This move comes after Vedanta Chief Anil Agarwal questioned the decision to conduct auctions for iron ore mines, claiming that input costs have gone up
due to this approach.
In statement issued late Friday, the Ministry termed
Agarwal’s comments as ‘completely misleading.’
“No mining company in India shares 100% of company revenue with the Government! The auction premium paid by a company is a percentage of
the average of the ex-mine prices of iron ore produced by all the mines in a State, excluding the expenditure made by the company outside lease boundary and on value addition for steel
production,” the ministry said while adding that
auction premium is not paid out of total revenue of the company.
Earlier in the day, Agarwal had posted on social
media, “Could you run a business successfully if you
have to share more than 100% of your revenue with
another party?… The bid is based on how much revenue you will share with the government. Since auctions were introduced, the average
for iron ore is 118%.”
He also said there are limited blocks are on offer.
“Many steel manufacturers seek raw material security, there is a huge demand supply mismatch and bid prices become massive,” Agarwal said.
Responding on this statement, the Ministry said,
“Contribution of iron ore in the cost of steel produced is about 15%. So, in case of a steel company which uses iron ore produced from
its own mine, it pays only a small percentage of total
value of steel produced as auction premium to secure assured supply of iron ore for running its steel plant.”
It added that prices of iron ore produced in India
are lower than the prices in international market.
“Even after payment of royalty and auction premium, the iron ore price in India are competitive as compared to the international market. Royalty and premium are part of cost of production for the company and not something shared out of revenue/
profit!,” the Ministry added.
Sharing details of mines auctioned till date, the Ministry said, “Since the introduction of auction in the Mines and Minerals (Development and
Regulation) Act, 1957 in 2015, 417 blocks have been
successfully auctioned. Out of 417 auctioned blocks,
119 are iron ore blocks.
34 auctioned iron ore blocks have already been
operationalised.”
According to the centre, another 21 blocks
are expected to become operational in near future.
Besides, 17 iron ore blocks are under auction process and 60 iron blocks handed over by the Ministry of Mines are available with the State Governments for auction.
“It is therefore wrong to say that only limited blocks are on offer,” the ministry said.
The Economist
