India’s Steel Ministry eyes alternate mineral auctions
India’s Steel Ministry is seeking to simplify and further liberate mining policy, including combining the two-stage auction of mineral blocks into a single stage bidding process.
The Steel Ministry feels that single stage bidding for mineral blocks will lower the impact of skyrocketing premiums that result from the multiple stage bid process as followed at present.
It has also sought to scrap the mandatory review of royalties payable on various minerals every three years, allowing steel producers stability of input costs over a longer term, and that various levies imposed on the mining sector at both the federal and state levels be subsumed into a single rate as this will lower the cascading impact of taxes on steel producers.
Currently, state and federal governments hold a two-stage bidding process for the auction of mineral blocks wherein the first stage entails technical bids, initial price offers, uploading of qualifying documents, opening of bids and opening of technical and initial price offers. Thereafter technically qualified bids are ranked in descending order based on initial price offer.
In the second stage, the highest initial price offer is taken as the reserve price and continuous incremental bids are submitted by qualified bidders. The highest bid submitted is allocated the mineral block.
The Steel Ministry has maintained that the competitive bidding in the second stage leads to unrealistic premiums and, in several cases, while investors were able to bag the asset at exorbitant prices, thereafter development of the mineral asset and downstream production have to absorb the high premium paid, making the cost of production unviable in many cases.
The Steel Ministry’s suggestions have been submitted to the recently formed committee under the National Institute for Transformation of India Commission, a government policy advisory body. The committee comprised representatives from various state mineral and mining companies, private metal companies and related government Ministries.
The mandate of the committee is to establish guidelines to streamline growth of the Indian mining industry. The trigger for this urgency is government’s concern over the fact that of the country’s total import bill of $465-billion in 2017/18 as much as $126-billion was accounted for by imports of minerals and metals despite the vast resources available in the country.
Various industry sectors have asked the committee to frame facilitating provisions in the various mining policy frameworks, that will reduce the time spent securing all mandatory approvals to start mining operations to 180 days from the average 840 days that it takes currently to secure all such approvals.
Source: Mining Weekly