 "Auction rules: Mineral reserves must not cross 1.25 times the requirement of company")
Besides, the Union government has proposed an upfront payment of 0.5 per cent of value of resources by companies, who secure licence for mining major minerals like iron ore through auction under the new law.
According to the new mineral auction rules proposed by the Centre on Wednesday, minerals such as bauxite, iron ore and limestone can only be reserved for the end-use of alumina, integrated steel plants and cement plants by state governments. However, a manganese mine can’t be reserved for any end-use.
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The Central government has proposed that if a bidder or any of its affiliates is holding one or more mining lease (ML) for the same mineral, then the amount of mineral reserves under such mining lease shall be deducted from the mineral reserves being auctioned, for the purposes of computation of 1.25 times of the requirements of minerals.
“The capacity restriction is not unusual, and governments or regulators specify these to avoid market dominance of any one or a group of bidders,“ said Kameswara Rao, leader (energy, utilities and mining), PricewaterhouseCoopers. “I expect there will be some flexibility on annual mine output as these end-use plants are lumpy in nature, and off-take will increase in a staggered manner as new projects come on stream.”
Moreover, the company or any of its affiliates would not be eligible for auction if they are holding a reconnaissance permit (RP) or prospecting license (PL) with respect to the same mineral which is under auction.
RP is granted for preliminary prospecting of a mineral through regional, aerial, geophysical or geochemical surveys and geological mapping, while PL is granted for undertaking operations for the purpose of exploring, locating or proving mineral deposit.
In order to participate in the auction, the company would either have to surrender its RP or PL or conclude its reconnaissance or prospecting operations.
The government has also clarified that if, on conclusion of prospecting operations, evidence of mineral contents has been established by the company, then that amount of mineral resources found would be deducted from the total value of mineral reserves being auctioned. As a result, the company would have to reduce its mineral requirement, over the period of 50 years, from the mine being auctioned.
All of these eligibility conditions would be applicable only when the state government uses its discretionary power and specify the end-use for the mine being auctioned.
The two-step auctioning process designed by the Centre would be done on an electronic platform chosen by the state government. The auctioning would be conducted by the state governments. Companies need to make an upfront payment equal to 0.5 per cent of value of resources, determined by multiplying the estimated quantity of minerals in metric tonne with the average price per metric tonne of such mineral of average grade.
The government has also made it clear that the area where the ML is auctioned should also include the area required for ancillary activities, including without limitation, sub-grade stacking, waste dumping and tailings.