Page 15 - Mines and Minerals Reporter eMagazine - Volume October 2021

INDUSTRY ANALYSIS

sance Permit (NERP) has been done
away with; there had been no takers
since its introduction in 2015.

Thoughts on an Efficient
System of Auction Allocations

The auction system needs a thorough
review. Mentioned below are a few ob-
servations in this regard.

1. The promised high returns are the
potential financial reward for the states,
if the winning miners can overcome the
‘winner’s curse’ paradigm (Vijay Kumar
& Sinha, 2020), and accomplish sched-
uled tasks. However, even if the miners

supply in the open market. succeed, the idiosyncratic promised over-payment acts as a
tax on merchant miners and the economy.
Public-sector mining companies are also being brought to the 2. The cost overspend would have to be recovered from down-
same playing field as private-sector miners. While public-sec- stream operations of these miners, creating inefficiencies of
tor companies may be allocated mining lands without going resource allocation in mining and downstream activities. In
through the auction process, they will be required to make a general equilibrium framework, the economy shall have to
additional payments to make up for the auction payments the bear the cost of a less than efficient allocation of productive
state exchequer would have otherwise received if allocated resources.
to private-sector companies. More changes have been made 3. As per discussions with senior officers of various mining
to the clearance transfer system, with auctioned brownfield companies and government officials, the reasons for overbid-
mines carrying any existing and valid clearances to the new ding may be many:
successful bidder. The aim is to ‘avoid the repetitive and re- a. Most relate to the security of procuring raw materials. The
dundant process of obtaining clearances again for the same cost of minerals may only be a small proportion of operations
mine’.9 Issues relating to the pending cases under Sections cost for downstream plants, but guaranteeing mineral supply
10A(2)(b) and (c) have also been cleared, and many mineral would be important to the producers.
blocks are set to be auctioned. The government has decided b. b. Additionally, some mining companies might have bid
to reimburse the expenses incurred by the mining companies, high in the hope of favourable policychanges in the future.
through funds from the NMET. The Non-Exclusive Reconnais- 4. The aftermath of the auctions appears to be unfavourable

OCTOBER 2021 / MINES & MINERALS REPORTER 13