FICCI says restrict mine auction only to proven mineral deposits

India’s second largest industry association, the Federation of Indian Chambers of Commerce and Industry (FICCI) has lent its support to Congress President Sonia Gandhi’s proposal to allot mines only through bidding, but called it unsuitable for many cases.

Under the current system, mines and similar natural resources (except oil blocks) are allotted in a non-transparent way by state governments without conducting any open auction or tenders. Sonia Gandhi had, a few months ago, urged the government to move towards an auction system to curb corruption and favoritism that has so far refused to let go off such allocation processes.

Environment minister Jairam Ramesh too has asked for such a system to be put in place, after going through several proposals of mine allocations that come to him for environmental approval.

FICCI’s reaction is seen as an indication that Government is serious about implementing the plan laid out by Gandhi at a party function.

“FICCI has suggested that auction based system should be followed for allocation of natural resources like iron ore, coal, lignite, bauxite etc. Currently, for allocation of most minerals the system of First-come-First-Served basis is followed,” FICCI said.

FICCI, however, said that in case of unknown mineralisation — where the quantity of minerals is not known — government can consider an “Open Sky policy.”

“Given India’s geologically underexplored reserves, it is important that large investments are attracted and incentivised for exploration,” it said, adding that auction based system may not be appropriate in those cases where adequate information about the extent or size and grade of minerals is not there.

“In such cases it may lead to a speculative bidding with a high risk of over paying by investor which may force him to abandon the project midway with associated environmental, social and technical consequences,” it added.