Relaxing the end-use norms for non-coal mines, the government has allowed, through amendments to the auction rules, prospective owners of such mines to sell 25% of the produce in the open market from nil previously, a move which is likely to rekindle investors’ interest in the auction process that saw lukewarm response so far. Since the amendment to the MMDR Act, carried out in 2015 paved the way for mandatory auctioning of non-coal mines, only 33 non-coal such mines have been successfully auctioned, while bidding for 60 blocks had to be cancelled after the process was initiated.
Briefing media on the impact of Mineral (Auction) Amendment Rules, 2017, mines secretary Arun Kumar said end-use restrictions resulted in inefficient mining as many mines with low grade ore dumps were saddled with this burden as they could neither use it for captive purpose nor could dispose it of. “In the amended rules, such miners will be able to dispose of 25% of such dumps, which are not used for captive purposes. This will help progress towards zero waste mining and utilisation of minerals even in low-grade ore. Bid values are likely to improve and participation will improve further,” he said.
However, the provision would be applicable for the mines that would be granted through auctions after November-end, 2017. It would not be retrospectively applicable.
As part of the changes made in the auction rules to rekindle investors’ interest in the mining sector, the government has also been tweaking the minimum three bidders rule for each round of auction. While a minimum of three bidders’ rule is still stipulated in the first attempt to auction, in the amended rules now, the states have been given the flexibility of allocating the block in the second round itself even if there are less than three bidders. Earlier, the flexibility was allowed only in the fourth round. “This will make the auction process less cumbersome and will help states auction mineral blocks quickly,” he said.
A major amendment in the rules has been that the requirement of net worth for the prospective bidders. In the changed rule, minimum net worth threshold for bidders has been reduced to 0.5% to 2% of the value of estimated resource in a block from 2-4% earlier. Apart from the limited number of successful auctions, the auctions have been limited from the perspective of minerals and the number of the states that have started auctions. Only five minerals, primarily iron ore and limestone, have been auctioned so far and only seven states took part in the process. Mines secretary hopes that the changes in the rules could result in auctioning of an additional 34 mines in the current fiscal and another 60-70 mines in 2018-19.