New Delhi – India’s largest iron ore producing state Odisha is likely to float tenders for auctioning dozens of mines and minerals blocks in the second half of this calendar year, as their mining leases are set to expire in 2020, a senior state official said.
“Twenty four working mines will be put to auction.. about 18 of them are iron ore mines,” Mr. DK Mohanty, Director of Mines in Odisha told SteelMint. “We are also getting some blocks ready for auctioning.”
The auctioning of the mines in Odisha and other states will be a landmark for India’s steel and iron industry as big portions of the natural resources could go into the hands of captive users, thus changing the market where merchant miners ruled the roost.
By 2020, India may need about 15 million tonnes of iron ore in addition to its production of about 210 million tonnes (2017-18) owing to the demand from the domestic and export market, according Federation of Indian Mineral Industries.
Some of the mines and blocks that go under the hammer, will be earmarked for captive use and some for merchant mining and a decision to this effect will be taken by a high level committee headed by the additional chief secretary cum development commissioner, Mohanty added.
“Anybody can bid, but the ownership has to be Indian,” Mohanty said when asked if foreign companies can participate. He added foreign investment routed through an Indian company would be acceptable.
To be able to start and conclude the auctions well before the leases expire in March next year and ensure there are no breaks in production, the centre would need to bring out an ordinance or amend the Mines and Minerals (Development and Regulation) Act, the official added.
High competition seen – Industry members said they expect steel companies to compete heavily to bid for the iron ore mines as barring the state-run Steel Authority of India Ltd and Tata Steel Ltd, none of them have enough captive iron ore.
“Steel makers will be the front bidders while institutions and PE funds may finance them,” said Amitabh Mudgal, ex president, marketing and corporate affairs, Monnet Ispat & Energy Ltd which has now been taken over by JSW Steel Ltd and AION Investments Private II Ltd.
“Banks maybe no, as they had taken too much exposure to the steel sector.”
India’s steel sector is seeing one of the highest growth rates in the world and is expected to follow India’s GDP growth rate of plus 7%. Big time M&As taking place are a pointer to aggressive competition and all companies have laid out expansion plans.
ArcelorMittal’s bid for Essar Steel and Vedanta Ltd’s acquisition of Electrosteel Steels Ltd is unlikely to go without any interest in mines. Experts say these companies are likely to bid competitively for the iron ore mines to strengthen their foothold and compete better against Tata Steel and JSW Steel.
Another industry member said the auctions would be ‘fixed’ by the government though in a transparent manner to match steel factories and mines closest to each other.
“It will be a bespoke kind of an auction. The bidding plants will be given the mines that are the closest to them,” said the industry member not wishing to be named due to company policy. “The process will be transparent of course, but it will be more like a logistical arrangement.”
To know more book your seat at 3rd Indian Iron Ore & Pellet Summit to be held on 18-19 Feb 2019 at the Leela Ambience, Delhi NCR, India. Mr DK Mohanty – Director of Mines (Govt of Odisha) is one of the speakers at the conference who will be addressing on the updates of mines auction.