Category: Mining

Financial Express : April 22, 2021 || Rajesh Chadha & Ganesh Sivamani

The Mines and Minerals (Development and Regulation) Amendment Act, 1957, was amended in 2015 to address the Supreme Court’s three major concerns in the mineral asset allocation process – transparency, fairness, and objectivity – and introduced a system of auctions.

India has a great mineral potential yet to be explored and large mineral-bearing land available for mining. However, the allocation of national resources has been a challenging exercise in India. We have seen this difficulty in the case of the telecom spectrum and coal blocks. To this end, The Mines and Minerals (Development and Regulation) Amendment Act, 1957, was amended in 2015 to address the Supreme Court’s three major concerns in the mineral asset allocation process – transparency, fairness, and objectivity – and introduced a system of auctions.

With some oddities arising from the new auctions regime and the issue of ensuring mineral security a pressing concern, the time has come for us to rethink whether there can be alternative ways of allocating mineral concessions while maintaining the tenets laid down by the Supreme Court. Or, can the existing auctions system be designed differently?

A total of 103 auctions have been executed since 2015. Many of the auctions, particularly iron ore mines, have had high bids, even higher than the estimated value of resources. On average, the estimated auction premium cumulated over 50 years amounts to about 86% of the value of the estimated resources. Additional payment commitments on royalties, District Mineral Foundation (DMF) funds, and National Mineral Exploration Trust (NMET) funds are about 17% of the value of the estimated resources. Hence there is a total commitment of 103% of the value of the estimated resources, which does not include corporate taxes, forest and wildlife protection payments and stamp duties.

Furthermore, there has been a shift in the profiles of mining companies, from merchant miners (those selling minerals on the market) to captive miners (those with downstream plants to consume the minerals). Such a change might lead to less-than-efficient usage of the mineral resource acquired through auctions and induced general equilibrium externalities. The recently passed MMDR Amendment Act 2021 seeks to level the playing field between captive and merchant miners and public sector and private miners, which is a welcome step.

High bids unsustainable in the long run

Despite being aware of the impact of high bids on their operations, captive mining companies are amenable to bidding more than the theoretical value of the mineable resources as it would assure them of mineral supply. These higher costs can be absorbed in their downstream operations, and, in the case of steel production, the cost of iron ore constitutes only 10% of the manufacturing cost. However, this system is not sustainable, and the consequence of higher costs of raw materials would hurt the public, who would have to pay more for end products such as steel and concrete. The results of the auctions would be detrimental to the country’s interest.

The auction system also raises some questions on mineral security in India, particularly with iron ore. There have recently been 24 auctions of previously operational (brownfield) iron ore mines in Odisha (with bids ranging from 90%–104% of mineral value), yet a year later, only ten mines have commenced operation, and at less than a third of their capacity. While more auctions and time will enable the sector to return to its previous output, India may once again, in the short-term, become a net importer of iron ore despite being rich in resources.

The auctions regime has been extolled for bringing large revenues to state governments, but the high bids are unsustainable to maintain, and states may not receive these notional earnings. This regime would also deter foreign investors, who would prefer jurisdictions with lower taxation. There is also the question of the impact on local communities’ welfare if mining companies have fewer resources available to invest in their development due to the high auction bids commitment.

Some changes to the system can help resolve these issues. For example, it would be useful to have an auction calendar with multiple blocks available for bidding at a set time annually, which would allow companies to plan for their mineral security needs. Additionally, there could be a relook at the royalty system, which is an additional payment on top of the auction commitment.

We should be mindful of the importance of deep-seated minerals in India (such as lead, zinc, copper, diamond, and gold) and how a different policy regime would encourage further exploration and production. If more exploration had been done earlier, including deep-seated minerals, there would have been more mining blocks on offer, and oddities with auction bids could have been avoided.

The Centre for Social and Economic Progress (CSEP) held a webinar on April 15, 2021, to discuss India’s mineral auction regime and its impact on government revenue, mining operations, and the national economy.

The Hindu | April 16, 2021

Congress’ Tansukh Bohra pitted against BJP’s Deepti Maheshwari for the seat in upcoming Rajasthan Assembly by-election

A robust development of infrastructure, matching with the nearby temple town of Nathdwara, through the mining sector and an effective utilisation of the District Mineral Foundation Trust (DMFT) connect the local populace with employment generation in Rajsamand. These are also the key factors during the campaign for the upcoming Assembly by-election here.

The southern Rajasthan district has about 1,500 quarries of marble, granite and minerals and their owners contribute ₹150 crore annually to the DMFT for the benefit of areas affected by mining-related operations. People’s resentment over under-utilisation of DMFT funds and diversion to other towns has prompted the ruling Congress to field mining industrialist Tansukh Bohra as its candidate.

On the other hand, Bharatiya Janata Party (BJP) candidate Deepti Maheshwari expects to carry forward the legacy of her mother, the late Kiran Maheshwari, who was elected from the constituency thrice between 2008 and 2018 and was a Minister in the Vasundhara Raje government. The BJP also hopes to get “sympathy votes” with the Maheshwari family member being in the fray.

‘People will select BJP’

BJP MP from Rajsamand Diya Kumari, camping in the town to address Ms. Maheshwari’s election rallies, told The Hindu that the Union government had been “responsive” to the demands raised in the constituency and had been doing its bit in different sectors. “The people here will once again repose faith in BJP. They are fed up with the Congress government, which has no clear policies or intentions,” she said.

The Congress has made an attempt to influence the local mine owners and workers with the credentials of Mr. Bohra. The mining baron, who enjoys a clean image, has been involved in philanthropic activities. Nitish Surana, managing Mr. Bohra’s election office, said the Congress candidate had made large contributions to the government hospitals and built several school buildings, besides developing the amenities at cremation grounds.

“There is no anti-incumbency wave in Rajsamand, even though the BJP has been traditionally winning this seat. Much will depend on how the Congress projects itself and influences the voters,” Ajay Singh, a youth from the nearby Kelwa village, said. Interestingly, the Congress has asked Mines & Petroleum Minister Pramod Jain to camp in the region till the polling day on April 17.

The Congress has also assured the voters that it would formulate a plan to develop the Chittorgarh-Rajsamand-Kumbhalgarh triangle as a new tourism circuit and widen the Khara feeder to bring more water to the historic Rajsamand lake, built by erstwhile Mewar ruler Rana Raj Singh in 1660.

Controversial remarks

Some controversial remarks made by senior BJP leader Gulab Chand Kataria, who is also the Leader of Opposition in the State Assembly, about legendary warrior king Maharana Pratap during the poll campaign earlier this week led to an embarrassment for the party.

As the Rajput outfits expressed an outrage, Mr. Kataria tendered an apology twice to the electorate.

Among the total of 10 candidates contesting in the constituency, the BJP faces a challenge from its rebel leader Suresh Joshi, who has entered the fray as an Independent in the name of protecting the honour of the region.

Business World | April 13, 2021

Coal India as a whole produced 602.14 MT of coal during 2019-20 accomplishing 91 per cent of the targeted production.

Notwithstanding the projections over renewables displacing coal, the fact of the matter is that coal will continue to be the dominant fuel driving India’s electricity generation for the next few decades and Coal India is the single largest coal producer in the world.

Coal India (CIL), the state-owned coal mining corporate, came into being in November 1975, producing a modest 79 million tonne (MT) at the time. CIL today is the single largest coal producer in the world and one of the largest corporate employers with a workforce of 2,72,445 (as on 1st April 2020). CIL functions through its subsidiaries in 84 mining areas spread over eight states. It has 352 mines (as on 1st April 2020) of which 158 are underground, 174 are opencast and 20 mixed mines. CIL further operates 12 coal washeries, (10 coking coal and 2 non-coking coal) and also manages other establishments like workshops, hospitals, and so on.

The PSU has 26 training institutes and 84 vocational training centres. The Indian Institute of Coal Management (IICM), a state-of-the-art management training ‘centre of excellence’ – the largest corporate training institute in India — operates under CIL and conducts multi-disciplinary programmes.

MAHARATNA MANDATE: CIL is a Maharatna company, a Government of India classification of the most important and the biggest state-owned enterprises with the mandate to expand their operations and emerge as global giants.

Despite the many challenges that emerged including the extended and heavy monsoon, inundation of Dipka mine, subdued demand for power, Covid-19 in the last fortnight of March 2020, CIL managed to come back strongly in the second half of fiscal 2019-20, making up most of the lost ground in the first half. Coal India as a whole produced 602.14 MT of coal during 2019-20 accomplishing 91 per cent of the targeted production.

Coal India achieved a net profit of Rs 16,700.34 crore and gross sales of Rs 1,34,979.13 crore. All subsidiaries of Coal India earned profit before tax during the year. Coal India and its subsidiaries paid/adjusted Rs 43,058.72 crore towards royalty, GST, cess, District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) and other levies. CIL subsidiaries also distributed 15,42,982 masks and 63,256 litres of hand sanitiser to its employees and people living in and around its operational areas to fight Covid-19. In addition, they also procured N95 masks, ventilators, PPE suits, thermal scanners and oxygen cylinders to fight the Covid pandemic.

Coal India is one of the highest CSR spenders among the PSUs touching the lives of the countrymen. Its CSR activities largely encompass education, rural development, healthcare, women empowerment, skill development and sports. CIL and its subsidiaries spent a total of Rs 587.84 crore on CSR activities during 2019-20.

Based on the demand projection for the coal sector in the country in the coming years and subsequently, a roadmap has been prepared for the medium term wherein CIL envisages 1 billion tonne coal production by 2023-24. To achieve this target, CIL has identified major projects and assessed other related issues.

The capital expenditure for 2020-21 has been pegged at Rs 10,000 crore. CIL plans to invest substantial amount in diversification projects like solar power, revival of fertiliser plants, coal gasification and rail wagon procurement during 2020-21.

The company’s vision is to ensure that there is no shortage of coal in the country and achieve self-reliance in coal. Coal India envisions to be a commercially viable company and endeavours to move ahead as a contemporary, professional, consumer friendly and successful corporate entity committed to national developmental goals.