Mining troubles

Following the order by the Supreme Court to stop all iron ore mining operations from March 16, it appears that the government of Goa is most likely to auction the mines which so far have been operated primarily by the Goans. This may be the eventual destiny of the Goan mining leases, but the duration of a fresh start of mining on or after March 16, is likely to be prolonged than what is being projected. The Goan community who are highly dependent of mining business is no doubt likely to suffer from the long lull period.

There are large number of steps and formalities involved even before the auction process actually starts. Before the state government comes up with notice inviting tender (NIT) to auction any mineral block, they have to prepare geological reports in conformance with Minerals (Evidence of Mineral Contents) Rules, 2015, based on latest available data to share with the prospective bidders.

However, although GSI took up 73 blocks for exploration for Field Session of 2017-18 to facilitate auction by the state governments , not a single block of Goa was there in the list of GSI for Field Session 2017-18, as per the minutes of Central Coordination-cum-Empowered Committee (CCEC) meeting held on June 2, 2017, apparently because there was no immediate plan for auctioning mineral block of Goa that time. So the preparedness of the state government to conduct auction is doubtful.

Before the state government comes up with NIT to auction any mineral block, as per the Mineral (Auction) Rules, 2015, it has to 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. Also they have to classify the demarcated area into forests land, land owned by the state government and land not owned by the state government which is a time consuming affair. In cases of privately held lands or surface rights, getting the same itself may turn out to be a big project.

The state government also needs to take crucial decisions regarding whether to reserve a mineral block for specified end use or keep it open to all. Reserve price, bid security amount, price of the tender document, composition of technical evaluation & transaction committee, sizing of mineral blocks etc., to name a few, should be finalised after thorough due diligence which cannot be dealt overnight.

After all these preparations, state government needs to publish the NIT for auction. An analysis of mineral blocks so far auctioned successfully shows that the number of days it takes to declare the highest bidder from the date of publishing NIT ranges from 60 days to 286 days (for Karnataka). It takes another 30-odd days to issue letter of intent (LOI) by the state government to the highest bidder. 

In between, there is chance of the auction being cancelled for various reasons like lack of bidders or legal issues. For example, In Karnataka, the iron ore block auctions got cancelled twice. So far only 33 mineral blocks have been successfully auctioned while 60 auction attempts failed.

After receiving the LOI the process starts for obtaining clearances of at least 13 different types, including forest clearance, wild life clearance, environmental clearance, consent to operate, mine plan approval, approval for water, power, diesel etc. and conduction of Gram Sabha. Each of these takes its sweet time and prior experience shows it may easily extend up to minimum two years under the current system.

Hold on. Process does not stop here. After getting all the consents, approvals, permits, no-objections from various government agencies/departments, the bidder has to pay rest of the installments of Upfront Payments and execute Mine Development Production Agreement (MDPA) with the state government within 60 to 80 days to ultimately get the mining lease.

Engaging man and machinery, developing the mine, arranging for transportation, placing all the system up and running will take its own time. In between if any litigation or protest from any quarter happens which is extremely common in Goa, may further delay the process.

Moreover, it is not easy to regain the lost share in the export market after such a gap. Goa has already lost its reputation of a reliable supplier of iron ore once during the mining ban period of 2012 to 2015. Miners will have to put strong efforts to find the market for a product which is already in low demand.  Will the possible new entrants to Goan mining business, post auction, be able to capture the lost market as quickly as the good old Goan miners who have been running the business for last three to four generations? The common people of Goa who didn’t commit any crime will have to continue to struggle for their livelihood for a long period.

A small fact can summarise the depth of the issue. Out of 10 iron ore blocks so far auctioned (3 in Odisha and 7 in Karnataka), not a single block has started mining! Even in the case of coal block auction, out of 35 coal mines which were operational when those were auctioned, only 15 could restart operation after the cancellation of mining leases by the Supreme Court in 2014.

It should also be borne in the mind that all the 88 cancelled mining leases in Goa are not going to be auctioned in one shot. They will come in phases as per the preparedness of all the paper work. Many of them may already be having legal disputes.

Who will take care of the affected people of Goa and how long? Shouldn’t the Goan government find a legal way to continue the mining operation at least till 2020 while simultaneously preparing for the auction for the sake of its own people?
(The writer is chairman, Goa Chamber of Commerce, and a veteran in the iron ore industry)