Perform or pay up: government to winners of mining licences

The government is finalizing a carrot-and-stick approach to ensure that mining companies move swiftly towards production at mineral blocks awarded to them at auctions, and to make delays unpalatable.

- Subhash Narayan

The stick first: delays in work at every milestone within an overall timeline will attract penalties. And the carrot: if delays in meeting milestones are overcome in the full course of the project development, the penalties paid will be adjusted, two people aware of the development said.

Delays would result in deduction of a part of performance security that will be paid by successful bidders to state governments. Performance security is calculated as a percentage of the value of estimated resources (VER) of a mineral block.

According to the people cited above, the government is holding consultations with industry on the draft recommendations of a committee that was constituted last year to explore intermediary milestones for activities to be completed from after a letter of intent (Lol) is issued till the execution of a mining lease.

The discussions with industry are expected to be completed by this month. Timelines and milestones for various stages of mining would be notified in March, following which they would form part of the rules of mineral block auctions, including for critical and heavy earth minerals such as lithium.