The government should complete exploration of mines before auctioning them to bidders so they have access to information that can help them make an informed business decision, says a report.
A joint report by Ernst and Young (EY) and industry body Federation of Indian Mineral Industries (FIMI) points out that due to various constraints, Geological Survey of India (GSI) has been unable to complete the exploration for most minerals, making it difficult for states to properly quantify them.
In such a scenario if minerals like iron ore, bauxite and limestone are auctioned, it could lead to either revenue loss for the government or a financial setback for the successful bidder, the report 'Mineral Concessions Framework: Imperatives for Success' said today.
Explaining the rationale behind emphasis on exploration, EY partner and leader (Metals and Mining) Anjani Kumar Agrawal said: "Government before notifying mines for auction must make available quality information for the bidder to help him make a good business decision."
It is important that there is clarity on resources for the bidders. If mining area has not been explored properly, the bidder will be playing a risky game and this can lead to low bids on the block, Agrawal told PTI.
On exploration, the report says that GSI has not been able to complete intensive regional exploration for most minerals other than coal due to technical and manpower issues, making it difficult for states to properly quantify minerals.
Besides, geo-chemical mapping of the country is still running slow and it may require coordination among various departments to complete it before auction, it added.
Presently, State Geological Programming Boards are responsible for mapping mining assets but these agencies may suffer from lack of manpower and advanced technology, it said.
Compared to coal, other mines are substantial in number.
It remains the responsibility of states to provide a list of non-working mines, mineral wise segregation and statutory clearance status with respect to FC/EC (Forest and Environment Clearance) for listing mines for auction.
However, considering the scale and geographical diversity, aggregation of this data remains a challenging task, it rued.
"As a consequence, the timing of auction needs to be evaluated. Rather than rush through the auction process for such mines, the states should be clear about the certainty of the auction," the report suggested.
The state will then be able to share and confirm to its best judgement in the notice inviting the bids. Depending upon the strategic importance and timeline for auctioning a specific mineral or mine, the exploration completion should also be targeted, it said.
