Supreme Court al­lows auc­tion of cat­e­gory-c iron ore mines in Kar­nataka

IN­DUS­TRY SAYS CON­DI­TIONS ATTACHED WILL RESTRICT COM­PE­TI­TION IN BIDDING

Resource Digest - - CONTENT -

The Supreme Court has al­lowed the Kar­nataka gov­ern­ment to e-auc­tion those 'C' cat­e­gory mines that are eco­nom­i­cally vi­able. C-cat­e­gory iron ore mines were last al­lowed to re­sume op­er­a­tions af­ter min­ing op­er­a­tions were banned a few years ago and a ceil­ing was sub­se­quently im­posed on min­ing ac­tiv­i­ties in the re­gion.

The de­vel­op­ment au­gurs good news for Kar­nataka, where the de­mand for iron ore has shot up in the wake of the state's grow­ing steel ca­pac­ity. How­ever, in­dus­try rep­re­sen­ta­tives say that the re­stric­tions placed on bid­ders dur­ing the e-auc­tion will make it dif­fi­cult to at­tract play­ers into the re­gion.

On Septem­ber 13, 2017, the Supreme Court had al­lowed the Kar­nataka gov­ern­ment to or­gan­ise an e-auc­tion for the 'C' cat­e­gory mines that are eco­nom­i­cally vi­able.

The e-auc­tion process is meant to help bring trans­parency, be­sides fetch­ing the right value for the pro­posed mines. How­ever, re­stricted par­tic­i­pa­tion in the form of al­low­ing only end users lo­cated in and around Kar­nataka to par­tic­i­pate in the bids re­duces com­pe­ti­tion, thereby, de­feat­ing the en­tire in­tent of fetch­ing fair prices for the mines on sale, rue in­dus­try play­ers.

Fur­ther, lim­ited par­tic­i­pa­tion leads to mar­ket mo­nop­oly, en­abling large-scale pri­vate steel play­ers to corner valu­able re­sources. The con­cen­tra­tion of re­sources, thus, leads to wide­spread eco­nomic dis­par­ity and is not ideal, said Bas­ant Pod­dar, for­mer chair­man and mem­ber, Fed­er­a­tion of In­dian Min­eral In­dus­tries (FIMI), South.

He added, “Since only seven of 51 'C' cat­e­gory mines have been auc­tioned, it has not served the pur­pose of sup­ply of cap­tive ore, which leads to a rev­enue loss of thou­sands of crores to the state gov­ern­ment. The com­bined ca­pac­ity of all 'C' cat­e­gory mines stands at 5 mil­lion tonnes per an­num (mtpa). In 2013, the Kar­nataka gov­ern­ment can­celled leases of 51 Cat­e­gory 'C' mines.

The Cen­tral Em­pow­ered Com­mit­tee of the Supreme Court had cat­e­gorised 166 min­ing leases into A, B and C as per the ex­tent of il­le­gal­i­ties com­mit­ted by them. Cat­e­gory A com­prised 45 mines which had neg­li­gi­ble or no il­le­gal­i­ties, Cat­e­gory B com­prised 72 mines where pits were found out­side the lease area and Cat­e­gory-c con­sisted of 51 mines where op­er­a­tions stretched be­yond their lease bound­aries by more than 15 per cent.

While press­ing for the ex­pe­di­tious auc­tion of new min­ing ar­eas, he added that ev­ery­one should be al­lowed to par­tic­i­pate in the bidding process. He also urged the state to form clus­ters to at­tract more bid­ders. An of­fi­cial spokesper­son from Vedanta said: "The e-auc­tion per se will not en­sure trans­parency and fair pric­ing un­less it is more in­clu­sive and com­pet­i­tive. The Supreme Court has asked the state gov­ern­ment to sub­mit a more co­he­sive pro­posal to auc­tion the re­main­ing 'C' cat­e­gory mines. The state should proac­tively work to en­sure that the mines are eco­nom­i­cally vi­able and fetch the best price in a trans­par­ent process."

Cur­rently, Kar­nataka is a closed mar­ket and only end-users in and around the state can pur­chase iron ore in the re­gion. The plants can im­port from other states and out­side the coun­try, while the leases can­not ex­port or sell to traders. More­over, the pric­ing of iron ore in Kar­nataka does not fol­low any in­ter­na­tional in­dex.

In April 2013, the apex court had di­rected the Kar­nataka gov­ern­ment to can­cel 51 'C' cat­e­gory leases for in­volve­ment in il­le­gal min­ing and had also asked it to re-al­lot them to end users through a trans­par­ent bidding mech­a­nism.

In 2016, the first round of auc­tions was con­ducted and seven mines were sold by the state. Among the buy­ers were JSW, which bought five mines and MSPL which won the bid for the re­main­ing two. How­ever, the sec­ond lot in­volv­ing the auc­tion of seven mines went un­der the ham­mer as it failed to elicit any re­sponse from the pre­scribed end users.

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