Amendment in Mining Act: A step towards building self-reliant India

Amendment in Mining Act: A step towards building self-reliant India

As part of the Government' efforts to usher in structural reforms in the mining sector, the Mines and Minerals (Development and Regulation) Amendment Bill, 2021 bill with amending some sections of the Mines and Minerals (Development and Regulation) (MMDR) Act, was passed in Lok Sabha and Rajya Sabha.

The Union Minister of Mines stated in one of his tweets that “With the Parliament passing Mines and Minerals (Development and Regulation) Amendment Bill, 2021, a stage is set for big-bang reforms in the mining sector. These reforms will make mineral mining sustainable and drive economic activities in the country”.This is major step in self reliant India, as the mineral sector contributes only 1.75 per cent to the country’s gross domestic product (GDP), with India importing minerals worth Rs 2.5 trillion annually, whereas for countries like Australia and South Africa, it is contributing 7 per cent. This comes against the backdrop of National Mineral Policy goals to increase mineral production by 200 per cent in seven years.

At present, only 10 per cent has been explored of India’s obvious geological potential area of 0.571 million sq km. The Minister further stated in realisation that “India is the fourth largest reserve of coal, still we import coal. According to an assessment by the Geological Survey of India, we have around 500 million tonnes of gold but still we import 983 tonne of gold every year, which is worth around Rs 229 lakh crore”. This will also meet the objective of generating employment. It will help generate approximately 55 lakh direct and indirect employment. The amendments suggested are with several effective steps including removal of the distinction between the captive and non-captive mines, allow captive mines to sell up to 50 per cent of the minerals excavated during the current year and will also help towards auctioning more mines. This article dealt with the various amendments done in the Mining Act, included with own views and reference taken from a few suggestions included from article PRS Legislative Research, Institute for Policy Research Studies dated March 17,2021 and various newspapers articles published on subject matter.

This provision will help in solving the dispute of PSUs and State government, for example between Karnataka and NMDC. Even in respect to reserved areas the PSUs shall pay additional amount over and above royalty as specified in Vth Schedule given above. This will generate additional revenue for the states and mine will be kept operational.

Removal of restriction on end-use of minerals: The earlier Act empowers the Central Government to reserve any mine (other than coal, lignite, and atomic minerals) to be leased through an auction for a particular end-use (such as iron ore mine for a steel plant and Limestone for Cement Plants etc). Such mines are known as captive mines.

The amendment in act states that no mine will be reserved for particular end-use.

Provision to sell mineral used for captive purpose: This is one of the important amendments, as the restrictions on the end use of minerals by captive plants have been relaxed, the captive mines (other than atomic minerals) may sell up to 50 per cent of their annual production in the open market after meeting their own requirements for plants associated with it. This means there is incentive now for people with captive mining leases to produce more.

The Central Government can increase further this threshold through a notification. For selling minerals in the market, the lessee will have to pay additional charges for minerals sold in the open market; this payment of additional amount is specified in the VIth schedule. Such rates vary from 50 per cent to 200 per cent on royalty for various minerals. For limestone following rates are fixed as additional:

Non-auctioned mining leases:

  • L.D. grade limestone (< 1.5 % Silica) – Equivalent to 200 per cent of royalty.

  • Other grades – equivalent to royalty payable

Auctioned mining leases:

  • Sale of mineral up to 25 per cent of annual production – Nil

  • Sale of Mineral >25 per cent and up to 50 per cent - equivalent to 50 per cent of royalty rates.

This will help in maximising the production from limestone mines, where the cement market fluctuation affects cement production, and optimising the productivity parameters. This reform helps in many ways. For example, manganese, which is a by-product of iron ore production, currently cannot be used by captive mines for anything at all and just piles up by the side of mines because companies cannot sell or refine it. This is a big change because while India imports oodles of manganese from countries like South Africa, Zimbabwe, its own manganese lies wasted.

Few cement companies own the coal mines also for captive purpose, it is also proposed to allow sale of 50 per cent coal production. This will facilitate the increase of coal production and help in optimising productivity of coal mines, while aiding in becoming self-sufficient in coal. This attracts additional amounts in terms of royalty on sale of coal.

Provisions for transfer of statutory clearances: As per the MMDR Amendment 2020, upon expiry of mining leases (other than coal, lignite, and atomic minerals), mineral concessions are leased to new lessee through auction under provisions of Section 8A (5) & (6). The statutory clearances issued to the previous lessee are transferred to the new lessee for a period of two years. The new lessee is required to obtain fresh clearances within these two years. While the amendment Act 2021 replaces this provision and instead provides transfer of statutory rights, clearances, approvals and licenses, that will be valid throughout the lease period or till termination of lease period to the new lessee. All clearance and licenses granted shall continue till the reserves have been mined and post the expiry or termination of the lease, will be transferred to the next successful bidder.

This is one of the important amendments brought in by enabling the transfer of various statutory clearances throughout the life of the mine. It says that “Notwithstanding anything contained in any other law for the time being in force, it shall be lawful for the new lessee to continue mining operations on the land till expiry or termination of mining lease granted to it, in which mining operations were being carried out by the previous lessee”. This is a non-obstacle clause therefore may prevail over other acts like FC act, etc.

This is really great help for the new lessee obtaining a lease through auction, as they have to pass through a long, tedious process for which already actions were initiated and obtained by the previous lessee. This will save a lot of energy, resources spent in obtaining these clearances throughout the life of a mining lease. This will help attract investors as under the previous regime, the new lessee had pre-embedded clearances for only two years, making it difficult to get fresh clearances within this time period.

Arrangement in case of failure to perform mining by the bidder: A new proviso to Rule 8B(1) has been introduced to allocate mining leases in cases where the bidders have not come forward to take up mining operations. This amendment provides grant of mining leases to a Government company or corporation for a period not exceeding ten years or till selection of new lessee through auction, whichever is earlier and such Government company or corporation shall be deemed to have acquired all valid rights, approvals, clearances, licences and the like vested with the previous lessee.

District Mineral Foundation (DMF): The Central Government by way of amendment brought out enabling provision to give directions regarding composition and utilisation funds by DMF. This amendment is in the best interest of the proper utilisation of the DMF. Of Course some States may feel interference of the GoI in its powers. As it can be seen that according to statistics Rs 45,000 crore have been collected under the fund of which less than half has been utilised till now. This amendment empowered the Central Govt to tell States how best to use these funds.

National Mineral Exploration Trust (NMET): NMET is now declared as a non-profit autonomous body. This is a good move since the funds allocation for NMET will be properly utilised. Further all the entities notified to take up mineral exploration (mostly PSUs and now private entities also) are entitled to funding under NMET. This is also a good move but with regard to funding to private entities there should have been some restrictions or otherwise there is scope for misuse. According to latest figures, the NMET (which is 2 per cent of mineral royalties) has accumulated Rs 2,300 crore in its corpus of which it has been able to use only Rs 308 crore. With this amendment, the Central Government now plans to empanel a bunch of private mining industry players, who will then be given incentives out of this fund to explore for more minerals in India.

Rights of certain existing concession holders and Applicants: In 2015, a major amendment in the Mining Act was done and an auction process was introduced for minerals like Limestone, Iron ore etc. At that time, all pending applications for Mineral concessions were cancelled except for existing concession holders and applicants, on the other hand it provided with certain rights provided for grant of PL from RP, ML from PL in respect of cases where RP or PL was granted earlier prior to MMDR Amended Act, 2015.

Now, these rights shall not be valid on the date of commencement of the MMDR Amended Act, 2021. Such persons will be reimbursed for any expenditure incurred towards reconnaissance or prospecting operations. There are many such cases pending with State Governments and in case the delay is on the part of the Government, such provision to make the applications lapsed may lead to litigation. The affected parties will approach the court for obtaining their rights. Instead, by making them for additional payment as per 5th and 6th schedules it would have been judicious. However, in all cases of lapse the RP/PL holders are entitled for reimbursement of expenditure in the manner prescribed by Central Government. This is through NMET funding.

Certain conditions resulting in lapse of mining leases post grant to lessee: The amendment states that a mining lease will lapse if the lessee:

  • is not able to start mining operations within two years of the grant of a lease, or

  • has discontinued mining operations for a period of two years. However, the lease will not lapse at the end of this period if a concession is provided by the State Government upon an application by the lessee.

The Amendment further adds that the threshold period for lapse of the lease may be extended by the State Government only once and up to one year period.

Grant of ML for notified minerals through auction: This section provides for grant of composite licence excluding the cases covered under Section 17A, minerals specified in Part-A and Part-B of the 1st Schedule and in respect to minerals do not vest in the Government. The word “minerals do not vest in the Government” is nowhere defined in the Act. On the other hand, the grant of composite license through auction in respect to minerals other than notified minerals. The procedure for notified minerals and non-notified minerals is almost the same.

Auction by the Central Government in certain cases: Under the MMDR Act, States have power to conduct the auction of mining leases and composite licenses (other than coal, lignite, and Atomic minerals). The amendment 2021 empowers the Central Government to specify a time period for completion of the auction process in consultation with the State Government. If the State Government is unable to complete the auction process within this period, the auctions may be conducted by the Central Government.

Similarly, in the event of other cases where due to noncompliance of such auction the mining lease or letter of intents get terminated or lapsed, the Central Government can fix a time limit for notification and in the event of non-compliance, the Central Government may proceed with notification. This is a view to pressurise State Governments in the matter of notifications and allocation of mining leases and this is an appreciable move, this is a support for the States to speed up mining in respective states. However, even if the Central Government conducts auctions for the mineral concession, all proceeds from it will go to the State only. Few States are protesting against this because they see this as an encroachment of their rights, including Jharkhand, Odisha, Chhattisgarh, and Rajasthan.

Non-exclusive reconnaissance permit has been omitted: This is completely omitted. This concept of introducing a reconnaissance permit is totally now removed from the mining Act.

Transfer of mineral concessions: This was a major hurdle in acquisition and mergers for industries. To make it simpler and helping mining leases pending with sick units to be transferred to new lessee. The earlier restrictions for transfer of mineral concessions are totally removed. As a result all the leases either granted before amended Act, 2015 or after the Act are transferable, without any applicable fee. The transfer chargers are also totally removed.

Reservation of areas for purpose of conservation: There is a period of five years specified for making use of the facility by PSUs reservation by amending sub-section 2A of section 17A. This provision enables State Governments not to keep the areas indefinitely under reservation and such reservations lapses after five years in case no mining lease will be granted. In respect of cases covered by previous reservations already held, one-year time is given from the date of this amendment. The State Government may relax the period by One year on the request of PSU. This is a good move.

Effect of MMDR amendments

Mining has been considered as a major industry by this Government and the new amendment has been focused to target to achieve a higher part of GDP from the same. The initiatives have been taken in the right spirit to boost the economy with the help of the mineral industry. It has few steps still to be incorporated, as we all know that not even 10 per cent of the mineral wealth in India is fully explored. Therefore, expecting quick results from this sector having neglected in the past many years may be a bit difficult. The expected results will be visible at a later stage. The result of these amendments must be reviewed frequently and necessary measures to fill the gap must be followed by way of constituting a High Level Expert Committee by involving stakeholders and senior bureaucrats and professional mining bodies.

The reforms with this amendment will be a milestone in preventing hoarding of minerals, as the additional production can be sold in the market, the incentive in occupying more and more resources is not profitable. Hoarding is quite an issue, currently, and data suggests that of the 2,904 mining leases, 1,900 that is two thirds are lying unused, non-working or unexploited. Even PSUs have 297 functioning leases right now of which 199 mines are non-functional and non-working.

This amendment also mandates that whoever takes a mining lease has to start producing within three years of taking such lease otherwise the lease will be taken over and the mine will be re-auctioned.

ABOUT THE AUTHOR:

Bhanu Prakash Bhatnagar is B.E. Mining Engg. (Gold Medal), FCC, MBA, working as Head Mining, Adani Cementation, Ahmedabad. He has more than 29 years’ experience in overall mine management including acquisition of mineral resources through auction process, new mine development, production planning, mine operations and quality management for large opencast limestone mines. He had previously worked with cement companies like ACC-Holcim, Reliance Cement and overseas mining experience.

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