CEC recommends nod for Karnataka govt’s Category C mines e-auction plan

Pursuant to SC’s 2013 order, around 51 C-Category mining leases were cancelled and are now being allotted to bidders from among end-users

The Supreme Court-appointed Central Empowered Committee (CEC) has recommended grant of approval to the Karnataka government’s proposed scheme of e-auction and re-allotment of 51 cancelled mines in ‘Category C’ in three districts — Bellary, Chitradurga and Tumkur — of the state.

In its report, the panel has also recommended to the apex court that the existing statutory approvals/clearance may also be transferred in favour of the new lessees and a direction should be given to the authorities concerned to take expeditious action for the grant of statutory approvals like environmental clearances and Temporary Working Permission under the Forest (Conservation) Act, 1980.

Pursuant to the apex court order of April 2013, around 51 C-Category mining leases were cancelled and are now being allotted to the highest bidders from among end-users.

The Karnataka government had accepted the report of M/s CRISIL Risk & Infrastructure Solution, which was appointed as transaction adviser for auctioning “Category-C” mining leases, with the modification that the leases should be disposed of through on-line e-auction (where the bidders can see the bids given by other bidders and continuously revise their bids) rather than through sealed bids in physical format or e-tendering.

For the best competitive bids, the SC-appointed panel has recommended that all end users, including state-owned pellet manufacturing units like KIOCL, should be eligible to participate in the e-auction.

The state government has identified 15 mining leases to be auctioned in the first phase and has entrusted Mineral Exploration Corporation of India (M/s MECL) with the task of assessing the mineral reserves position in each of leases. While the reports of M/s MECL in respect of six mining leases have already been received, the reports for the balance nine mining leases are expected latest by June 2015.

The CEC has also stipulated the ore produced be used for captive use only. A consortium of two or more end-users may be formed for making applications. “The selling price approach linked to the average of the IBM published prices of iron ore for different grades at all India and Karnataka levels (IBM published average price) is most appropriate for the auction and… the floor price should be fixed at 35% of the IBM published average price for the latest 12 months corresponding to the average grade of iron ore assessed by M/s MECL to be present in the mining lease and by considering the ratio of lumps and fines as 50:50,” it said.

According to the CEC, the successful bidder should be asked to pay every month an amount equal to the sum total of the quantities of iron ore of each grade of fines/lumps produced multiplied by the IBM published average price of the corresponding grade multiplied by the quoted percentage price (premium amount). “The CEC is of the considered view that it may be appropriate that after adjusting the cost incurred by the state government on exploration 75% of the balance premium amount receivable every year is permitted to be deposited as revenue in the state consolidated fund and the balance 25% is deposited with the SPV for implementing the prescriptions/provisions of the CEPMIZ (and with the District Mineral Foundation, if required),” the report stated.

It further stated that the lessees will have to pay the royalty, forest development tax, VAT and other applicable taxes, cess  etc (such as contribution to the National Mineral Exploration Trust) at the prescribed rates. The successful bidders will be required to deposit interest free security deposit equivalent to the premium amount payable for two years of approved permissible production —  50% by cheque/draft and the balance in the form of  bank guarantee, it added.

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First published on: 30-01-2015 at 03:18 IST