By Abhishek Law
Copyright thehindubusinessline
India is weighing a possible shift in the iron ore mine auction mechanisms to curb high premium and simplify procedures.
Those in the know said, at least three line ministries are likely to be taken on Board and form an inter-ministerial committee.
“There is a set auction procedure in place. If that has to change, it needs consultation with stakeholders, legal experts and a ministerial level too,” said a senior government official.
Suggestions include moving away from the current reverse bid mechanism to simpler single-bid format or a Swiss Challenge one, senior officials in the know told businessline.
High mine auction premiums, impact final price of raw material.
For example, if the mine-head price of iron ore is ₹1,000 per tonne and a 200 per cent premium is bid over a reserve price of ₹100, the total government payout becomes ₹300, even before mining activity starts. Other costs follow.
In India, mines are reverse bid, that is a company bids the highest premium over reserve price, committing to pay more to the government for mining rights.
Industry has favoured a single price-type auction where each bidder submits one sealed bid; and a time-bound chance to revise it, if necessary.
Swiss Challenge mechanism
Others suggested a Swiss Challenge mechanism, where a floor price is set, round-based bidding occurs. And bidding ends when either a clear winner emerges or two parties match bids.
The move comes amid rising concerns from steel-makers regarding “high input costs” – iron ore being a feedstock and increased auction premiums which have been hovering in the 115–120 per cent range, and sometimes as high as 200 per cent.
Auction premium is the additional amount a company pays above reserve price to secure a mining lease.
High level meeting
Industry and government representatives recently attended a high level meeting in August.
At least two line ministries participated, and the issue of high auction premium on iron ore mines was raised.
“Yes the industry wanted to have a simpler auction mechanism that would not push up prices,” said a government source who was present.
In fact, a steel industry representative businessline spoke to also said, “Auction premiums should not exceed 60 per cent at most.”
Published on September 9, 2025
