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Govt. eases mine auction rules
Amendments aimed at making process more pragmatic, spur bidding interest

  

More than two years after it introduced auctions as a means to allot mining rights for major minerals, the Centre on Thursday significantly eased the auction rules in a bid to rekindle investor interest in a process that has been marred by failed auctions.

While 33 blocks of minerals have been successfully auctioned since May 2015, when the mineral auction rules were introduced, as many as 60 auctions have flopped for lack of interest. The development assumes significance as the Centre is looking to auction more than 100 blocks over the next 15 months with a potential value of about ₹2 lakh crore.

“We have been monitoring the process closely with State governments and there was a consensus that the rules needed to be eased to make the process more pragmatic for bidders without sacrificing the requisite checks on successful bidders,” Union Mines Secretary Arun Kumar said at a briefing to explain the amendments notified on November 30.

States can now allocate blocks even if there are less than three bidders in the fray during the second round of auction, as opposed to the existing rule that requires the process to be annulled if there are less than three bidders in the first three rounds.

“Each round of auction carries on for at least three months and this resulted in many blocks getting annulled time and again. States were granted flexibility in awarding mines only if there were less than three bidders in the fourth round,” Mr. Kumar said, adding this had made the whole process infructuous.

Net worth norms

In a bid to expand the pool of prospective bidders, net worth requirements have also been relaxed. For an average annual output of up to ₹2 crore, bidders now need a net worth of just ₹0.5 crore as opposed to ₹4 crore earlier. Similarly, for an average annual output of up to ₹20 crore, the net worth norm has been slashed from ₹40 crore to ₹10 crore.

Rigid end-use conditions imposed by States on minerals excavated from a block, have been done away with as miners were saddled with low-grade ore that didn’t meet the standards for the specified end-use. Miners can now dispose of 25% of low-grade ore that is not used for the stated captive purposes of the mine.

The Centre aims to spur increased interest in the upcoming auctions — 34 mineral blocks are in the pipeline for the rest of 2017-18. The new norms also have a clause to discourage miners from ‘squatting’ on mine leases. “We have now decided that if you have the letter of intent for a mine, be ready to mine within three years,” Mr. Kumar said.
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