Mineral production from the iron ore mines auctioned since 2016 following the amendment of the Mines and Minerals Development & Regulation Act (MMDR Act) in 2015 accounted for nearly 25% of India’s production in FY22. SteelMint data shows that mine blocks auctioned in Odisha and Karnataka, India’s leading iron ore producing states, recorded over 62 million tonnes (mnt) of iron ore production in the last fiscal when the country’s total production stood over 250 mnt.
1/4th of India’s total output
In fact, the auctioned iron ore mines accounted for nearly a quarter of the country’s total production in FY22 and both major steel companies as well as merchant miners contributed to the total output. While JSW Steel produced over 30 mnt from its mines in Odisha and Karnataka, AM/NS India raised its production to nearly 8 mnt from the two auctioned mines that it has won in Odisha auctions.
State PSU miner Odisha Mining Corporation (OMC) recorded production of over 10 mnt from the two mines that were allocated to it after months of non-operationalization post the Odisha auctions in 2020, although Odisha-based Serajuddin & Co. posted output of just over 4 mnt from its 15 mnt/year Balda iron ore block due to considerable delay in resumption of production post auctions.
Impact of MMDR amendments
The landmark MMDR Amendment Act, 2015 paved the way for the introduction of the auctions regime in India’s mining and minerals sector by replacing the older first-come-first-serve system in a bid to ensure transparency in allocation of mineral blocs. The reforms undertaken in 2015 have resulted in successful auctions of 216 mineral blocks in different states of the country since 2016.
Importantly, the pace of mineral auctions has quickened since the MMDR Amendment Act of 2021, with 108 mineral blocks getting auctioned – the same number auctioned over the preceding six years, according to the Ministry of Mines. Auctions of 70 blocks are underway in various states. This has been possible due to radical reforms in the 2021 Amendment such as the abolition of the ‘end-use’ restriction for auctions and uninterrupted transfer of valid old environmental clearances to the preferred bidder.
Moreover, in order to augment domestic minerals supplies, Section 8(A) of MMDR Act was further amended allowing any lessee of a captive mine to sell minerals up to 50% of the total mineral produced in a year after meeting the requirement of the end use plant linked with the mine. This, however, would require an additional amount to be paid to the concerned state government. Similarly, government companies or corporations whose mining lease has been extended after the commencement of the MMDR Amendment Act, 2015, shall also pay such additional amount for the mineral produced after the commencement of MMDR Amendment Act, 2021.
The additional amount for extension of mining leases is 1.5 times the prevailing rate of royalty for iron ore mines, while for other minerals (barring coal and lignite) it is the same as the current rate of royalty payable.
Auctioned blocks
Of the aforementioned 216 mines that have been auctioned since 2016, 68 are iron ore while six are composite blocks with both iron ore and manganese reserves. Total limestone mines auctioned are 66, while 22 manganese mines have been successfully auctioned. Around 18 bauxite blocks have gone under the hammer, while the rest are gold, graphite, chromite, diamond and other minerals.
Among the states, Odisha saw 40 mine blocks getting auctioned since 2016, while 34 mines have been auctioned in Karnataka. The majority of auctioned mines in these two states have been iron ore blocks. In Madhya Pradesh and Maharashtra 32 and 28 mines, respectively, have been auctioned even as Rajasthan saw 22 mines getting auctioned during the period. In Andhra Pradesh 20 blocks have been auctioned, while the figure in Chhattisgarh is 19. While 12 mines have been auctioned in Gujarat, around nine have been auctioned in Jharkhand and Uttar Pradesh.
Ongoing & upcoming auctions
The Goa government has put four iron ore iron ore blocks for auction – Monte de Sirigao, Sirigao-Mayem and Bicholim in North Goa and Kalay in South Goa. SteelMint reported that Nana Bandekar has won the Monte De Sirigao block by emerging as the preferred bidder offering a premium of 111.28%. The Monte De Sirigao mineral block is spread across an area of 95.67 hectares and has reserves of 9.514 mnt of iron ore with the average grade being Fe 57.39%. Salgaonkar Shipping Company Pvt. Ltd. has bagged the Sirigao-Mayem block for 99.2% premium of the average IBM sales price. The Kalay block will come up for auction on 21 December.
On the other hand, the Mineral Resources Department of Chhattisgarh has earmarked six iron ore blocks for e-auction and has invited bids for the purpose of grant of composite licenses. Similarly, the Karnataka government will auction six iron ore and one limestone mine in December. Of these, three are lapsed leases, including MSPL’s lease 2416 in Vijaynagara to which more area has been added. Two blocks, Jaisinghpura South and Jaisinghpura North, have been created from dividing a large area over which Dalmia Cements (Bharat) once had rights.
Outlook
The ongoing Goa iron ore block auctions have received bids from 28 companies and the steel majors have also evinced interest. The Directorate of Mines, Goa, has informed that at least seven more blocks with embedded licenses are likely to come up for auctions shortly. Although the Odisha government postponed mineral auctions this year due to the sudden impact of the imposition of export tariffs on iron ore and pellets, it may be expected that auctions will commence in 2023.
The scenario is also bright in Karnataka after the Supreme Court removed restrictions on exports of iron ore from the state. With the easing of restrictions on sales and with the production ceiling being raised in the state, it may well be expected that auctions will gather increased momentum in the coming year.
It is further expected that production from the auctioned iron ore mines will increase further in the mid-term as mines auctioned in 2021 move towards operationalisation and as production capacity of the existing mines are expanded.
SteelMint reported that JSW Steel has applied for expanding the capacity of the Nuagaon mine in Odisha from 5.62 mnt to 7.99 mnt/year. The Nuagoan mine is for merchant use with the KJS Ahluwalia Group being the previous lessee. JSW has plans to ultimately raise production to 20 mnt/year from the mine. Further, OMC has sought approval for expanding the capacity of the Jilling Langalota mine in Odisha’s Keonjhar district from 6.28 mnt to 10 mnt/year. The leading merchant miner has plans to increase the capacity of the Guali iron ore mine to 30 mnt/year from 5.7 mn t at present.
Karnataka roadshow
Keen to know more about the policies, processes and challenges of mineral block auctions in India? To gain a deeper insight of the policy reforms reshaping the Indian mines and minerals sector, book your seat at SteelMint’s Road Show-cum-Conference on Karnataka’s Mining Sector to be held from 19-21 January, 2023.
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