New Delhi: The Supreme Court on Thursday laid down the rules for the auction of 15 iron ore mines in Karnataka, giving the state government 32 weeks to complete the process.

The auctioning of the mines, among those where the Supreme Court allowed extraction to resume in April 2013 after a nearly two-year ban, shall start immediately, a bench comprising justices Ranjan Gogoi, R. K. Agrawal and N. V. Ramana said.

The court said the auction should preferably end in 26 weeks, and not later than 32 weeks from Thursday.

The apex court banned mining of iron ore in Karnataka in July 2011 following allegations of illegal mining that had resulted in large scale abuse of the environment. In in April 2013, the court ordered resumption of mining activities in Karnataka with a cap on production of 30 million tonnes per annum.

The auctions of the 15 mines will be open only to users, which includes public sector ventures engaged in producing sponge iron, pig iron, steel and pellets. Only existing industries can take part in the auctions. Bidders from across the country have been allowed to participate which will not be open to a group of users acting in concert.

Three-fourths of the proceeds from the sale will be credited to the consolidated fund in the state and the remaining to a special purpose vehicle that will use it for economic development of the areas surrounding these mines, infrastructure and forest conservation.

The court also set a reserve price for these mines which is 35% of the Indian Bureau of Mines (IBM) published average price of iron ore for the last 12 months. This could be reduced the state government if no bids were placed at the reserve price.

The permitted annual production limit of these mines would be in accordance with the reclamation and rehabilitation (R&R) plans to ensure environmentally conscious and sustainable exploitation of these mines.

Successful bidders would have to maintain R&R processes in their mines, and will be reimbursed by the state government. The state government will fund this through the penalties it received from the erstwhile lease holders of these mines.

The apex court bench said these modalities will be in addition to the rules prescribed by the amendments to the Mines and Minerals (Development and Regulation) Act 1957 and the Mineral (Auction) Rules 2015.

The court directed the Karnataka government to proceed with the exploration process to estimate the iron ore reserves in 27 mines. After the exploration, these mines will likely be auctioned.

The state government has said that the exploration for the first 15 of these mines, as per an estimate of the Mineral Exploration Corp. Ltd (MECL), would be completed by June 2016 and the remaining 12 by January 2017.

The government told the court that there were nine mines with very small reserves, which were not commercially viable for exploitation.

The court also issued notice to the Central Bureau of Investigation in a plea by the original petitioner in the case—non-profit Samaj Parivartana Samudaya— represented by lawyer Prashant Bhushan seeking a status report on a probe against Deccan Mining Syndicate Pvt Ltd.

Separately, the court also asked the Central Empowered Committee, which deals with environmental issues and impact through activities such as mining, to consider a plea by Sesa Sterlite Ltd to increase its individual production capacity from the existing 2.29 million metric tonnes (mmt).

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