Mining sector e-auction throws up new entrants and record royalty for government

Written by Avinash Nair, Updated: August 9, 2018 7:15:20 am

In the first-ever e-auctions for granite blocks in Gujarat, a real-estate developer from Ahmedabad and a businessman from Palanpur were among the winning bidders for the 10 granite blocks in Mehsana district.

The auction for phase-I of granite blocks that closed on Wednesday evening not only sprung up new entrants in the mining sector, like the Ahmedabad-based Safal Constructions Pvt Ltd and Palanpur-based Arun Digital Corporation, but also saw the state government mop up royalty amounting to an estimated Rs 696 crore during the 30-year-lease period.

“This is more than double the amount of royalty collected before e-auctions were introduced. The previous allotment regime had no concept of premium and the additional income now is due to the premium quoted by the bidder,” said Roopwant Singh, Commissioner of Geology and Mining department, Government of Gujarat.

Among all the successful bidders, Safal Constructions paid the highest premium for the two mining blocks it won. For the Otlapur-3 block in Satlasna taluka of Mehsana district, the company is paying a premium of 31.26 per cent (of the average sale price) and for the Otalpur-2 block, it is paying a premium of 28.11 per cent. During the 30-year-period, the real-estate company will pay over Rs 427 crore as cumulative royalty to the government for the two blocks — the highest royalty paid among all the bidders.

“So far, we have been an end-user as far as granite is concerned. This will be our first foray into the mining sector and we plan to do it all by ourselves. Mining has its own potential,” said Rupesh Brahmbhatt, Director, Safal Constructions. All the 10 auctioned blocks, each measuring about 3-4 hectare, largely contain pink and dark-grey coloured granite that can be used for the internal flooring and external pavements by the construction sector.

Arun Digital Corporation, winner of the Bhatvas block-I, is already scouting for joint-venture partners. “This is a sector, where usually people with political connections win. My friends had advised me against bidding. But now that I have emerged successful, I plan to forge a joint-venture with one of the mining companies operating in our region. I do not have any prior experience in the mining sector, but I have friends who can help me forge a partnership,” said Arun Joshi, a 43-year-old businessman who has been dabbling in the telecom sector in Banaskantha district.

When asked why inexperienced entities and individuals were allowed to place bids, Mining Commissioner Roopwant Singh said that during the bidding process only “net-worth” of the bidder was taken into account. “It also helps widen the pool of bidders,” he added.

The bidding process happens in two stages. The highest bid in the first stage is taken as a base for the second stage of bidding where only the top five bidders from the first stage are allowed to place their bids. “Currently, the e-auction for granite blocks in Chotta Udepur is live, and in the coming days similar blocks in Sabarkantha will be auctioned,” Singh added.

Reference

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