From Allocation to Auctions

How India shifted to auctioning coal and mineral blocks after 2014-15, how the auctions work, and what they changed for revenue and investment.

After the coal scandal, India overhauled how it gives mining rights.

Coal auctions

The Coal Mines (Special Provisions) Act, 2015 provided for e-auctions of cancelled coal blocks. Later, in 2020, India opened commercial coal mining, letting companies mine coal for sale, not just for their own use, with bids based on a revenue share to the state.

Other minerals

The Mines and Minerals (Development and Regulation) Amendment Act, 2015 made auctions the main way to grant mining leases for major minerals like iron ore, bauxite and limestone.

How auctions work

Blocks are offered with geological data.
Bidders offer a percentage of the value of minerals mined as payment to the state, on top of royalties.
The highest bidder wins.

Results

Transparency and much higher revenue for states from many blocks.
District Mineral Foundations, funded by miners, support local communities.

Problems

Aggressive bids: some winners bid very high revenue shares, then struggled to operate profitably and delayed mining.
Delays in clearances.
Exploration gaps: few blocks were well explored.

Further reforms

A 2021 amendment removed the distinction between captive and merchant mines and allowed more sales of minerals. A 2023 amendment opened some critical minerals to private exploration and auctions.

The high bid

A company bids to pay 90 percent of the mineral value to the state for an iron ore block. It wins but finds the mine unprofitable at that rate and delays operations, showing that the highest bid isn't always the best outcome.

Thinking auctions solve all mining problems

Auctions improve transparency and revenue, but aggressive bids and clearance delays can stall mines.

Key takeaways

India moved to e-auctions for coal from 2015 and commercial coal mining from 2020.
A 2015 amendment made auctions the norm for major minerals.
Auctions raised transparency and state revenue.
Aggressive bids and clearance delays caused problems.