KOLKATA (miningweekly.com) - In a step towards allocating mineral resources through auction, the Indian government has established a committee entrusted with setting the parameters of evidence of mineral contents across the country in line with the recently promulgated legal framework.

The committee, to be headed by Indian Bureau of Mines Controller of Mines  Ranjan Sahai, would consider all aspects of delineating mineralisation for the purpose of earmarking it for direct mining lease (ML) auction or ML cum prospecting lease auction.

The committee would also lay down the rules for easy transition of reconnaissance permits to prospecting licence, and subsequently, the of the latter to a ML, according to a note issued by the Mines Ministry.

Indicating the government’s urgency in setting the rules and pushing for the allocation of mineral resources through the auction route to replace the current practice of allocation through government nomination, the Mines Ministry has set a stiff deadline of January 29 for the committee to submit a draft report, and February 13 for the final report.

The initiative comes in the wake of the government issuing an ordinance, the Mines, Minerals Development and Regulation (MMDR) Ordinance 2015, which amends the MMDR Act and lays down the legal framework for auction of mineral resources to Indian and foreign companies.

To start with, the Indian government was working towards adopting the auction route for allocation of iron-ore and bauxite resources to government and private companies.

This was in the wake of the ruling of the Indian Supreme Court, which came down heavily on existing natural resource allocation process and held them to be arbitrary and illegal.

In 2012, the Supreme Court declared allocation of 2G-telecom spectrum illegal and cancelled 122 telecom licences allotted to 11 companies after January 2008.

In a similar vein, the Supreme Court in September 2014 had declared that 214 coal blocks allotted to companies by the government since 1993 was done arbitrarily and illegally, directing the latter to take back all coal blocks and put them on the auction block.

Meanwhile, the government’s initiatives on the auctioning of mineral resources has once again cast doubts over Posco, Korea’s $12-billion steel project, the largest single foreign direct investment (FDI) proposal for India.

The steel project proposal, as per a memorandum of understanding signed between Posco and provincial government of the eastern Indian coastal state of Odisha, envisaged the grant of a prospecting licence to the Korean steel major by the Indian government on a nomination basis and not auction.

Simultaneously, it is not clear whether Posco would be willing to proceed with its steel project by participating in auctions to secure raw material linkage, though in an official statement the company said that it was "studying the orders of the government and would not comment on it".

The Odisha government has been communicating with the federal government and the Mines Ministry in seeking exemption from the auction route for the granting of iron-ore linkage to Posco, considering that it was the largest FDI project for India.

Mines Minister Narendra Singh Tomar, however, said that he would not comment on the impact of policy changes on any single company.