Auctioning minerals: Sector divided, mines ’ development a concern
As the Union government looks for suggestions from the domestic mining industry for enhancement of private investment in the sector, industry stakeholders remain divided on the auctioning of minerals under the amendment to the MMDR Act 1957.
Finance minister Nirmala Sitharaman had in May asked for more private investment in the mining sector under the Atmanirbhar Bharat scheme and industry stakeholders have to submit their suggestions to the government by September 3.
While a section of the industry continues to lobby for mineral auctioning, industry bodies such as Federation of Indian Mineral Industries (FIMI) want more private involvement in exploration, which remains subdued because of tepid government efforts.
After the amendment to the MMDR Act in 2015, 97 mineral blocks have been auctioned so far at 80 per cent-130 per cent bid premium.
“We are advocating mine auctioning primarily because it will bring down the cost of production for a steel producer and make steel more competitive in the market.
The product, after it leaves the plant, becomes up to 14 per cent costlier, making it less competitive. Captive ores will ensure lower cost of production,” Bhaskar Chatterjee, secretary general at Indian Steel Association (ISA), told Business Standard.
The state exchequer is estimated to earn a revenue of ~8 trillion from the auctioned mineral blocks over the lease period, including an estimated contribution of ~6 trillion through auction premium.
Also, around ~1.3 trillion will come to the state by way of statutory payments, that is, royalty that miners contribute to District Mineral Foundation (DMF) and contribution to National Mineral Exploration
Trust (NMET). “Mines that have been auctioned at premium are brownfield mines. Till day, not a single greenfield mine of the 52 (mines) that were auctioned has come into production. They are stuck for want of clearances. So, auctioning is not helping in developing resources,” said B.K. Bhatia, joint secretary general at FIMI.
Before the amendment to the MMDR Act, 1957, about 123 mines were granted reconnaissance permit, which is a very preliminary exploratory phase. Also, 688 mines were granted prospecting licence during 2006-2014.
After the amendment for auctioning in 2015, not a single mine has been granted a reconnaissance permit while only one received prospecting licence, said FIMI.
To further streamline the auction process, the government is planning to repeal the existing mineral concession under Section 10A2(b) and 10 A2(c) of the MMDR Act, 1957, that is being blocked by the merchant miners, said industry officials.
The government is planning to delete this clause so that around 700-odd mineral blocks can come into auctions and generate huge revenue for the exchequer.
“When these concessions were granted to miners, there was no sunset clause. Deletion of the clause sends a wrong message within the country and across the globe that there is no consistency in the laws of this country. This can impact the investment climate in the sector,” said Bhatia. Miners of these blocks are not just merchant miners but captive owners as well, added Bhatia.
Before amendment to the MMDR Act 1957, mining in India was largely carried out by merchant miners. These miners could also control production of the mineral resource in tune with demand, in turn governing the supplydemand equation.
“It is time India’s mining sector has private investment in the exploration of minerals instead of leaving it entirely to the government entities. They have limited funds and cannot use huge amounts of public money,” added Bhatia.
Mineral Exploration Corporation (MECL) and Geological Survey of India (GSIS) are some of the dedicated government entities engaged in carrying out exploration activities in the country.
Globally, mining countries such as Canada, Australia and Brazil have high private participation in exploration of minerals, making them some of the largest mining countries in the world.