Odisha to again call for auction of 20 mine blocks after tweaking norms

The Odisha government will on December 6 again invite bids for 20 iron and manganese mine blocks, cancelling tenders it had called for in October because of controversy over the criteria in previous bid documents. 

The official reason for the cancellation is "administrative inconvenience", but government insiders blame it on wrong interpretation by bidders.

“The real flaw was not in the contentious clauses in the tender document. Rather, it was the manner in which these norms were interpreted by the bidders,” said a source.

"For instance, the model tender documents allowed a subsidiary to show the net worth of its parent concern and this made the subsidiary company eligible to bid for a mineral block. But the same norms did not allow a parent company and its subsidiary to compete for the same block till the last leg of auctions. Apparently, this lack of clarity elicited backlash from a few competing bidders,” said the source.

An industry source, who requested anonymity, said, “Both ArcelorMittal and Adani Enterprises had given written submissions to the state government on bids for Nuagaon block citing clauses of restrictive practices. Government officials had delayed the deadline for submission of bids for the second phase of auctions from November 28 to December 5.”

The Nuagaon lease, currently held by KJS Ahluwalia, is a massive iron ore block straddling 767.28 hectares and it has balance reserves of over 700 million tonnes. Owing to its immense deposit, the floor price for auction of this asset was kept at 50 per cent of the sale value (of the mineral) determined as per IBM (Indian Bureau of Mines). The block attracted 15 technical bids—six of which were JSW Group companies—JSW Steel, JSW Raigarh, JSW Bengal Steel, JSW Jharkhand Steel, JSW Utkal Steel and Amba River Coke.

Some bidders felt though there was no clause to debar the subsidiaries from partaking in auctions, the practice of clustered bidding of companies of a single conglomerate was unfair since it led to unequal competition.

In the recast tender documents, the guidelines would be spelt out explicitly to overcome this anomaly. While a subsidiary would still be able to use the net worth of its parent firm to apply for a mineral block, both cannot compete for the same resource, the source added. The state steel and mines department has already alerted SBI Caps, the consultant for mineral block auctions to work on the fresh tender documents.

In the first lot of 10 merchant iron ore and manganese blocks offered for online auctions, the state government has received 177 bids in all from 58 companies- large steel producers, secondary steel makers, pellet manufacturers and top merchant miners from Odisha and Goa. ArcelorMittal, Tata Steel, JSW Steel, Jindal Steel & Power Ltd (JSPL), Vedanta owned Electrosteel Steels Ltd, ferro alloys maker T S Alloys, Aditya Birla Group-owned Essel Mining & Industries Ltd, KJS Ahluwalia, and Serajuddin & Company are among the companies which have bid for Odisha’s iron ore mines.

Government papers reviewed by Business Standard reveal that the decision to annul the auctions process of 20 blocks initiated via Notice Inviting Tenders (NITs) on October 4 and 14 was taken after meetings of the Technical Evaluation Committee and the High Level Committee. Fresh NITs in respect of the 20 blocks will be issued on December 6. The deadline for bid submission is January 3, 2020. The conduct of ascending forward electronic auctions and submission of final price offer on the auction platform will be done between January 31 and February 21, 2020 while the Letter of Intent (LoI) is to be issued from February 10 to February 29, 2020.

The state government has decided to insert some additional conditions in the tenders for the expiring merchant mine leases. A successful bidder after obtaining all statutory clearances needs to produce in the first two years at least 80 per cent of what the mine actually produced in the preceding two years. This clause wi-Your data has been truncated.