Mineral mine auction: Govt proposes cap on performance security, upfront amount to draw bidders

The Ministry of Mines has proposed an amendment to the Mineral (Auction) Rules, 2015 under which it plans to put a cap on performance security and upfront amount
A file photo of Mines Minister Pralhad Joshi
A file photo of Mines Minister Pralhad JoshiEnergy Watch

New Delhi: Yielding to a request from potential bidders, the Ministry of Mines has proposed an amendment to the Mineral (Auction) Rules, 2015 under which it plans to put a cap on performance security and upfront amount. Noting that performance security and upfront amount beyond a certain amount “does not serve any purpose but may act as a barrier in participation of bidders in the auction process,” the Ministry of Mines has proposed a cap of Rs 500 crore for upfront payment and performance security for mining leases. For composite licences, the government has proposed a cap of Rs 250 crore on performance security prior to issuance of composite licence.

The government has sought suggestions on the proposed amendments from stakeholders by January 10, 2024, after which a decision will be taken on making the amendments in the tender that are floated subsequently.

High performance security, upfront amount would reduce participation of bidders: Govt

The Ministry of Mines has said that certain mineral blocks, particularly critical and strategic minerals, have high Value of Estimate Resources (VER) of critical and other associated minerals. “Due to such high VER, the requirement of performance security and upfront amount (which are a percentage of VER) is also very high. Such huge requirement for performance security and upfront amount would reduce participation of the bidders in the auction process,” the ministry noted. Prior to the proposal floated by the ministry on December 6, there was no cap on performance security and upfront amount for bidders.

Ministry floats 2 draft docs for offshore mineral blocks

With a view to auction offshore mineral blocks, the Ministry has framed two draft rules — Offshore Areas Mineral Auction Rules and Offshore Areas Existence of Mineral Resources Rules and has sought comments from stakeholders until January 25, 2024. The draft Offshore Areas Mineral Auction Rules are broadly based on the Mineral (Auction) Rules, 2015 framed under the MMDR Act. It lays down the bidding structure for offshore mineral block auction.

The draft Offshore Areas Existence of Mineral Resources Rules are broadly based on the Minerals (Evidence of Mineral Contents) Rules, 2015 framed under the MMDR Act, said the Ministry of Mines. These draft rules provides norms for the exploration of various types of minerals and deposits. The draft rules propose at least a G2 level of exploration (General Exploration) for considering a block for auction for a production lease. However, in case of blocks of Construction Grade Silica Sand and Lime Mud or Calcareous Mud, auction for product in lease can be made at G3 level of exploration also. For grant of composite licence, the block should be explored upto G4 level of exploration or mineral potentiality of the mineral block should be identified.

A file photo of Mines Minister Pralhad Joshi
100 critical mineral blocks to be auctioned by Feb, 15 offshore blocks by March: Joshi

Ministry of Mines is also in the process of framing other rules under the OAMDR Act, such as, the Offshore Areas Mineral Conservation and Development Rules; Offshore Areas Mineral Concession Rules; Offshore Areas Mineral Trust Rules, etc.

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