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Odisha to auction 20 iron ore, manganese mines starting Friday

Oct 4,2019

Marking an important transition for the sector since the Narendra Modi government amended mining laws in 2015 to introduce the auction system to allocate mining licenses Odisha is inviting bids for 20 iron ore and manganese mines in the state starting October 4.

 

Now, 329 mines across the country will see the end of their terms in March 2020. This includes 24 working mines in Odisha, whose economy in the last two decades has been significantly dependent on mining. Of these, the state has decided to auction 12 iron ore, two manganese and six iron and manganese (associate minerals that co-occur) mines in two lots, beginning Friday, senior officials said.

 

Notices inviting tenders for the two lots will be issued on October 4 and 14 and letters of intent will be sent by January 3 and 15 2020, respectively, they said. Five of the leases have been reserved for manufacturers of steel and steel intermediaries.

 

The Naveen Patnaik government has already invited bids for two chromite mines and decided to reserve Tata Steel’s Sukinda chromite mine for state-owned Orissa Mining Corporation.

 

A high-level committee chaired by development commissioner-cum-additional chief secretary that met from September 21 to 23 also decided to reserve the Guali iron ore mine, with an estimated resource of 198.74 million tonnes for another state-owned company, the officials said.

 

The Mines and Minerals (Development and Regulation) Amendment Act, 2015, which ended the first-come-first-serve policy of the earlier era, was hailed as an answer to much of the mining sector’s problems.

 

The transition, however, has been far from smooth as recent notifications and the government’s own deliberations suggest. Transparency and discretion continue to be ticklish issues, it seems.

 

The Odisha high-level panel’s dilly-dallying over the Nuagaon iron ore mine, the largest mine to be auctioned, is a case in point. Spread over 767.284 ha with reserves of 792.93 million tonnes (of all grades of above 45% Fe ore), the Nuagaon mine equals all the other iron ore deposits in the state put together. It’s so big that only a handful of companies are expected to meet the net worth eligibility to bid for it.

 

An agenda note for the committee’s meeting had discussed the need to divide the area into three because it was “too huge a mineral reserve and would attract very few bidders since the net worth eligibility will be too high”. While a larger area offers economies of scale and is in the interest of mineral conservation, greater participation could have fetched the state a higher premium.

 

A technical committee examining how the deposit could be split, considering the ore body, existing mine, and infrastructure, suggested a southern block of 192 million tonnes, a northern block of 80 million tonnes, and a large central block of 520 million tonnes. Suspecting that the ore body extended into a neighboring freehold that would need exploration, it recommended holding this undivided Nuagaon iron ore block back for now.

 

The high-level committee, however, has chosen to tender this deposit as a whole.

 

The panel has also changed its mind on Rungta’s Jahang Iron ore block, Essel Mining’s Jilling-Longlata iron ore deposit, and Kalinga Mining Corporation’s Jurudi iron ore deposit. These were earlier identified for captive use, but will now be auctioned as merchant leases.

 

An official in the mines directorate said splitting a continuous mineral occurrence artificially would mean leaving behind mineral in the safety zones. However, the government considered but chose not to amalgamate two other adjacent blocks of Feegrade's and BICO.

 

A section of miners, speaking on condition of anonymity, alleged that the reason for the disharmony in rationale was conflicting demand from large competitive lobbies who were edging out the smaller player. “While experience which was a criterion earlier is not today, net worth is,” one of them said. “The condition is a material error; it allows the same party from continuing to bid for mines, increasing his exposure with each bid, but quoting the same net worth each time.”

 

The minutes of the meeting offered no explanation for the decisions.

 

Speaking on the condition of anonymity, a senior official who attended the meeting said, “Decisions were taken on the collective wisdom of those present. There are no arithmetic formulas that can answer these questions. The environment ministry says mines, where there is no change in temporary clearance for the next three years, can be granted. By clubbing our splitting the blocks we will lose this advantage and mines may have to be shut for the next two-three years.”

 

Odisha delayed its mine auctions by a year, waiting for the Centre to increase an area cap that disqualified Tata Steel from participating in iron ore auctions. These working mines, set to lapse in six months, account for half the state's iron ore production.