BHUBANESWAR: After inviting bids for grant of mining lease (ML) and composite lease (CL) for 20 critical and strategic mineral blocks across states including four from Odisha through an auction process, the Ministry of Mines has proposed to put a cap on the performance security and upfront amount to encourage more participation in the bidding process.
At present, the performance security and upfront amount is required to be paid by successful bidders for commercial exploitation minerals is 0.5 per cent of the value of the estimated resources which is very high and has been acting as a barrier for the participation of more bidders in the auction process. “Such huge requirement for performance security and upfront amount would reduce participation of the bidders in the auction process,” said the Ministry justifying the need for amendment of the Mineral (Auction) Rules, 2015.
Under the auction rules, the net worth requirement is capped at Rs 200 crore for the auction of a mining lease and the bid security amount is capped at Rs 50 crore for the auction of a mining and composite licence. However, presently there is no cap for the performance security and upfront amount.
The Centre has proposed to cap the performance security and upfront amount at Rs 500 crore each for a mining lease and Rs 250 crore for performance security under a composite licence. A mining lease is given for areas which have proven reserves of minerals while the composite lease is for areas where preliminary exploration has been done but further exploration is required by mining companies to establish more resources. Performance security amount is to be maintained by successful bidders till the expiry of the mining lease period and revised every five years based on the reassessed value of the resources. The upfront amount is adjusted in full against the auction of premium payable by the successful bidder on commencement of production.
Circulating the draft Mineral (Auction) third Amendment Rules, 2023, on December 26, the ministry has sought views and suggestions from the state governments and mining industry stakeholders about the proposed amendments by January 10, 2024. The ministry has invited tenders for action of Dudhiasol East nickel and copper block in Mayurbhanj district, Babja graphite and manganese block and Biarpalli graphite and manganese block in Balangir and Akharkata graphite block in Angul district in November.
Impetus to bidders
Centre has proposed to cap performance security and upfront amount at Rs 500 crore for a mining lease
It is Rs 250 crore for performance security under a composite licence
Centre has sought views and suggestions from states and stakeholders on the proposed amendments by Jan 10