While e-auction of mines is underway now, a majority of companies participating in the bid process are found to be mining offenders.
According to the State Government’s plan, 100 mines would be put to e-action for 50 years. According to the MSTC website, the first phase of auction bidding notice was issued in February 2016 for two limestone mines followed by second phase auction notice for four mineral blocks in December 2016 and third phase auction notice issues for three blocks in 2017 and notice issued to five mines in fourth phase in 2018. In 2019, the Director mines notified for auction bidding of seven mines in July, two mineral blocks in September, nine in October and 20 mines in December. Notices were issued for two more mineral blocks in January 2020.
So far, the Sirajuddin and Co has succeeded in retaining the Balda iron ore mine of 135 hectare in Keonjhar district at a premium of 118.05 %. The Arcellor Mittal has bagged the Thakurani mines at a premium of 107.5%. The Syam Ores has quoted the highest bid of 135% premium to take over Jilling Iron Mines. The Jindal Steel Works (JSW) has grabbed the Ganua mines in Sundergarh district at 132% premium, Nuagaon mines at 95.2% premium, Aryan Mining and Trading Corp, Narayan posi at 98.55% and Jajang Iron Mines at a premium of 110%.
Majority of the mines are lapsing on March 31, 2020 and many existing lessees have been fined for illegal mining by the Supreme Court. Most of the existing mining companies bidding in the auction are serious violators of mining, environment and forest laws, illegal mining and some have vigilance cases and forest cases pending against them.
It is a debate if tainted miners should be allowed to take part in the auction.
Another question arises as to whether these companies who have taken the mines on auction will be able to operate them with such non viable high premium rates.
For example, Syam Ores has to pay 135% of the sale value of iron ore, as set by the IBM, to the Government. Apart from this, the company will pay a royalty 15% of base price, District Mineral Fund contribution 30% of Royalty and NMET (National Mineral Exploration Trust) 2% of Royalty. This does not include the sales tax, GST and other commercial taxes levied on the sale of mineral and its transportation. At least 50% expenditure of the sale price will incur towards mineral raising cost per tone and the hefty dues of crores for NPV, Forest Clearance, surface rent etc to be borne by the lessee too. It means if iron sale price is Rs 1,000 per tonne, then Syam Ores would require paying Rs 1,548 per tonne as premium, royalty, DMF, NMET deposit to the Government and spending Rs 700 per ton to do the mining. Hence by selling ore at Rs 1,000 per tonne, the company would spend Rs 2,248.
The high premiums are set to put iron ore prices on a different orbit altogether. Since many of the large companies are emerging as the winners, they are expected to become new price makers in the
market.