Odisha bats for immediate auction of mining leases

State says insisting on G1 level of exploration to establish proven mineral reserve without any gain in insight into economic value of the resource will delay auction process

Odisha has pitched for commencing immediate auction of mining leases in the interest of mineral bearing states that are battling high incidence of poverty.

The state government has suggested to the Central mines ministry that insisting on G1 level of exploration to establish proven mineral reserve without any commensurate gain in insight into the present economic value of the resource, will only delay the process of auction and, consequently delay flow of economic benefits to mineral rich states.

“The assumption that conducting G1 level exploration to assess present value of mineral reserve will not hold good for minerals with volatile market price like iron ore as the present value cannot be accurately fixed even after G1 level of exploration as it will be impossible to forecast the future market price for next fifty years with only reasonable confidence level”, the state government stated in its views submitted to the Union mines ministry on ‘Draft Parameters of evidence regarding existence of minerals contents Rules, 2015’.

Immediate auction of mining leases could be achieved by enabling a pragmatic system of establishing the mineralization to a fairly reasonable level of confidence and of bidding parameters which are not linked with the present economic value of the proved mineable measured mineral resources, the state government said.

Odisha has opined that bidding parameters need to be de-linked from the estimated present value of ‘proved mineral reserve’.

It has suggested an upfront payment for auction which can either be in the form of lumpsum amount per hectare for each mineral or a prefixed amount equal to six per cent of the royalty on the entire balance estimated indicated mineral reserve available in the area.

“The lessee may be required to take up the exploration upto G1 level before the end of five years. In case the final proved mineral reserve falls short of the indicated mineral reserve by more than 10 per cent, the bidder may be given the option of surrendering the lease and refund of unadjusted upfront payment. In case, the proved mineral reserve exceeds the indicated mineral reserve by more than 10 per cent, the lessee would be required to deposit the differential upfront payment on pro-rata basis”, the letter stated.

On mineralisation in virgin areas, the government said, such areas explored up to G2 level should be allowed to put to auction and accordingly provisions should be made in the Draft Rules.

Certain virgin areas may be reserved for exploitation by public sector and the exploration in these areas should be entrusted to the concerned public sector with specific terms and conditions as may be specified by the state government.

The state government suggested that areas in respect of which mining leases have been determined or surrendered or lapsed may be put to auction immediately factoring in the exploration already carried out by the previous lessee and available geological information.

It suggested maximum mining lease area prescribed for limestone, iron ore and manganese ore and bauxite may be reduced to five sq km instead of 20 sq km in case of leases to be given to the private sector. For the purpose of public sector undertakings, the existing limit of 10 sq km should be retained instead of increasing to 20 sq km as proposed.