The Odisha government has issued vesting orders to 21 successful bidders to facilitate the reopening of all 24 merchant iron ore blocks that were auctioned. In case of the balance three mines, one is sub judice with the Orissa High Court while two others are in the midst of some paperwork relating to change in name of the new leaseholders.
The lease tenure of these existing mines had lapsed on March 31, 2020. Despite the Centre extending the validity of all statutory approvals of the mines by two years, they could not recommence activity as paperwork in Odisha was delayed in the wake of Covid outbreak. Only essential departments functioned during lockdown whereas other administrative departments were under shutdown.
All top bidders such as JSW Steel and ArcelorMittal have received the vesting orders. An official privy to the development said that lease deeds to restart the mines will be executed shortly. All mines are expected to recommence production next month. The bidders will be required to start mining activity within 15 days of signing the lease deeds.
At the time of auctions, the state government had pegged the floor price of mineral blocks at 0.5 per cent of the value of the estimated resource. The preferred or successful bidders had paid 10 per cent of the amount. Now, they need to pay 10 per cent more (10+10) and a matching bank guarantee to make the mines running again.
The resumption of merchant mines is expected to ease supply concerns of iron ore. But with the virulent Covid-19 pandemic shrinking demand as steel and other end use industries operate at downsized capacities, it remains to be seen if the mines could still operate at their normative capacities.
Also, a successful bidder after obtaining all statutory clearances needs to produce in the first two years at least 80 per cent of what the mine actually produced in the preceding two years. This clause is inserted in the Mine Development and Production Agreement (MDPA). Failure to achieve this production benchmark will debar the successful bidder from participating in future auctions for three years.
Online auctions of merchant blocks in Odisha had evoked a resounding response. The average bids for the blocks stood at 104 per cent. While Tata Steel retained its Sukinda chromite lease, its fully owned subsidiary TS Alloys (now Tata Steel Mining Ltd) emerged as the successful bidder for three chromite resources- Sukinda, Saruabil and Kamarda.
Almost all the iron ore leases barring one held by Serajuddin will change hands. Sajjan Jindal led JSW Steel had turned out to be the key disruptor at electronic auctions in Odisha, bagging four mines with aggressive price bids. Global steel behemoth ArcelorMittal won the Thakurani mine formerly held by Kaypee Enterprises.
The reopening of the merchant mine blocks is also expected to shore up revenues for the state government. During April-May, the state has barely been able to garner around Rs 700 crore of mining revenue as collections have tanked considerably after the Covid outbreak. In FY20, Odisha collected mining revenue in upwards of Rs 10,000 crore.
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