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About 34 mineral blocks in six states have been chosen for auction by the end of this fiscal year. Photo: Abhijit Bhatlekar/Mint
About 34 mineral blocks in six states have been chosen for auction by the end of this fiscal year. Photo: Abhijit Bhatlekar/Mint

Govt eases rules for auction of mineral blocks

New mining rules to allow wider participation, ensure auctions are not called off for want of bidders

In an attempt to generate fresh interest from miners for auctions of mineral blocks, the government has amended the rules to allow wider participation and reduce the chances of auctions getting called off for want of bidders.

A statement from the ministry of mines said on Friday that the Mineral Auction Rules were amended on Thursday, a move expected to enhance investor participation in future auctions.

About 34 mineral blocks across six states have been chosen for auction by the end of the current fiscal year, the statement said.

Poor investor interest due to subdued commodity prices and tighter rules led to the cancellation of about 60 auctions since 2015, when auctions replaced administrative allocation of mineral blocks.

The National Democratic Alliance government had introduced auctions to remove the element of discretion in the allocation of natural resources.

So far, 33 blocks have been auctioned, which could fetch Rs1.28 trillion for states over the lifetime of the lease.

The statement said the 34 blocks to be auctioned in the states of Chhattisgarh, Gujarat, Maharashtra, Odisha, Rajasthan and Telangana are expected to fetch an additional revenue of Rs75,000 crore for states. States get royalty on the production of minerals.

As per the changed rules, auctions will not be cancelled if there are fewer than three bidders from the second round onwards. Earlier, three bidders were required up to the third round for an auction not to be cancelled.

“While a minimum of three bidders is still stipulated in the first attempt to auction, in the amended rules states have the flexibility of allocating the block in the second round itself even if there are less than three bidders. This will make the auction process less cumbersome and will help states auction mineral blocks quickly," the statement said.

The revised rules also sharply reduce the net worth requirement for eligible bidders from Rs4 crore to Rs50 lakh for blocks with average annual production of up to Rs2 crore. It has been slashed from Rs40 crore to Rs10 crore in the case of mines, with average annual production of up to Rs20 crore, the statement said.

The end-use conditions of the mineral output have also been relaxed. The rules, however, discourage successful bidders from squatting on leases without mining, the statement added.

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