FY20 to witness auctions of most mineral blocks since inception of new MMDR

Topics Mineral blocks

Iron ore Photo: Bloomberg
Auctions of 59 mineral blocks are set to be completed in FY20, making it the most successful year for online auctions since the enactment of the amended Mines and Minerals - Development & Regulation (MMDR), 2015.

In this fiscal, 16 blocks have already been auctioned. Notice Inviting Tenders (NITs) have been issued for 43 others and auction formalities in respect of these blocks are expected to be completed before the close of FY20.

Auctions first took off in 2015-16 after a recast MMDR killed the practice of discretionary allotments and mandated award of mineral resources through a transparent system of auctions. Auctions were slow to start with only six blocks offered in the inaugural year. Between 2015-16 and 2018-19, 54 blocks were auctioned online.

“In this fiscal, the tempo of auctions has accelerated as tenure of all merchant mining leases ends by March 31, 2020. These mines have to be readied for production again before their validity ends. The government is working on environment clearance, forestry clearance and an array of other approvals to ensure seamless transfer of ownership and continuity in operations," said an official with a standalone mining company.

Since the promulgation of MMDR Act 2015 and framing of Mineral Auction Rules, 70 mineral blocks have been auctioned. The combined revenue to states from auctions of these blocks over the lease period spanning 50 years has been estimated at Rs 2.02 trillion, inclusive of  royalty and contributions to the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET).

In Odisha, the process of online auctions of 20 merchant leases- a mix of iron ore and manganese has taken off.

The deadline for bid submission is January 3, 2020. The conduct of ascending forward electronic auctions and submission of final price offer on the auction platform will be done between January 31 and February 21, 2020 while the Letter of Intent (LoI) is to be issued from February 10 to February 29, 2020.

The state government has inserted some additional conditions in the tenders for the expiring merchant mine leases. 
A successful bidder after obtaining all statutory clearances needs to produce in the first two years at least 80 per cent of what the mine actually produced in the preceding two years. This clause will be inserted in the Mine Development and Production Agreement (MDPA). Failure to achieve this production benchmark will debar the successful bidder from participating in future auctions for three years. And, in case of blocks reserved for end use, the consumption should be limited to the plant of the bidder located within the country.

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