Chhattisgarh leads the way


Chhattisgarh Creates History

Chhattisgarh created history when it auctioned its Baghmara Gold Mine at Sonakhan in Balodabazaar-Bhatapara district on February 26, 2016. It is the first gold mine auctioned in the country for grant of composite licence (prospecting licence-cum-mining lease) since enforcement of new amendment in Mines and Minerals (Development and Regulation) Act 2015.

Mineral Resources Department, Govt. of Chhattisgarh, had identified 4 limestone blocks for the purpose of granting a Mining Lease (ML) for specified end use of clinker/cement, and 1 gold block for the purpose of grant of Composite Licence (CL), through forward electronic auction in the platform provided by MSTC. Chhattisgarh government notified auction of these mines on December 8, 2015. The pre-bid conference for registered bidders for the gold block was conducted on January.

Several states came forward for auction of their limestone mines. Chhattisgarh, however, earned the distinction of becoming the first state in India, amongst a host of other states like Maharashtra, Gujarat, Rajasthan, et al, to successfully auction a ML for non-coal mineral blocks followed by a CL, for the first gold mine in India.

Over 160 bids were submitted and the mine witnessed aggressive bidding that lasted for 13 hours - when the final bid was stamped. London-listed Vedanta Resources Inc bagged the auction with the highest bid of 12.55% of Indian Bureau of Mining (IBM) price of Rs.74,712/troy ounce (1 troy ounce = 31.10 gram). The company would be granted the composite licence that includes both prospecting licence and cum-mining lease. Vedanta Resources, a global diversified metals and mining company that produces oil, zinc, aluminium, copper, lead and silver has now added gold in its mineral portfolio. The four companies that participated in the auction were Rungta Mines Ltd, Vedanta Limited, Krishna Global Minerals Ltd and Sainik Mining and Allied Services Ltd.

Karhi Chandi Limestone Auction – Another Milestone for Chhattisgarh

The auction of the gold mine followed briskly on the heels of two earlier auctions, on February 18th and 19th when two limestone blocks were successfully bid for mining lease. Chhattisgarh recorded yet another milestone when the Karhi Chandi limestone mine became the first non-coal mining lease to be auctioned in India. It saw aggressive bidding from cement manufacturers. The highest bid was 58.95% of IBM Price against floor price of 23.60%. The bidding went on for more than 5 hours and saw 192 bids being submitted. This was followed by the successful auction of the second mineral block – Kesla Limestone Block, in district Raipur, on 19th February 2016. The floor price was 5.45% of IBM price and the highest bid was 10.15%. The bidding went on for more than 3 hours and over 50 bids were submitted. Shree Cement Limited and Century Textiles and Industries Limited were the successful bidders for Karhi Chandi and Kesla, respectively.

Bulging Exchequer and Reduced Gold Imports

While Chhattisgarh is endowed with abundant coal, bauxite, iron ore and limestone reserves, the gold mine is a veritable treasure trove that promises to bring in hefty revenues to the State. The mine which is spread over 608 hectares is located about 130 km northeast of Raipur and is the oldest explored gold deposit in Central India which has long been held as having a commercial potential. Based on exploration and available reports, it has a reserve of 2,700 kg of the yellow metal. In addition to the existing royalty of Rs 24.70 crore, the auction is expected to make the State Exchequer richer by more than Rs 81.40 crore.

India is the world’s second largest consumer of gold. In the face of its insatiable appetite for the metal, the government raised import duties and launched a gold monetisation scheme to mop up and mobilize an estimated pool of 20,000 tonnes of gold lying idle in homes and temples. Neither measure met with the anticipated success. In a more recent move, the government announced the offering of a total of 100 mineral blocks for exploration to private companies in an attempt to reduce dependence on imports.

India imports about 1,000 tonnes of gold annually, and the precious metal is the second-highest component of the imports bill after crude oil. According to Subodh Singh, State Secretary Mines, Chhattisgarh, the development of the Baghmara gold mine would contribute to India’s target of reducing gold imports, in addition to promoting gold, gems and jewellery business in the State. The exploration and mining of gold would generate employment and through the multiplier effect, enhance the country’s income and wealth.

Exploration of gold deposit was earlier carried out by directorate of geology and mining in erstwhile state of Madhya Pradesh between 1981 and 1990. Dr.Raman Singh, the Hon’ble Chief Minister of Chhattisgarh explained that the level of exploration undertaken so far falls under G3 category as defined in Minerals (Evidence of Mineral Contents) Rules, 2015, and it qualified for auction as a composite licence. As winner of composite licence, the onus would be on Vedanta Resources to carry out detailed exploration and take the deposit to a G2 category as stipulated in the Minerals (Evidence of Mineral Contents) Rules, 2015.

Industry and economic experts perceive the open auction of the gold mine as the right way forward for India. They opine that the national income and wealth of the country would be enhanced by allocating the exploration and exploitation rights of such a natural resource to the most efficient hands. From a purely economic perspective, the auction would enable the realization of profit out of the technology developed to exploit these natural resources and also from the application of capital. Further, since the gold miner would be a price taker, he can sell the gold only at globally determined prices established by market forces. Hence any royalty paid is simply a transfer of some portion of shareholders’ profits, to the State and the people. Since the operational environment is not entirely free market in the economic sense, it is credible to assume that corporations are the profit maximizers.

Based on the current assessment, auction of Karhi Chandi block is expected to yield Rupees 4,386 crores by way of bid revenue to the State Government. As for the Kesla block, the total increment during the e-auction process almost doubled the bid-revenue-receipt of the state from Rupees 169 Crores to Rs 314 Crores. These amounts would be in addition to the existing royalty, DMF and NMET amounts payable to the state.

More Auctions to Follow in the Mineral Rich State and India’s Power Hub

Chhattisgarh is one of the richest State in terms of mineral wealth, with 28 varieties of major minerals including diamonds. Important mineral deposits have been discovered in various part of the State - notably the diamondiferous kimberlite in Mainpur, Alexandrite, one of the rarest gem stones, in Raipur, gold in Sonakhan, iron ore in Kawardha District and workable deposits of corundum in southern Chhattisgarh.

Chhattisgarh is the largest coal producer in the country. While all the tin ore in India is in Chhattisgarh, the State contains a fifth of the country’s iron ore. It exports to Japan one of the world’s best quality iron ore which is present in its Bailadila mines. The State also boasts substantial amounts of Bauxite, Limestone, Dolomite and Corundum deposits. The availability of large deposits of limestone, coal and iron ore in close proximity to each other, makes the State an ideal location for the lowest cost of production.

Needless to say, the State offers monumental scope for private participation in its mining sector. The State’s Mineral Policy has created a healthy business environment to lure both, domestic and foreign private investment in the State so that it may translate the State’s natural wealth more efficiently into prosperity for its people.

More auction plans are in the pipeline in respect of other such natural resources. It is expected that two more limestone mines - at Mohra East and Mangsa Pauni Khauna – would be similarly auctioned later this year. Chhattisgarh plans more auctions of bauxite, limestone and other mines in the comming years.

The Allure of Chhattisgarh as an Entrepreneurial Haven

What has enabled Chhattisgarh to pull of such a dramatic victory? In the first instance, the attractive policies of the State Government resulted in a large participation in the bid. According to Dr. Raman Singh, Hon’ble Chief Minister of Chhattisgarh who is also in charge of the mining portfolio, “Ease of doing business” in the State with transparency in allocation of mineral resources, pragmatic stamp duty policy, availability of power, establishment of land bank and the e-auction, expedited the entire process of mining lease allocation. These very factors make Chhattisgarh a preferred investment destination.

With a view to enhance the country’s image as a friendly investment destination, the Indian government in association with the World Bank released a state-wise report on the “Ease of Doing Business”. Chhattisgarh ranks 4th with 62.45% on the index. The report assesses implementation status of 98-point reform measures across the following eight areas: Setting up a business, Allotment of land and obtaining construction permit, Complying with environment procedures, Complying with labour regulations, Obtaining infrastructure related utilities, Registering and complying with tax procedures, Carrying out inspections and Enforcing contracts. The State provides quality power at 35% lesser cost than all India average. It offers tailor-made incentives for large investors and commences business in real time.

Chhattisgarh Mineral Development Corporation

Chhattisgarh Mineral Development Corporation Limited (CMDC) is an undertaking of the Government of Chhattisgarh, registered under the Companies Act, 1956. It was incorporated under Section-21 of the Company act 1986 by register of the Company 7-6-2001. CMDC, single or in joint venture, undertakes scientific exploration, commercial exploitation and viable trading of minerals in the State. It aims to search Major and Minor minerals, and precious stones in the State, to acquire mining rights for exploration, exploitation and development, to enhance the production of minerals, to establish and promote mineral-based industries and lead the country’s mining sector. With a dedicated staff skilled in diverse fields associated with mining and minerals, it is engaged in various qualitative & quantitative aspects of mineral investigation in the State.

The operations of CMDC benefit the large tribal population in southern Chhattisgarh. Chhattisgarh is the only Tin Ore producing State in India. Tin Ore is purchased from 5 Tribal cooperative societies of the State and its collection directly and indirectly benefits 3000 tribal families in the region. CMCD operates its Tin Ore Project on a “No profit No Loss” policy for the Tribals of Bastar.

CMCD which operates Bauxite mines at Mainpat, Sarguja Daldali, Kawardha, plans to expand its existing work in the entire State. With a view to meeting the entire raw material demand of both present and proposed industries in the State, CMDC proposes the opening of new bauxite mines in different bauxite bearing districts of the state. According to a notification from the Government of India, Ministry of Mines, CMDC also functions as an agency for carrying out exploration without a valid prospecting license.

CMCD has in the pipeline, the Aridongri and Kabirdham Iron Ore projects in Kanker and Kabirdham districts, respectively. The ore produced from these mines will be supplied to sponge iron and steel plants of Chhattisgarh. Apart from this, CMDC has also formed a joint venture with NMDC for the development and mining of iron ore from specific segments of Bailadila deposit to meet requirements of local Sponge iron/ pellet / steel plants, as well as for the steel plant to be setup by NMDC at Nagarnar Bastar in Chhattisgarh.

At present, CMDC, along with the Madhya Pradesh State Mining Corporation (MPSMC), also has the Kerwa Coal Block in Korba district, Chhattisgarh. CMDC will also partner the development of the proposed railway line from Raoghat to Jagdalpur.

District Mineral Foundation Trust & The Prime Minister Khanij Kshetra Kalyan Yojana

The State Government constituted the District Mineral Foundation Trust (DMFT) in January 2015 in all the 27 districts of the State for the benefit of people and areas affected by mining. Despite their hefty contribution to the wealth of the State, these mineral rich areas have remained backward in socio-economic development. They have been adversely impacted by mining activities like decreased water flow, falling ground water level, excess load on the existing infrastructure and resources due to transport of minerals. Now, however, DMFT would ensure accelerated development of these mineral rich areas by taking appropriate measures to deal with the negative effects arising from mining activities.

Under the DMF, an account has been opened in all 27 districts and the mining lease holders have deposited more than Rs 425 crores as contribution till now. Nearly Rs.1100 crores contribution is expected in the year 2016-17. As the mining operation increases in the upcoming years, more contribution will be received.

Further, the functions of DMFT will be enhanced by the Prime Minister’s Khanij Kshetra Kalyan Yojana (PMKKKY) scheme which is slated to have far-reaching benefits. Through the DMFT, the developmental works in villages like drinking water, environment conservation, health, irrigation and railroad construction will ensure fast track development.

A judicious approach has been evolved for optimal utilization of mining resources for proper industrialisation and economic development, not only of the State, but of the regions in the neighbourhood of the mining areas that had hitherto remained backward.

30% of the royalties obtained from auctioning of mines will be utilized by the DMFs to implement the PMKKKY to ensure socio-economic upliftment of the population dwelling in the vicinity of the mining areas. Developmental and welfare programmes will be implemented in mining affected areas to enable the people to lead healthier and qualitatively, improved lives. Work is in progress towards minimizing and mitigating the negative impacts from mining and related activities, and to maintain ecological health and balance, aimed towards creating long term sustainable livelihoods for these people. A major thrust will be on areas related to good drinking water supply, health care, sanitation, women and child care, welfare of the aged and differently-abled, education, skill development and environmental conservation.

Infrastructural development in the areas affected by mining activities, has been given a high priority. Substantial funds will be spent on making roads, bridges, railways, waterways projects, irrigation and alternative energy sources.

Chhattisgarh Welcomes Investors

Recognizing the pivotal role of minerals in the industrialization of the State, Government of Chhattisgarh has formulated policies that allow entrepreneurship to flourish in an atmosphere of ease, stability and certainty. These policies ensure elimination of procedural hindrances and transparency in decision-making. Further, the State is ensuring a minimum lease area with secured land rights so that investors can safely commit large resources to mining projects. According to Chief Minister Raman Singh, the Government of Chhattisgarh has adopted a focussed policy approach towards realising the Prime Minister’s vision of ‘Make in India’. The State’s policies are geared towards making it easy for investors and entrepreneurs to establish business in the state. Further, they are putting in place world class infrastructural development.

Chhattisgarh welcomes investors who envision plans to add value with downstream industries and those who establish export-oriented mineral-based units in the State. These entrepreneurs would have priority in sanctioning of Mining Lease and Prospecting Lease and would benefit from the incentives offered to all other industries. The State is replete with infrastructural facilities in the form of chemical laboratory to enable chemical analysis of minerals and ores, wherewithal to conduct Petrographic studies, and drilling division with all necessary equipments and amenities. Since the target area has been shifted to remote areas and deep-seated mineral deposits, the mineral-search requires sophisticated technology. The existing chemical, petrological and photogeological laboratories are being equipped with modern equipment to provide logistic support to high tech entrepreneurs venturing in the State. Beneficiation study of the subgrade ore, substitute study for scarce minerals and industrial use of small deposits are being undertaken.

Mining and Ecological Balance

To strike a balance between ecology and mineral development, environment awareness is being created. Lease holders are oriented towards the preservation of local ecological balance, and are motivated to participate in afforestation programmes in degraded land bank for compensatory afforestation in every mining block. Lease agreements have conditional clauses related to planting and nurturing of saplings and trees, to dumping of waste at appropriate sites, to proper stacking of top soil for use later. Waste resulting from the mining activities would be allowed for use on payment of royalty as applicable to waste materials. Further, funds are being earmarked for education, social issues and health hazards arising from mining and related activities.

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