Bengaluru | March 16, 2016: The Karnataka government has postponed the online auction of 14 ‘C’ category mining leases for the second time after potential bidders raised objections regarding high stamp duty and registration tax.

The bidders have objected, saying the prevailing rate of stamp duty levied on registration of mine development and production agreement and mining leases will make it unviable for them to bid for mines.

According to a major steel company which is participating in the bidding process, the state government has taken note of the bidders’ objection and has deferred the auction process. During the pre-bid conference, the stakeholders had suggested reduction in the stamp duty.

“The government has taken our views and decided to reduce the stamp duty by bringing an amendment to its stamp duty Act. An amendment Bill will be moved in the upcoming Budget session of the state legislative assembly,” a source told FE.

The apex court, in its final order on illegal mining in Karnataka pronounced in April 2013, had directed the state government to cancel 51 ‘C’ category leases for engaging in rampant illegal mining and re-allot them to end users through a transparent bidding mechanism.

The state department of mines and geology, which had scheduled the e-auction of ‘C’ category mining leases between February 9 and 11, has now rescheduled the process between May 2 and May 6. The state government has also filed an interlocutory application in the Supreme Court seeking condonation of delay in the auction process.

The apex court, in its order on July 30, 2015, had directed the state government to conduct auctions within six months. Currently, the stamp duty is levied at 5% with 1% registration charges by the state government. The stakeholders have, however, suggested reducing it to 0.5% each.

“We hope the state government has taken our suggestions during the various pre-bid conferences we had with the department. We are waiting for the government’s amendments in this regard,” sources said.

Mining industry sources added that the existing duty structure would have yielded the state government an estimated `3,000 crore by way of stamp duty. However, the government has decided to reduce the duty following widespread objections raised by the stakeholders.

“The new duty structure proposed by the department will be put up before the state cabinet for approval shortly. We hope the government will reduce the duty and announce it before the March 30 deadline for sale of tender documents,”the source added.

In December last year, the department of mines and geology had invited bids from end-users for e-auction of 14 out of 51 ‘C’ category leases in Ballari and Chitradurga districts. These mines together possess an estimated 127 million tonnes (MT) of iron ore reserves.

The state-owned MSTC Limited will conduct electronic auction for allotment of these mines to end users. As per the revised auction calendar, the state government intends to hand over the letter of intent to successful bidders by May 26.

(Source: http://www.financialexpress.com/)