Page 8 - Mines and Minerals Reporter eMagazine - Volume October 2021

INDUSTRY ANALYSIS

NON-FUEL MINERAL AUCTIONS:
N O N-FUEL MINER AL A UCTI O NS:

W
F
O
HOW FAIR IS THE GAME,AND FOR WHOM?
H
AIR
WH
R
M?
O
THE
IS
FO
GAME,AND
- Rajesh Chadha & Ganesh Sivamani, Source: www.csep.org

ABSTRACT

The Mines and Minerals (Development and Regulation) Act,
1957 was amended in 2015 and introduced as an auctions sys-
tem to address three major concerns—transparency, fairness,
and objectivity—raised by the Supreme Court regarding the
mineral asset allocation process. Four changes became evi-
dent following the Act coming into force, and these have im-
pacted competitive efficiency in the mining sector. (1) Of 114
non-fuel mineral auctions held so far, many received exces-
sively high bids (particularly for iron-ore mines); bids higher
than even the estimated value of reserves. (2) Mining compa- where the leases had lapsed as of March 2020 as per condi-
ny profiles changed from merchant miners (selling minerals tions laid down in the amended Act. This paper also touches
on the market), to captive miners (owning downstream plants upon the subsequent amendment to the Act in 2021, and con-
that consume the minerals). This could lead to less-than-effi- cludes with suggestions for rationalising the auctions mech-
cient usage of the minerals acquired through auctions, with anism to ensure competitive efficiency in the mining sector.
induced general equilibrium externalities. (3) High auction
bids, combined with high royalty rates and some other stat-
utory payments, have not encouraged new mining activity in INTRODUCTION
any significant way. Short-term financial gains for State gov-
ernments, and possible long-term revenue losses and stran- The Mines and Minerals (Development and Regulation)
gulation of new investments, may result. (4) Many auctioned Amendment Act, 2015, (henceforth MMDR Act, 2015) ended
blocks are of previously operational mines (brownfield mines), the firstcome, first-serve system of mining allocations and has
brought in an auctions regime. This was
intended to bring in ‘greater transpar-
ency’ and ‘[remove] discretion’ (Min-
istry of Mines, Government of India,
2019) in the allotment of natural re-
sources. The Government of India not-
ed that State governments would re-
ceive an ‘increased share [of revenues]
from the mining sector’ with the new
system (ibid.). According to the Ministry
of Mines, 114 non-fuel mines have been
successfully auctioned to date. Techni-
cally qualified bidders (i.e., companies
fulfilling certain criteria) participated in
an ascending forward online electronic
auction and bid on the percentage of

6 MINES & MINERALS REPORTER / OCTOBER 2021