India: More than 60 companies in the fray for forthcoming Odisha mineral block auctions

The Odisha government has issued notice inviting tenders for e-auction of 11 mineral blocks, including seven new blocks, for grant of mining lease. Of the 11 blocks offered for auction, seven are iron ore blocks, two iron ore and manganese blocks, one iron ore and dolomite and one bauxite block. A panel of experts participated in SteelMint's webinar 'Mines Auction - what to expect from the second phase' on 31 Jul'21.

Below are the key takeaways from their informative and enlightening presentations:

Umesh Chandra Jena, Joint Director of Mines, Government of Odisha

• Out of 19 iron ore mine leases executed in 2020 in Odisha, three have been put up for re-auction at the upcoming round of auctions.
  
  
• Only nine lessees achieved 100% MDPA target, while five lessees achieved more than 50% of the target.
  
  
• Among those lessees that failed to meet the MDPA dispatch target were Serajuddin & Co. and Narbheram Power and Steel
  
  
• Lessees who failed to maintain dispatch target have to pay a penalty premium of the targeted quantity and 24% of their performance security will be appropriated. The state government is processing the demand notice which will be issued soon.
  
  
• If a successful bidder doesn't pay the security deposit he will not be declared as preferred bidder and the second-highest bidder will be given an opportunity to quote the amount quoted by the highest bidder.
  
  
• The second round of online forward section will start on 17 Sept'21. The upcoming auctions have triggered active participation with nearly 62 companies buying tender documents.
  
  
• The composite license (PL-cum-ML) for the four brownfield leases for the auctions will be awarded soon while license for the seven greenfield blocks could take a little time.
  
  
• Till July'21, Odisha's iron ore production has been 55 mn t and production is expected to be around 170 mn t in FY'22 and dispatches should be around 160 mn t.
  
  
• The revised amendment of Section 16A (2) of MCR, prioritises on meeting the dispatch target for auctioned mines under MDPA and not the production target.
  
  
• Stocks lying at mines that were auctioned in 2020 have been transferred to OMC for sale via auctions.
  
  

Ramakrishna Chinnamsetty, Head, Mining and Business Development, AM/NS India

• Pre-operational activities are on at AM/NS India's Sagasahi block and it is expected that operations will commence shortly. The mine has EC limit of 7 mn t/year and ROM production is projected to be gradually ramped up to that limit.
  
  
• By 2026 India's iron ore production should be 260 mn t to sustain crude steel production of 150 mn t/year. By FY'31 India will need 380 mn t iron ore to make roughly 220 mn t crude steel. Auctions by the Odisha, Chhattisgarh and Jharkhand governments are expected to boost production in the coming years.
  
  
• The National Mineral Index (NMI) is expected to address the shortcomings of IBM.
  
  

Somesh Biswas, Head, Raw Materials Strategy, Tata Steel

• By 2030 if all the mines are auctioned and there are no captive mines left except for the PSUs, the royalty-on-royalty issue could escalate to bid premium-on-bid premium. NMI is needed to stop this situation from arising.
  
  
• Aggressive bidding should be reduced so that share of commercial mining in GDP improves.
  
  
• In the prospective NMI, unlike coal, iron ore imports should not be taken into consideration because a) iron ore imports are insignificant and b) import prices could raise the price index compared with the weighted average for grades and states published by IBM. This will result in raising the bid price for auctions.
  
  
• If NMI is implemented with retrospective effect it will give unfair advantage to the successful bidders, as the Odisha government has recently pointed out.
  
  
• Five-six mines expired in Jharkhand in 2020 and therefore production has been somewhat affected. The state government had auctioned one block, Ajitaburu, and it fetched 122% bid by the state-owned company Jharkhand State Mineral Development Corporation (JSMDC) company. The auction has been challenged in court and thus postponed.