Auction of non-coal mineral blocks is set to gain momentum. The mines ministry is planning to auction around 100 blocks in the current fiscal, compared with a total of 23 till the end of March 2017 since the Mines and Minerals (Development & Regulation) Act was amended in January 2015 to pave the way for auctioning of non-coal mines. The auction of 100 blocks could attract bids worth Rs1 lakh crore, according to a preliminary estimate.
Mineral-rich states have auctioned four blocks in the current fiscal so far. The auctioning of 100 blocks proposed in 2017-18 would not only help in increasing production of natural resources, it will also help generate higher revenues for the government. The 23 blocks auctioned off so far had fetched bids worth Rs73,359 crore and the revenue to the state governments by way of royalty, DMF and NMET are estimated to be Rs1,19,032 crore over a 50-year lease period. “The entire allocation system has changed now. Now, the government has to bring up the blocks to a certain level of geological knowledge and then bid them out, reducing the risk for the bidder. It takes two-three years to develop the geological knowledge,” mines secretary Arun Kumar told FE in an interview.
The auction process has had a tepid start for the lack of bidders, resulting in annulling of auctions for most of the mines on the block initially. States were then advised to assess market factors and resolve regional factors, such as land, to rekindle investors’ interest. They were told that providing detailed geological reports, geological maps and other essential details were 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.
Kumar said that the significant jump in the bid amount (revenue) in the last two-three months implies that more blocks are now being put up for auction and with the upgradation of geological knowledge base, more parties will take part in auction in the next round. “I don’t believe in hype. Our target for the current fiscal is to auction off 100 blocks. We may touch 90 or we may touch 110. The speed is indeed picking up. My estimate is that revenue for the states from the bids in the current fiscal would be at least Rs1 lakh crore (over the lease period of 50 years) and it might touch Rs2 lakh crore next year. And then it may stabilise at a figure which I can’t predict,” Kumar said.
While auctioning has brought transparency in the allotment process, 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 are also an extremely critical factor for successful auctioning. 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.