Indian mineral blocks up for auction finds few takers

KOLKATA (miningweekly.com) - Indian provinces are pushing more mineral reserves onto the auction block only to find few takers.

This situation had become so prevalent, that the federal Mines Ministry was directing provincial governments to intensify engagements with the mining industry to get a clearer picture of the reasons for the dismal response.

Eight provinces had already put 42 non-coal mineral reserves up for auction while another 40 were slated to be added to the auction list by the end of March.

Barring provinces like Odisha, Jharkhand and Chhattisgarh, which received favourable response with few bids for iron-ore reserves, other provinces like Rajasthan, Maharashtra and Gujarat failed to get any response for mineral reserves like limestone, bauxite, iron-ore and tungsten, which had been put up for auction specifically for end-use companies, according to information culled from the Mines Ministry.

Only the government of the eastern Indian province of Jharkhand was able to successfully conclude the auction of two limestone blocs, last week, while all four limestone blocs on offer in Chhattisgarh and two in Rajasthan failed to elicit any bids.

Prompted by the dismal showings at the auctions so far, the Mines Ministry has directed Rajasthan, Maharashtra and Chhattisgarh to hold consultations with the mining industry to find out the causes of no-bids, a ministry official said.

However, the mining industry, as represented by the Federation of Indian Mineral Industries (FIMI), was not surprised by the lack of interest from miners in competitive bids for the resources.

According to FIMI, the very move to auction mineral resources to user industries was erroneous and should not have been done in the first place, simply because allocation of mineral resources through competitive bidding was not a practice anywhere else in the world.

“Who will put in bids for mineral assets during the current downturn in global commodity business? Most would prefer to wait and watch the commodity market movement before drawing up their long-term raw material sourcing goals. At the moment it is cheaper to access and import raw materials than invest long term,” FIMI secretary general R K Sharma said.

Simultaneously, fearing that an absence of fresh investment in iron-ore mines would result in a scarcity of raw material supplies, FIMI had sought that in the case of noncaptive existing iron-ore mines, the government should extend the lease till 2030.

As per the new legislation under the Mines Minerals Development and Regulation Act 2015, leases of all existing noncaptive mines allocated through the preferential route would expire on March 31, 2020 and ensure that by then, all mine allocation would be through the auction route. And only iron-ore blocks explored to a level of G2 could be put up for auction under the new laws.

FIMI apprehended that iron-ore blocks explored to a level of G2 would not be available by 2020 and with leases of existing noncaptive mines also expiring by then, only captive iron-ore mines would be left operational in the country, leaving steel mills based on merchant purchase of raw materials, high and dry.