Salient Features of India's Mineral (Auction) Rules, 2015

Following the successful initiation of auctioning coal blocks, the Central Government of India has framed the Mineral (Auction) Rules, 2015 for auctioning other minerals like iron ore, bauxite, limestone etc. The article shows the overview of the process and implications.

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Salient Features of Mineral (Auction) Rules, 2015
Following the successful initiation of auctioning coal blocks, the Central Government of India has framed
the Mineral (Auction) Rules, 2015 for auctioning other minerals. However, the unlike coal the mineral
auctions will be conducted under the ambit of State Governments. Through auctions the State
Governments will grant the leases in two forms – Mining Lease where evidence of mineral contents is
established and Composite Lease, a combination of a prospecting licence and a mining lease, where there is
inadequate evidence of mineral contents.
The rules will be applicable to all minerals, except (a) coal & lignite, (b) atomic minerals like uranium,
lithium, zirconium, titanium etc. and (c) minor minerals like building stones, gravel, ordinary clay, ordinary
sand etc.
Salient Features
 Role of Government: The Government will initiate an auction process for grant of a mining lease with
respect to an area within the State. It will issue a notice inviting tender with respect to mineral auction,
identify and demarcate the area where a mining lease is proposed to be granted through auction by
using total station and differential global positioning system. It is also required to classify the area so
demarcated into forests land, land owned by the State Government and land not owned by the State
Government.
The tender document will also include estimated mineral resources and brief particulars regarding
evidence of mineral contents and list of all clearances and permissions obtained with respect to such
area with respect to commencement of mining operations.

 Eligibility Conditions: The eligibility conditions for participating in the auction has been simplified and
categorized according to the Value of Estimated Resources which is defined as the product of -
(i) the estimated quantity of mineral resources for which the mineral block is being auctioned,
expressed in metric tonne; and
(ii) the average price per metric tonne of such mineral as published by Indian Bureau of Mines for the
relevant State for a period of twelve months immediately preceding the month of computation of the
Value of Estimated Resources.
Lease Type
Value of Estimated
Resources (INR
Crores)
Net Worth
as % of VER*
Mining Lease
> 25 > 4%
1

25 ≤ > 2%
2

25 ≤ ≥ 1%
3

Composite License > 1%
* Value of Estimated Resources
1 - applicant, including an individual
2 - applicant, not being an individual
3 - applicant, being an individual

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It has also been mentioned that the mineral reserve should not exceed 1.25 times the requirements of
minerals for the specified end use over a period of 50 years.
 Specific End Use: In addition to the specified end use for some minerals as given in the table below,
the State Government has been given the power to reserve particular mine or mines for any particular
industry. It can also earmark a certain percentage of mines for a specific end use.
Sl. No. Mineral/Ore End Use
1 Bauxite Alumina Refinery
2 Iron ore Integrated steel plants
3 Limestone Cement Plant

However, it has been stipulated that the minerals extracted under the mining lease can only be used
for the specified end use and cannot be used for merchant purposes.
 Auction Modalities: The auction will be conducted electronically. The bidding will be done in two
rounds, as it has been observed in coal block auctions. In the first round the bidders will be required to
furnish the technical details and the “initial offer” which has to be equal to or greater than the
“reserve price” mentioned by the Government.
In the tender document the Government will specify a “reserve price” which will be the minimum
percentage of the value of mineral despatched. The value of mineral despatched shall be an amount
equal to the product of -
(i) mineral despatched in a month; and (ii) sale price of the mineral (grade-wise and State-wise) as
published by Indian Bureau of Mines for such month of despatch.
The highest initial offer in the first round will be considered as the floor price in the second round
where the technically qualified bidders will be required to bid for the final offer for the lease area in
terms of percentage of the value of mineral despatched which the bidder will like to pay to the State
Government.
Our Comments
Geovale considers the approach to be a pragmatic and equitable one which can solve a long pending
problem of vague and inefficient process of allocating natural resources. However, we find a few
shortcomings in the process.
 Regulatory Clearances: The Draft copy of The Mineral (Auction) Rules, 2015 mentions that the State
Government will obtain the conditional forest clearance and wildlife clearance or any other law so as
to enable commencement of operations. It was also supposed to obtain all necessary permissions from
the owners of the land and those having occupation rights.
However, in the official Gazette there is no mention of such obligation on part of the State
Government. It may reduce the attractiveness of the auction process if the successful bidder has to
arrange for all forest clearance etc.
 Mineral Requirement Condition: The rule states that “If a bidder or any of its Affiliates is holding one
or more Mining Lease for the same mineral, then the amount of mineral reserves under such Mining
Lease shall be deducted from the mineral reserves specified in sub-rule (a) above, for the purposes of

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computation of 1.25 times of the requirements of minerals”. This can be detrimental for big existing
mineral lease holders like Tata Steel, SAIL and others for participating in the auction process and future
expansion plan of their end use plants.
 Failure of Composite License Holders: If the Composite License holder fails to establish the existence
of mineral content in the lease area, the Composite License will be terminated. This increases the risk
of applying for such areas without proper advice from the competent consultants.
 Basis of Value of Mineral: The value of mineral will be based on the prices published by Indian Bureau
of Mines (IBM). However the IBM published prices are often criticised as misrepresented by the
market players. In that case a stronger price reporting mechanism has to be established. Also linking
international indices like IODEX etc. could be another of for better price discovery.
 Time Difference between EC and ML: While the Environmental Clearance is given for a maximum
period of 30 years the Mining Lease under the new rules will be given for 50 years. A suitable approach
needs to be framed to bridge the gap.
In response to the new rules, 13 State Governments are ready to come up with auctions in 70 blocks for
Mining Lease and 45 blocks for Composited Licenses in the next one year or so. However, for Goa, no lease
can be considered prior to 2020. Also the impending case of Abolition Act, 1987 in the Supreme Court
makes mineral auction procedure delayed for Goa.
Commodity-wise, total 58 blocks totalling 21,659 Ha of limestone are ready to be auctioned for ML while 10
iron ore blocks and 2 bauxite blocks may go for auction for ML, mostly by end of 2015.
Specialized Services Offered
Geovale Services offers a gamut of specialized services to the mining industry, which ranges from due
diligence, exploration project management, GIS & remote sensing, resource modelling, mine planning,
infrastructure assessment, hydrogeological & geotechnical studies to preparation of EIA/EMP.
The geologists and mining engineers of Geovale have enormous experience in large number of projects
relating to iron ore, limestone, bauxite, gold, diamond, copper, zinc etc. in India and abroad.
Here is a representative list of projects recently done by Geovale Services.
 Prognostication of Iron Ore Resource in the Horse Shoe Belt, Singbhum Craton, Jharkhand &
Odisha States – India
 Vishakhapatnam Gemstone Project: Reconnaissance Due Diligence – India
 Exploration and evaluation of Manganese deposit – Zimbabwe
 Iron ore property due diligence - Peru
 Reconnaissance study of Iron ore potential in Madhya Pradesh & Rajasthan – India
 Due Diligence of Sapphire assets in the Ratnapura region of Sri Lanka – Sri Lanka
 Value Optimisation Study in Mangampeta Barite Deposit – India
 Drilling for gold exploration in Jonnagiri, Andhra Pradesh – India
 Stapregrina Blue Dome Copper Due Diligence – Morocco
 Mauritania Iron Ore Project Scoping Study – Mauritnia
 Western Ghats Bauxite - Scoping Study – India
For more information on services rendered by Geovale, projects under taken and its people, please log on
to www.geovale.com. We can assist the prospective bidders in identifying and winning the mineral blocks
in a process oriented and cost effective way.