Shree Cement wins first non-coal mining lease under auction route

The firm offered to pay the Chhattisgarh government Rs 284 for every tonne of limestone produced at the Karhi Chandi mine

Ambuja Cement
Ramco Cements today reported over two-fold increase in consolidated net profit at Rs 206.3 crore for the quarter ended March, helped by lower depreciation costs. (Reuters)

Shree Cement on Thursday won the first-ever non-coal mining lease allocated through the auction route, by offering to pay the Chhattisgarh government around Rs 284 for every tonne of limestone production from the Karhi Chandi mine that has an estimated reserve of 255 million tonne (MT) spread over 242 hectares.

In addition, it would have to pay royalty, contribute to the district mineral foundation and national mineral exploration trust once the company starts mining, which might take a little over one-and-a-half years, considering the time required for land acquisition, to prepare the mining plan and to get environmental clearance. Mines minister Narendra Singh Tomar congratulated the state for the “bumper success” of the mining lease auction, done for the first time in the country.

“Shree Cement Ltd emerged as the highest bidder for Karhi Chandi limestone block at 58.95% of IBM price. It was the first non-coal mining lease auction in the country and saw aggressive bidding from cement manufacturers. The reserve price for bidding was fixed at 5% of IBM price and the floor price was 23.60% of IBM price. The highest bid was 58.95% of IBM Price. The IBM price of limestone in Chhattisgarh was R483.17/tonne,” Chhatiisgarh mines secretary Subodh Kumar Singh told FE.

The bidding went on for more than five hours. A total of 192 bids were submitted. Sources said at least five cement firms were in the fray in the final round.

“Chhattisgarh earns the distinction of becoming the first state in India to successfully auction a mining lease for a non-coal mineral block. Auction of this single block itself is expected to yield R4,386 crore at the said IBM price by way of bid-revenue in addition to royalty of R1,232 crore to the state,” Singh said. Chhattisgarh had notified auction of four limestone blocks and one gold block on December 8. Over 25 bid documents have been purchased so far. The state will e-auction the Kesla limestone block e-auction on Friday and on February 26, the Baghmara gold block. KPMG is the transaction advisor to the state government. The e-auction platform is provided by state-run MSTC.

The positive outcome of the auction of these large “representative” blocks will help the union mines ministry to heave a sigh of relief as it is already under pressure, following a poor show of the initiative to allocate mines only through a transparent auction process for 12 mines in Gujarat, Rajasthan and Maharashtra. Though mines are a state subject, the auction process has been brought in by the Centre through an amendment of the MMDR Act, aimed at ensuring transparency in the allocation of mines.

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