The Odisha government has expressed serious disagreement with some of the recent amendments to the Mines and Minerals (Development & Regulation) Act (MMDR Act) proposed by the Ministry of Mines (MoM), especially the proposal to introduce a National Mineral Index (NMI) as well as bringing about changes in District Mineral Fund (DMF) regulations and scrapping the distinction between captive and non-captive mines for future auctions of mineral resources.
NMI Concerns
The Steel & Mines Department of the Odisha government, in its letter to the MoM dated 31 Aug’20, expressed reservations about introducing NMI on the basis of the National Coal Index (NCI) as factoring in “captive sales and Non-Arm’s-Length sales prices” of minerals – in place of the IBM notified average sales prices (ASP) as declared by merchant miners – will “substantially lower the ASP, auction premium, DMF” and have “an adverse impact on the revenues of the state government”, the letter noted, a copy of which is with SteelMint.
Furthermore, in the absence of any clear direction from the MoM as to whether NMI will be implemented with retrospective effect, the Odisha government warned of “serious implications for the already concluded auctions giving unfair advantage to the successful bidders” if the proposed index is sought to be implemented retrospectively. This would violate the bid conditions of the recent Odisha auctions and harm the state’s revenues, the letter stated.
Violating Auction Conditions
Placing the amendment proposals for public scrutiny, the MoM had earlier invited opinions and comments from state governments, industry associations and stakeholders. The Odisha government expressed further reservations as regards proposed amendments to allow captive miners to sell 50% of the extracted output of the previous financial year from the current 25% as it would again benefit the successful bidders in the recent auctions for whom 5 of the 24 blocks were reserved.
These blocks were not open to all miners as they had been earmarked for end-users and doubling the permissible limit of selling minerals for captive users would not only violate bid conditions but would also be unfair to those who couldn’t participate in the auctions of these 5 blocks.
Scrapping End-use Clause
Similarly, if the proposed amendment to do away with the distinction of end-use restriction while auctioning mineral blocks is applied retrospectively to any or all blocks auctioned in Odisha, it would benefit the successful bidders to the detriment of other miners who could not participate in the auctions of some blocks due to the end-user restriction clause in the “limited” auctions for these blocks instead of “open” auctions, the letter observed.
Moreover, the ministry’s proposal to scrap the right of first refusal of captive miners ought to be applied prospectively and all leases that are on extension “shall not be covered by this clause till their expiry”, the letter stated.
Moreover, the MoM’s proposal to put partially explored blocks of G4 (UNFC) or equivalent classification (mainly reconnaissance survey) for seamless prospecting license-cum-mining lease will result in inaccurate estimation of the mineral reserve thereby affecting auction parameters and the estimated value of the mineral reserve.
With regard to the MoM’s proposed reallocation of virgin blocks – to state public sector undertakings – where production is yet to commence, the Odisha government said that state PSUs are mandated to ensure raw materials supplies of state-based industries and MSME producers are entirely dependent on them for meeting raw materials requirements. Reallocating such virgin blocks will call for obtaining all statutory clearances afresh which will inevitably delay the operationalisation of mines at a time when supply shortage has emerged as the industry’s central concern, especially in Odisha.
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