In post-auction regime, production in new mineral blocks fails to take off

Business Standard | Jayajit Dash | Bhubaneswar | May 15, 2019

Despite 54 blocks being auctioned, no mining leases have been executed for greenfield blocks

The transparent allocation of mineral resources through auctions after the promulgation of the amended Mines and Minerals(Development & Regulation) Act, 2015, or MMDR, has failed to quicken the pace of production from virgin blocks.

Of the 106 concessions offered for mininglicence (ML) and composite licence (PL and ML), only 54 have been actually auctioned, shows data from the Union mines ministry. The figure includes six composite licenses and 48 MLs. The breakdown of MLs reveals 34 greenfield resources and 14 Category-C iron ore mines in Karnataka. None of the greenfield blocks auctioned have been hitherto awarded an ML, emblematic of the sluggish pace of production from the new deposits. The three MLs executed are Category-C iron ore mines in Karnataka that were already operative before the new MMDR Act. In respect of the Karnataka mines, the Supreme Court had previously ruled that environment clearance (EC) and forestry clearance (FC) granted earlier would be seamlessly transferred to successful bidders to ensure continuity in operations.

As for the new mines won through intensely fought bids, the transition is not as seamless. Historical delays in obtaining statutory clearances have pulled back the production timelines.

“The record of converting successful auction to production is poor and very few blocks have come up to the stage of production. While the MMDR Act 2015 bestows the winner of the mineral block with sub-surface mineral rights, the successful bidder has to scramble to obtain surface rights and necessary clearances. Auctions should enable the bidder to commence operations forthwith”, said a source.

Before the auctions kicked in, the country witnessed award of 300-400 concessions each year. But the number has dwindled to 15 per year after the MMDR Act 2015. The key impediment in accelerating production from auctioned blocks is land acquisition and mounting delays in getting the EC and FC. Steep tax burden on the mining sector has also slowed the pace of production. The Effective Taxation Rate (ETR) on mining in India ranges from 60-64 per cent, topping all other mining jurisdictions globally.

“States should be endowed with all regulatory clearances — EC, FC and surface rights before initiating a mineral block for online auctions. This will substantially cut time between auction and actual production and lead to a thrust on mineral exploration,” said an official with a stand-alone miner.

India’s expenditure on mineral exploration is only $17 per square km and the figure pales when compared to Australia’s $124 and Canada’s $118. The country’s exploration expenditure is almost insignificant in comparison to other nations, even though India stands among the leaders in being a repository of minerals.

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