The Odisha government has annulled three rounds of bids meant to auction 20 iron mines whose leases are expiring in March. The fresh bid documents were released on December 6 keeping in mind the original timelines.
The Government has banned multiple bids from the same company to stop the cornering of mines by one single bidder, including its affiliates.
The Government had invited bids for auctioning 29 iron ore mines in three rounds, 9 of which represent virgin mines. Unfortunately, after opening the technical bids, the entire process was abandoned.
New bids have been invited for 20 mines, whereas the rest 9 virgin mines were kept as a part of phase-II of bids. Further, the Ministry of Environment, Forest and Climate Change has issued a notification mandating fresh Environment Clearance for mines being auctioned, citing the Supreme Court judgment in the Goa Foundation case.
According to Mr. Vishal Chandak, Research Analyst, Emkay Global “About 20 merchant mine leases are expiring by March 2020 which will lead to shortage of supplies of iron ore from April 2020 as five of the six mine leases that are expiring will not feature in the auction already announced”. He said that the total production of the five mines that will be impacted is about 60 million tonnes and EC clearance has to be sought for production of about 80 million tonnes.
The steel prices is ought to get higher due to higher iron ore prices because of the likelihood in supply disruption of iron ore post-March in from Odisha. The execution of the mining leases is supposed to take around six months from the date of issuance of the letter of intent by the State government.
The Letter of Intent by the Government should ideally be issued by March 2020, so that the mining leases can be issued in September 2020 although ideally at least three years is taken to get regulatory approvals from the date of issuance of the Letter of Intent.
The lease of Donimalai iron ore mine to NMDC was suspended after the Karnataka government demanded sharp hike in royalty but later, the Central Government amended the Mines and Mineral Development Act to mandatorily renew leases.
NMDC would be the major beneficiary of the rising iron ore prices which is looking to restart production from its Donimalai iron ore mine in Karnataka. NMDC has already increased iron ore production in the first two months of the third quarter, FY20 to 5.4 million tonnes against 5.1 mt in September quarter.
