New Delhi, Nov 18: The group of ministers on the mineral policy has decided to go ahead with the auction of iron ore mines, overriding the objections of some states.
Mineral-rich states had opposed auctions and sought a reconsideration of the norm from the ministers.
They wanted allocations on the basis of commitments by steel makers to invest within their boundaries. The proposal will have to be passed by the Union cabinet.
Officials said the problem for the Congress-led government was that the mineral-rich states were being run by Opposition governments.
The chief ministers of these states Orissa, Chhattisgarh, Rajasthan and Karnataka are arguing against auctions as this mean bidders will opt for states that are better endowed with infrastructure and a ready market.
In the mineral policy, companies are allowed to bid for ore.
They will give back a percentage of the mined mineral to states as a licence payment and can ship the rest out of the state.
The mineral-rich but backward states say commitments by steel units of facilities within their boundaries were the only way to ensure their development.
New industry and more jobs not only enrich a state but also generate political capital for the incumbent government. However, the officials said the Centre favoured a bidding process to ensure transparency. There are apprehensions about states getting robbed off their mineral riches merely on the basis of commitments.
The officials said they have been looking at a compromise formula that involves assigning weights to investment plans within a state and investments in the social infrastructure of the region where a mine is located.
The cabinet will have to take a view whether to go ahead with the GoM (group of ministers) recommendations or to look afresh at the objections raised by chief ministers. Most of these chief ministers are from non-Congress ruled states and a decision bluntly against them could be turned into a political issue, the officials said.
The other way out is to propose amendments to various mining acts based on the recommendations of the ministers, leaving it to Parliament to make the changes.
When the ministers had approved the policy in July, the minister of state for mines, T. Subbarami Reddy, had said the government expected $2 billion of foreign direct investment after the new policy was in place.
He said the mining sector would generate five lakh more jobs in the next five years.