The central government on 8 Apr’15 has come out with draft rules for auction of mines. The government has proposed to e-auction two types of licences/leases namely ‘Mining Lease’ and ‘Composite License’. This proposal is a part of ‘The Mineral (Auction) Rules, 2015’.
Before the auctioning process, the state governments have to identify, demarcate and geo-reference the area. Moreover, the governments have to obtain the green clearances and acquire all the land required in the proposed area.
In the e-auction, the bidding will be carried out in two stages viz technical stage and financial bid stage. In the technical stage of bidding, bidders have to give an initial price offer and the highest initial price will be the floor price in the financial bid stage.
Based on a production linked revenue sharing model, the bidding parameter will be decided and as per this the bidders have to quote a percentage of the revenue.
In context to mining lease, an evidence of mineral content in the area will be required. If a bid is successful and a mining lease is awarded, the successful bidder have to pay an amount equal to the actual production, the percentage quoted and average price of the mineral as given by IBM (Indian Bureau of Mines).
For eligibility, the mineral reserve should not cross 1.25 times the bidder’s requirement for its specified end-use over 50 years. In addition, bidders have to furnish performance bank guarantees that will link to milestones in the mining plan.
For areas with insufficient evidence of mineral content, a composite licence, combination of prospecting-cum-mining lease, will be put under hammer. Here also, the state governments have to obtain all green clearances and acquire the necessary land.
The winning bidder will have to undertake exploration activities in the area. In case, the winner fails to find mineral content, the composite license will lapse and the mining lease shall be cancelled.
Leave a Reply