Mining reform plan hits state pushback

Revenue loss fears rise; high upfront fees may aid large steel firms

- Dipali Banka & Abhishek Law

Two of India's major mineral-producing states have opposed an overhaul of the country's iron ore auction rules out of fear of revenue loss, in yet another blow to an ambitious plan to boost production and cool prices. Resistance from states and steelmakers has stalled the process, and a mines ministry committee set up to shepherd The reform has not met in more than two months, three people aware of the matter said.

The ministry plans to limit so-called auction premiums to 50% of the ore value, replacing the current system where bids can cross even 100%. Also, companies who win the mining blocks would need to pay more money upfront. Premium is the extra amount a bidder agrees to pay the government above the base price.

Odisha and Goa have opposed the proposal to cap premiums, said one of the three people, a senior official in the steel ministry. Auction premiums are the biggest revenue earners for mineral-rich states, and both states fear the restrictions will hurt. For instance, when ore valued at ₹1,000 per tonne attracts a 100% premium, the state earns an equal ₹1,000 per tonne in premium, but a 50% cap would cut this income in half.

Queries emailed to the governments of Goa and Odisha remained unanswered. Odisha accounted for over 50% of iron ore mined in India in FY24 and Goa slightly over 4%.

The ministry official cited above said the measures to change the auction format are "currently on hold." A second official added, "Lower premiums directly translate into lower state revenues."