Mining companies to appoint consultants through reverse bidding

More than a month after the passage of the Mines and Minerals (Development and Regulation) Amendment Bill 2015, companies readying themselves for the auction of minerals such as iron ore, bauxite, zinc and lead have come up with a novel way to appoint a consultant to advise them when the states call for mineral bids. Just like it happened in the case of coal block auctions, they are employing the reverse bidding process where the lowest bidder is appointed as a consultant.
Bangalore-based KIOCL Ltd, earlier known as Kudremukh Iron Ore Co. Ltd, has called for tenders for bid advisers in the same manner, leaving many consultants bemused. “KIOCL plans to employ reverse auction process for the appointment of a consultant to act as its bid advisor. It’s a unique approach,” said a person who was aware of the development and requested anonymity.
In an attempt to prevent an increase in electricity tariffs due to coal block auctions, the National Democratic Alliance (NDA) government offered coal blocks for power generation firms through reverse bidding earlier this year. This led to aggressive bids and, for a lot of blocks reserved for the power sector, companies quoted zero price. Till now, 29 blocks have been auctioned and another 38 allotted to state-owned entities. Of the 67 blocks auctioned or allotted, a total benefit of Rs.3.35 trillion will go the states and another Rs.69,000 crore will be unlocked by way of tariff benefit to the consumers. “The process of auction for allotment would usher in greater transparency and boost revenues for the states,” India’s Economic Survey said this year.
But the proposed auctions come at a time when there is declining profitability in the iron ore business.
Queries emailed to Malay Chatterjee, chairman and managing director of KIOCL, and its public relations department on Tuesday remained unanswered.
State-owned KIOCL Ltd, which was set up in 1976, has a production capacity of around 1.71 million tonnes of pellets. According to the government, India has an iron ore resource of 25.24 billion tones. Mineral-rich states have identified mines for the auction.
The mines and minerals bill passed in March by Parliament states that mining leases of notified minerals—iron ore, bauxite, limestone and manganese ore—will be allotted through a process of competitive bidding. The new bill also makes the offence of illegal mining in respect to notified minerals a cognizable offence.
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