Steel companies have urged the Centre to tighten the eligibility criteria for iron ore and other minerals bidding to ensure that companies with less ore requirement do not corner large mines andhoard asset.

Incidentally, the mining policy for coal addresses this issue well. In the case of coal auction, a steel company is eligible to bid only if the extractable coal is less than 150 per cent of its annual requirement and the mine’s overall capacity meets its requirement for 30 years.

“Such eligibility criteria is restricted to only coal mine auctions. In the case of other minerals, small companies bid at exorbitant price and hoard large mines. In the process, they gain valuation and higher working capital limit,” said an executive of a large steel company.

As of January-end, the government had auctioned 53 mineral mines of which 32 are coal blocks. Revenue for government from the auctions is estimated at ₹1.83 lakh crore which can be realised only if the winning bidders start mining and pay the auction price, royalties and contribute for District Mineral Foundation, he added.

In a recent letter to the mining ministry, Uday Kumar Verma, Secretary General, Assocham, said, some of the bidders are participating in auction beyond their mineral requirement for their end-use plant leading to hoarding and accumulation of resources.

“These resources will never convert to production and steel industry would continue to suffer for want of raw material. Such practices are not only counter-productive but also against the overall objective of Mines and Mineral Development (Regulation) Act. Moreover, State governments will also lose revenue and auction premium,” he said in the letter addressed to Narendra Singh Tomar, Minister for Mines and Rural Development.

Moreover, the industry has urged the government to increase the upfront payment for the winning bidder to three per cent.

Presently, the MMDR Act pegs upfront payment for the winning bidder at only 0.5 per cent of the resource value payable in three instalments of 10 per cent each on successful bidding and mining plan approval and 80 per cent at the time of lease execution. This leads to hoarding of minerals for future use or for capacity expansion.

The winning bidder should pay at least 50 per cent of the upfront payment as first installment.

Defaulting bidders should not only be banned from future auctions, but also cough up the premium for the entire resource, said the executive.