of the industry and other macro-economic factors should also be considered while taking up mineral blocks for auction, he added.

“Timing of the auction is also essential for successful auctions. Majority of the blocks put for auction were of limestone. At the time of the auctions, major cement players were pressing for alternate dispensation by way of transfer of leases,” he further said.

Restrictive conditions prescribed by the states such as end-use reservation and setting up of end-use plants within the state also need to be done away with, he said.

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