After a year and a half of lull, Odisha makes a splash at auctions, offers 20 blocks, the country’s largest iron ore producing state, has recommenced the auctions of iron ore blocks with a bang. In a staggered process, the state’s steel & mines department has put 20 iron and manganese ore blocks to online auctions.
All the blocks offered are lapsing merchant miners and hence are expected to witness frenzied activity as the auction progresses.
It may be recalled that Odisha was the first state to auction a freehold iron ore block after the promulgation of the amended Mines and Minerals- Development & Regulation (MMDR) Act, 2015.
Ghoraburhan-Sagasahi, an immense block with 99.54 million tonnes of iron ore deposits went to Essar Steel, a company that turned bankrupt and is now still awaiting resolution under Insolvency & Bankruptcy Code (IBC).
Later, two more iron ore blocks- Kalamang West and Netrabandh Pahar were auctioned and they were bagged by two Bhushan Group entities that turned insolvent as well.
Despite seizing the initiative in mineral block auctions, especially mentioning iron ore, Odisha drew a blank in auctions performance in the last fiscal year.
This fiscal too, the state despite lining up a host of blocks for auctions had to keep the process in abeyance. The stumbling block was the contentious provision on the cap in mining lease area limits.
Eventually, the Union mines ministry hiked the ceiling on mine lease area for iron ore and associated minerals in Odisha to 58 square kilometers (sq km), up from 10 sq km mandated in the Mineral Auction Rules read with the revised MMDR Act of 2015.
The Centre had previously jacked up the mine lease area limits to 75 sq km in Jharkhand and 50 sq km in Chhattisgarh. The Centre’s go-ahead means that auctions in Odisha will be more keenly fought and intensely competitive.
Big integrated steel players and top merchant players are expected to slug it out at the auctions contest. This time, the state government has broad-based the auctions eligibility, permitting pellet makers, sponge iron producers and pig iron players at auctions.
Out of the 20 iron and manganese ore blocks enlisted for auctions, five are reserved for steel and other end-user industries. The rest 15 resources are earmarked for the non-captive, merchant miners.
This is the first time that a large number of iron ore blocks are simultaneously preferred for auctions in Odisha, making it an intriguing spectacle to watch.
To ward off low bids, the state government has kept the reserve prices of mineral blocks a bit on the higher side. Iron ore leases with reserves up to 10 million tonnes have a floor price of 15 percent.
Those with deposits in excess of 10 million tonnes attract a reserve price of 25 percent. For manganese ore block, the reserve price is pegged uniformly at 15 percent of sale value regardless of the quantum of deposits embedded in the block.
The methodology adopted is ascending forward auction which suggests that a bidder will place aggressive premiums to outperform his peers at auctions.