New Delhi, Oct. 2: The Centre is trying to work out a compromise with iron ore-rich states who have rejected the new national mineral policy.
These states are opposed to the proposal of auctioning mines. They want to give mines in return of promises of investments in upstream units.
While asking the states to suggest alternatives, the government has proposed a formula.
Mine allocations will be decided on the basis of three criteria, with weights attached to each of them.
These are bid values, investment plans for states where mines are located and plans for social infrastructure near mines.
Government officials said bidding was necessary because it made the selection exercise transparent.
They said allotting mines on the basis of promises of investments was risky.
“An upfront payment besides a royalty share of the mineral prospected, to be decided through the bidding, are perhaps a necessity,” the officials said.
The plan to assign weights answers the objections of the states to the new policy.
The Centre is approaching the problem with an open mind and is willing to consider alternative suggestions from the states, the officials said.
The compromise plan followed protests by the chief ministers of Jharkhand, Orissa, Chhattisgarh and Karnataka against the new policy.
The states believe promises by steel makers of plants in return for mining concessions are the only way of bringing development to their backward regions where ores are located.
New factories and jobs not only enrich a state but also generate political capital for the incumbent government.
The group of ministers which met here for the new mineral policy on July 6 had, however, decided in favour of auctions instead of mining concessions against plans for steel mills.
Auctions mean global giants such as Posco and ArcelorMittal will not be allowed to negotiate for leases with Jharkhand and Orissa on the basis of plans for units in these states.
States without iron ore, such as Bengal and Maharashtra, feel the grant of concessions in return of investments in mills will lead to lopsided development.
Besides, there will be other problems if the states are allowed to have a say in the location of units.
For instance, in the future, a state rich in any other mineral, such as coal or manganese, may insist on a facility within its boundaries as a condition for a lease.
The new policy created a level-playing field for private firms.
It had proposed an end to preferential treatment for public sector units in the allocation of mines.
Rapid economic growth has fuelled infrastructure demands, and steel companies are sensing big returns from capacity expansion.
However, they are facing bureaucratic hurdles in mining leases and opposition over land acquisition from farmers.
The country has iron ore reserves of 23 billion tonnes.