Limestone Auctions : How would it impact Cement Industry ?

Limestone auctions by the Centre have witnessed winning bids as high as ₹735 a tonne, going by latest data available with the Ministry of Mines.

In 2015, the Centre amended the mining laws, through the MMDR Amendment Act 2015, wherein it was stated that instead of renewing the mining concessions post expiry, they are to be granted only through competitive bidding by auction.

The process of bidding was resorted to adding significant premiums to the State’s kitty- on the royalty currently earned – and to ensure minimum disruption in mineral availability. The data on the Ministry of Mines website reveals that, of the 18 limestone mines auctioned so far, final prices offered ranged from 1.1 to 25 times of the reserve prices set. Companies like, Ultratech cement had reportedly bid for as high as ₹685 and Rs735 a tonne, thereby bagging two mines- one each in Chattisgarh and Madhya Pradesh. The mines have limestone reserves of 61.96 and 124 MT respectively, as per the data on Ministry of Mines website.

In comparison with the auction price, companies currently pay a maximum royalty of Rs 82/tonne to the States, for mines allotted to them before the enactment of the new law. For cement manufacturers, raw material, energy and freight comprise 70-80 per cent of their total costs. Increase in any one element can significantly eat up their profit margins. Limestone to Cement ratio is approximately at 1.5:1, meaning 1.5 tonne of limestone goes in the production of 1 tonne of cement.

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