India's iron ore mine auctions gain traction in FY23; what to expect next?

• Competitive bidding route gains traction from FY20
  
  
• Odisha tops auctions chart since FY16
  
  
• Odisha and Karnataka eye further auctions
  
  

Morning Brief: India's mineral block auctions showed a marked upturn in 2022-23 (FY23) with successful bids more than doubling y-o-y. Madhya Pradesh led the competitive bidding route with 29 non-coal blocks allotted for auction last fiscal, followed by Chhattisgarh with 20 and Odisha with 10.

It may be mentioned, the country has successfully auctioned off 267 mineral blocks since the Minerals Development & Regulation (MMDR) Act was amended in 2015, with the process gathering speed sharply in FY23, reveals data maintained with SteelMint.

Two iron ore blocks auctioned in 2019-20 -- Guali and Jilling Langalota, which had been bagged by Jindal Steel & Power and Shyam Ores Jharkhand respectively, were later forfeited because the high premiums rendered these unviable for the winners. They surrendered the same, which were awarded to OMC.Therefore, in total, 269 mineral blocks were auctioned but in actuality, the net figure had been 267.

MMDR Act paves way for auctions

It may be recalled that the auctions regime in India had received the green signal from the amended MMDR Act. Prior to this, mineral blocks were dispensed on a first-come-first-serve basis. However, the amended Act cleared the way for the more transparent competitive bidding route. And, since 2016, India has been awarding mineral blocks only through this platform.

Section 8(A) of the Act was further amended, allowing any lessee of a captive mine to sell minerals up to 50% of the total mineral produced in a year after meeting the requirement of the end-use plant linked with the mine. This, however, required an additional amount to be paid to the concerned state government. Similarly, government companies or corporates whose mining lease has been extended after the commencement of the MMDR Amendment Act, 2015, shall also pay such additional amount for the mineral produced after the commencement of MMDR Amendment Act, 2021.

All the amendments were made with an eye on raw material security for domestic steel mills.

However, it was only from financial year 2019-20 (FY20) that this route started gaining traction when 43 blocks were auctioned off. This was also the year when 25 key working iron ore leases in Odisha were put under the hammer. The year 2020-21, being a Covid one, saw a subdued response. But the pace again gained momentum from 2021-22, when 46 blocks were bagged, reaching a peak of 105 in 2022-23.

State-wise auctions break-up

Odisha has topped the auctions charts with a leading 48 blocks having come under the hammer and successfully finding takers till date. Madhya Pradesh came a close second with 46, followed by Karnataka in third slot with 36.

Other states that played an active role were Maharashtra (34) and Chhattisgarh (29).

Mineral-wise break-up

Of the 105 non-coal mineral blocks auctioned off in 2022-23 (including mining leases and composite licenses), the share of iron ore was at a leading 35 (including two iron ore and manganese). This was followed by limestone (20) and manganese (18).

Auctions highlights

• Goa auctions take off last year: Goa started the auctions last year after much proactive deliberations. The state auctioned four blocks last year (three in north Goa and one south). The successful bidders for the north blocks were Vedanta (Bicholim), Salgaoncar Shipping (Sirigao Mayem), Rajaram Bandekar (Monte de Sirigao) while Fomento Resources bagged Kalay in south Goa. Together, these have around 139 mnt of reserves.
  
  

The state has put auctioning of mining leases on the fast track.

• Auctions gain pace in Maharashtra, Karnataka: Active auctions were seen in Maharashtra and Karnataka last year too. Five blocks were auctioned in Maharashtra over 2022-23. Of these, four were composite leases and one, a mining lease.
  
  

In Karnataka, the Supreme Court, ten years after it clamped down on illegal mining in the state, relaxed its order on production and sale of iron ore. Post-this order in August last year, auctions activity escalated, with six taking place from September last year till late March, 2023.

Update on auctions held so far this fiscal

So far in 2023-24 (till 19 May), around 8 blocks have gone successfully under the hammer, reveals data.

Outlook

Some more iron ore blocks are lined up for auction in Odisha. The auction may offer 5 new iron ore and manganese mines.

SteelMint's upcoming international conference on coal, iron ore & sponge iron

Is Maharashtra becoming the next mining hub? When will iron ore production from Goa start? What is the way ahead for the upcoming mines auctions? These and many more pertinent questions will be discussed at SteelMint's joint international conference on coal, iron ore and sponge iron, to be held in Kolkata over 24-26 Aug, 2023, at the JW Marriott. Ensure you register early!