Odisha to resume auctions of mineral blocks after one-year delay

After a one-year delay, the Odisha government is preparing to auction eight mineral blocks - a mix of six virgin blocks and two merchant mines that will see their leases lapsing by March 31, 2020. The auctions are scheduled for the first week of August 2019.
 

In the last fiscal year, the state government was unable to auction even a single new mineral block due to pending litigation over the eligibility norms for the participation of a bidder with more than 10 square km in its leasehold. Although the state steel & mines department had started the process to auction Chandiposhi and Purheibahal- both iron ore blocks - in FY19, it was stalled due to a Public Interest Litigation (PIL) filed in the Delhi High Court in May 2017. The court had stayed the auctions till clarity emerged on eligibility norms.

With the Centre and the state government still locked in a spat over the ceiling on maximum leasehold area, the auctions of iron ore and manganese ore deposits have been kept in abeyance. A high level committee chaired by the additional chief secretary (steel & mines) is expected to take a call shortly on auctioning iron and manganese ore deposits.

Instead, the state government has lined up two expiring chromite mines held by B C Mohanty (Kamarda chromite mines) and Misrilall Mines (Saruabil chromite mines) for auctions. The remaining six are freehold mines - Behera Bhanjipalli (limestone), Garamurrah (limestone), Khatkurbahal (limestone/dolomite), Pipalmunda (limestone), Naringpanga (graphite) and Jagdalpur (graphite). All the eight blocks are likely to be offered to merchant miners. The eight blocks between them have 144.58 million tonne reserves with estimated resources valued at Rs 21,773.21 crore.

In this fiscal, Odisha is aiming to auction 40 mineral blocks online. The blocks include 16 merchant mines, with an approved capacity to produce 79 million tonnes of iron ore per annum. The expiry of their leases by March 31, 2020, has triggered concerns on raw material crunch that might affect the end user industries, especially the non-integrated steel producers which are operating without captive mines. The lapsing of these mine leases will knock off 55-60 million tonnes of iron ore supplies from the open market.

To allay the fears, the state steel & mines department has given its approve to end use industries in the state to stash iron ore in stockyards till March 31, 2022.

Realising the need to build an inventory of iron ore in the light of expiring blocks, Odisha’s steel & mines department has issued a notification to provide storage licenses to stockyards.

The state government has invoked the powers under Rule 10 B of Odisha Minerals (Prevention of Theft, Smuggling & Illegal Mining and Regulation of Possession, Storage, Trading and Transportation) Rules, 2007 to permit storage licenses valid only for iron ore.

“The stockyard will be used only for the storage of iron ore meant for captive use of the licensee in its plants located within the state and shall not be despatched for trading purposes or for export outside the state. All the requisite clearances and approvals as required by law shall be obtained and maintained by the licensee”, the government notification read.

Meanwhile, SBI Caps has submitted a note title ‘Decision & Way Forward’ outlining the decisions to be taken by the Odisha government. The cost of Tender Document for each of the eight blocks is prepared basing on the value of Estimated Resources as suggested by the Transaction Advisor (SBI Caps). As per the note submitted by the transaction advisor, the reserve price for each of the mineral blocks queued up for auctions have been suggested at five per cent.