India Govt. Modifies Rules for Non-Coal Mines Auction to Increase Participation

The government has brought in sweeping changes in the auction rules for non-coal mines by relaxing the end-use policy, reducing the stipulation for three bidders’ criteria and lowering the net worth of the prospective bidders in order to rekindle investors’ interest in the auction process.

Bringing in the changes became imperative as 66 attempts were failed mainly due to investors’ apathy since the amendment to the MMDR Act was carried out in 2015 till now. Only 33 mines could be successfully auctioned so far.

Describing the rationale for brining in the changes, mines secretary Arun Kumar said that as per the earlier rule, the rigid end-use conditions would result in inefficient mining as many mines with low-grade ore dumps could neither use it for captive purpose nor could dispose off.

“In the amended rules, such miners will be able to dispose of 25% of such dumps, which are not used for captive purposes. This will help progress towards zero waste mining and utilization,” he said.

Kumar, however, said that mines granted through the auction route post the notification of the rules in the gazette (30-11-2017) would be entitled to get the benefit the provision and, not retrospectively.

Relaxing the minimum of three bidders’ rule, the new rule has given the states the flexibility of allocating the block in the second round itself, as compared with in the fourth round earlier, through the auction process even if there are less than three bidders. In the first round, however, the three bidders’ norm shall prevail.

“A major amendment in the rules has been that the requirement of net worth for the prospective bidders. In practical terms for an average annual production of up to Rs 2 crore, the net worth required was Rs 4 crore, which is reduced to Rs 0.5 crore. For an average annual production up to Rs 20 crore, the net worth required was Rs 40 crore which has been reduced to Rs 10 crore,” he said.

The amended rules have also provided adjustment of the upfront premium to be adjusted against the due payments of miner at the earliest. This would increase the liquidity of the mining entities at the time when production begins.

Kumar expects the changes will help states to auction around 70 mines in the next fiscal and an additional 34 mines in the remaining period of 2016-17.