Category: Mining

Government should make suitable amendments in MMDR Act

The Hitvada | B K Shukla | 28-04-2021

Recently the Central Government amended The Mines and Minerals (Development & Regulation) Act-1957, a parent statute, which contain regulations for grant of mining leases in India. Reasons cited for amendments in the Act is to boost domestic production and to reduce import of minerals but it does not seems to achieve the object. 1. “Mining operation” occurring in Section 4A of MMDR Act-2015 is now replaced by “production and dispatch”, as result Lessee has to start production and dispatch of mineral from lease area within two years from date of executing mining lease agreement. This period of two years could be extended by maximum period of 1 year, if lessee satisfied the Government that reasons for not producing and dispatching the mineral from his mine were beyond his control. Thus after period of three years, mining lease will be lapsed.

Lapsed lease could be revived, only once during entire period of lease, if lessee satisfies the Government that reasons for not producing and dispatching the mineral from his mine were beyond his control. It is pertain to note, within above period of time, lessee has to procure all “Statuary Clearance” like environment clearance, consent to operate the mine, consent of occupier of land, Forest clearance etc. and thereafter lessee have to install plant and machinery, construct road within mine and remove over burden of mine and to continue such extraction and dispatch the mineral from the mining lease without interruption during entire period of mining lease, irrespective of market conditions, lock-down, strike, labour problems or directives of authorities not to undertake mining operation. Government should examine and consider the reasons for which the lessee could not start or continue mineral production in the mine. Shortage of minerals in the domestic market cannot be overcome by lapsing existing mining leases and allotting same, through auction, to others.

  1. Tenders for allotment of minerals blocks, through auction, were invited by the State Government from “specified category of bidders” who undertakes to consume 100% of minerals in their own industry (Captive use). Such successful bidders were not allowed to sale minerals in open market. Through amendment in Section 8 and 8A of Act, the Central Government now permit such lessees to sale up to 50% minerals so produced from auctioned mine in open market, on payment of additional amount to the State Government. Had there been this condition in the tender document to sell 50% of annual production in the open market, a number of otherwise eligible applicants would have participated in the auction process and the State Government would have fetched a better premium on allotment of such mineral blocks. Subsequent relaxation to sell mineral being contrary to terms of tender documents is therefore bad in law. According to the Ministry of Mines, one of the reasons for this amendment is to make available in open market huge quantity of mineral, extracted during the last 50 years, stocked unutilised at mine head of PSU. It is matter of record that this unutilised stock of mineral is of low grade (mineral reject) therefore same could not be utilized in mineral industries. Amendments in these provisions of law will help lessees (who before amendment were not allowed to sale their mineral in open market) to sale their high grade mineral in open market. Moreover such lessees are required to pay lesser additional amount to the State Government (at the rate zero to 50% of royalty payment) in compare to lessees, who were allowed to sale the mineral in open market, (at rate of 100 to 200% of royalty payment).
  2. The Government acknowledges, it requires longer period of time for procuring environment clearances, consent to operate the mine from PCB, Forest clearances, consent of occupier of land to enter piece of land for undertaking mining operation (in some cases, such clearances are not granted even after 10 years) and therefore by amending Section 8B of the Act, validity of such statuary clearances, if already procured by previous lessees, will be extended to new lessees. Since provisions of MMDR Act and provisions for grant of above statuary clearances are govern by different statutes and separate ministries / departments, enforcement of this amendment may not help new lessees in undertaking mining operation without acquiring such clearances individually. If the Government acknowledges it is beyond control of applicant / lessees to acquire above statuary clearance in short period of time it is unfair on part of the Government, to declare the entire bunch of pending applications as lapsed (for not procuring said clearances by applicants in time), by amendment in section 10A of Act.
  3. By deleting Sub-Section (6) of Section 12A, the Government has now allowed to transfer mining leases, acquired otherwise through auction, by lessees, in favour of third parties (subject to additional payment to the State Government, mentioned in the “Sixth Schedule” of Act). Such lessees are at liberty to charge premium, from prospective transferee, for transfer of mining leases. This amendment will boost trading of mineral concessions 5. Long pending suggestion of mining industry for appropriate amendment in MMDR Act: Since the Central Government is authorised, under provisions of the Constitution, to take control of regulation and development of mines and minerals in India, suitable amendments should be made in MMDR Act authorising the Central Government to obtain all clearances required for undertaking mining operation, before any mineral block is made available for auction. The author is Mining Law Consultant and can be contacted at [email protected]

What lies beneath: Mineral mining in India

The Telegraph | 27-04-2021

The gap between ownership and control over minerals has been at the core of many discussions on resource federalism in India

India produces 95 metallic, non-metallic, fuel, atomic and minor minerals. The share of mining in India’s GDP is 2.6 per cent but its contribution to the economy is greater as it provides the material foundation for other sectors. India has a detailed set of mining-related laws and rules for minerals exploration, extraction and incidental activities. As per the Constitution, the development of minerals is within the legislative jurisdiction of states as well as the Union. But the shared competence over minerals has often been a subject of contention rather than cooperation.

The Mines and Minerals (Development and Regulation) Act is the main legislation governing the minerals sector in India. Notable amendments were made to the Act in 2015 which changed the minerals concession system from a ‘first-come-first-serve’ basis to competitive auction and included the District Mineral Foundation.

In March 2021, the MMDR bill, 2021 was passed in Parliament through a voice vote despite demands for the bill to be referred to a Select Committee. The bill aimed at increasing and expediting exploration and auction of minerals and coal. It enables the Centre to intervene in matters such as mineral auctions, end use, utilization of funds and so on. As per the existing Act, state governments have the power to notify an area for the granting of mining lease. This lease is granted through competitive bidding. The 2021 amendment curtails the power of the states by adding a proviso that where a state government has not notified the area within a stipulated time the Centre can notify the area for the granting of mining lease. The stipulated time is going to be fixed by the Centre as well. The overall scheme of mining regulation, whereby states are the owners and, therefore, the granters of a lease, stands changed with the Centre empowered to auction mines in states.

Another domain where the Central government has expanded its reach is the DMF. When the DMF was included in the MMDR Act, it was hailed as a historic move to ensure decentralization and address social sustainability in the mining sector. The DMF is a non-profit trust to “work for the interest and benefit of persons, and areas affected by mining-related operations” in any affected district. Under the Act, any DMF is to be constituted, established, and assigned functions only by the state government. The 2021 amendment provides that “the Central Government may give directions regarding composition and utilisation of fund by the District Mineral Foundation.” The whole premise of the DMF was decentralized decision-making: the new provision attempts to reverse that.

The gap between ownership and control over minerals has been at the core of many discussions on resource federalism in India. Irrespective of the concession regime in place, states have always demanded greater autonomy in decision-making related to minerals. Since minerals comprise a major share in the revenue of resource-rich states, they want to defend their fiscal powers with respect to minerals. Granting of lease and licence for mining and prospecting is a prerogative of states, albeit as per the rules laid down by the Centre. The MMDR 2021 amendment has stretched the Centre’s powers by allowing it to auction mines when the states have not notified and auctioned a mine within the period specified by the Centre.

Taxation on mineral rights is a subject within state jurisdiction. However, the scope of the Central law (MMDR Act) is so expansive that it leaves little room for states to levy any additional charge on minerals. Even the royalty rates — the primary mineral revenue accruing to states — are determined and notified by the Centre.

The DMF’s large corpus of Rs 41,650 crore has attracted interest from every level of the government. The DMF was introduced for specific local purposes and beneficiaries but its fund has also faced centralization partly due to instances of inaction and misuse in states. The issues of under-utilization and misuse must be addressed by correcting procedural lapses, not by transferring the power to the Centre.

The 2021 amendment facilitates the Centre’s hold on the important and strategic mining industry but also the mineral resources and wealth of states. There are pros and cons of centralized and decentralized governance in mining. Central oversight or guidance can be instrumental in addressing some of the problems associated with decentralization, such as vested interests, corruption, inadequate capacity, information flows and so on. A decentralized governance of natural resources, including minerals, ensures that those affected by mining and those dependent on mining for employment or revenue are involved in the decision-making and revenue stream around minerals. It also gives the local governments an opportunity to voice concerns that are local or regional in nature. However, the potential of either strategy has seldom been utilized optimally.

This is not the first time that Centre-state issues are emerging in mineral regulation. This shall not be the last time either. There have been several such amendments, ordinances and rules in the past and the sector has often been a fertile ground for contention for resource federalism. Since the issue is unlikely to be settled or buried in the near future, it is imperative that the amendments do not exacerbate the conflict between the Centre and the states but help resolve the limitations in the jurisdiction of each and give effect to cooperative federalism.

Haryana Cabinet nod to policy for sale of shops/houses by municipal bodies

The New Indian Express | April 22, 2021

TO ENCOURAGE monetisation of locked properties of municipal bodies, Haryana government has made a policy for sale of shops/houses by municipal bodies, where possessions of such properties is with entities other than the municipal bodies or its predecessor for a period of 20 years.

The state Cabinet chaired by Chief Minister Manohar Lal Khattar on Thursday approved the policy, besides taking several other important decisions.

“There are a large number of properties in the shape of shops/houses which, though are presently owned by municipal bodies, are in possession of entities/individuals other than the municipal bodies for a period of 20 years or more. The municipal bodies find managing such properties difficult, particularly in view of the fact that the ownership/possession of such properties have, in several cases, changed hands on numerous occasions and the municipal bodies lack authentic documentation in this regard. Furthermore, several municipal bodies are unable to even recover the rentals of such properties,” the state government spokesperson said.

“On careful consideration, it was decided to transfer the ownership of these properties to such persons who are currently in justified possession of these properties. As per the policy, the shops/houses and other properties of municipal bodies which have been assigned to persons (other than the municipal bodies) for a period of 20 years or more shall be converted in the properties belonging to such of the persons, or shall be transferred in the ownership possession of such persons and also to sale such properties to such persons. This policy will not only strengthen the financial position of municipal bodies but will also grant small shopkeepers and other pattedar to the ownership of the said properties under their possession,” the spokesperson added.

Cabinet also approved the policy for transfer of municipal lands by charging consideration. “This policy would apply on the categories of properties/persons, where due to exigencies or otherwise, no approach road is available to the land owned by private individuals or entities.

In such cases, where no approach road is available to land owned or, as the case may be, held on lease for a minimum period of 30 years or more, by private individuals or entities and it is possible to provide approach access through the land owned by the respective municipal body, the respective municipal body shall provide land for being utilized for the purposes of constructing approach road (rasta) against the consideration equal to the market rate of the said land which is proposed to be transferred, provided that such transfer cannot be claimed as a matter of right and the decision of government, purely on the discretion of the government, on all aspects related to the transfer including shall be final,” the spokesperson added.

Other key decisions

Policy for homeless abandoned and surrendered children

Cabinet approved the Homeless Abandoned and Surrendered Children Rehabilitation Initiative Haryana (HARIHAR) policy for providing employment, educational and financial benefits to abandoned and surrendered children who have completed the age of 18 years from the childcare institutions of the state and were abandoned before the age of 05 years or surrendered before the age of 1 year.

The policy shall cover children admitted to childcare institutions before the age of 5 years (as abandoned) and before the age of 1 year (as surrendered) and who have completed the age of 18 years in childcare institutions, upto the age of 25 years, and who possess the required qualification.

“Also, to provide free school and higher education including technical education, skill development and industrial training and after care stay, rehabilitation and financial assistance upto the age of 25 years or marriage, whichever is earlier and one time interest free loan for purchase of a house in Haryana to abandoned and surrendered children who were admitted to childcare institutions before the age of 5 years (as abandoned) and before the age of 1 year (as surrendered), who have completed the age of 18 years while living in childcare institutions and have obtained admission in such courses,” the spokesperson added.

“In case an abandoned and surrendered beneficiary in after care gets a job on compassionate grounds, his/her salary will be deposited in a fixed deposit account and withdrawal will be allowed after attaining the age of 25 years or marriage or opting out of after care, whichever is earlier by such beneficiary. Such person will get upto 20 per cent salary advance from his/her own salary per month for his/her living expenses and will not be eligible for financial assistance. They will be provided one time interest free loan for purchase of a house in Haryana at the time of marriage,” the spokesperson added.

Uninstallation of toll

Cabinet approved uninstallation of toll on Punhana to Lakarpur, Sri Singalheri, Thenkri, Jalalgarh, Ranota-Manota upto Rajasthan border at 12.65 km in Nuh district.

Mining lease/contract rules amended

Cabinet approved amendments in the ‘Haryana Minor Mineral Concession, Stocking, Transportation Minerals and Prevention of Illegal Mining Rules, 2012’ and ‘Haryana District Mineral Foundation Rules, 2017’.

“As per the amendments, in case of mining lease/contract being granted through competitive bidding process, the highest bid received shall become the ‘annual dead rent’ or annual contract money payable by the lessee or contractors respectively. As per existing State Rules [Rule 9(3) and 22(2) respectively of the State Rules, 2012, the same is increased at 25 per cent on completion of each block of three years. The department proposed that rate of increase after every 3 years shall be reduced to 10 per cent as the existing rate is too high. Also, the request of mining contractors/lease holders seeking surrender [unconditional request] of lease/contract will be allowed subject to the condition that they submit application with no dues certificate up to the calendar month. The surrender will be allowed on payment of surrender fee equal to one-month dead rent/contract money. However, such surrender fee would be equal to two months dues in case applications are submitted during June 1 to September 15 (monsoon period). No application for surrender of part area of the mineral concession shall be maintainable. The director shall pass orders accepting the surrender request within 30 days. In case no decision is communicated, the application for surrender shall be deemed to have been accepted on expiry of 30 days of submission of the application. Also, the minimum distance from the source of mineral (mine) for grant of MDL be increased to 5 km for raw mineral from mines, to reduce the possibility of stocking illegally mined mineral. In cases of washing plant and screening plant, provision for grant of MDL based on NOC/CTE of the HSPCB,” the spokesperson said.

Mineral auctions: How fair is the game?

Financial Express : April 22, 2021 || Rajesh Chadha & Ganesh Sivamani

The Mines and Minerals (Development and Regulation) Amendment Act, 1957, was amended in 2015 to address the Supreme Court’s three major concerns in the mineral asset allocation process – transparency, fairness, and objectivity – and introduced a system of auctions.

India has a great mineral potential yet to be explored and large mineral-bearing land available for mining. However, the allocation of national resources has been a challenging exercise in India. We have seen this difficulty in the case of the telecom spectrum and coal blocks. To this end, The Mines and Minerals (Development and Regulation) Amendment Act, 1957, was amended in 2015 to address the Supreme Court’s three major concerns in the mineral asset allocation process – transparency, fairness, and objectivity – and introduced a system of auctions.

With some oddities arising from the new auctions regime and the issue of ensuring mineral security a pressing concern, the time has come for us to rethink whether there can be alternative ways of allocating mineral concessions while maintaining the tenets laid down by the Supreme Court. Or, can the existing auctions system be designed differently?

A total of 103 auctions have been executed since 2015. Many of the auctions, particularly iron ore mines, have had high bids, even higher than the estimated value of resources. On average, the estimated auction premium cumulated over 50 years amounts to about 86% of the value of the estimated resources. Additional payment commitments on royalties, District Mineral Foundation (DMF) funds, and National Mineral Exploration Trust (NMET) funds are about 17% of the value of the estimated resources. Hence there is a total commitment of 103% of the value of the estimated resources, which does not include corporate taxes, forest and wildlife protection payments and stamp duties.

Furthermore, there has been a shift in the profiles of mining companies, from merchant miners (those selling minerals on the market) to captive miners (those with downstream plants to consume the minerals). Such a change might lead to less-than-efficient usage of the mineral resource acquired through auctions and induced general equilibrium externalities. The recently passed MMDR Amendment Act 2021 seeks to level the playing field between captive and merchant miners and public sector and private miners, which is a welcome step.

High bids unsustainable in the long run

Despite being aware of the impact of high bids on their operations, captive mining companies are amenable to bidding more than the theoretical value of the mineable resources as it would assure them of mineral supply. These higher costs can be absorbed in their downstream operations, and, in the case of steel production, the cost of iron ore constitutes only 10% of the manufacturing cost. However, this system is not sustainable, and the consequence of higher costs of raw materials would hurt the public, who would have to pay more for end products such as steel and concrete. The results of the auctions would be detrimental to the country’s interest.

The auction system also raises some questions on mineral security in India, particularly with iron ore. There have recently been 24 auctions of previously operational (brownfield) iron ore mines in Odisha (with bids ranging from 90%–104% of mineral value), yet a year later, only ten mines have commenced operation, and at less than a third of their capacity. While more auctions and time will enable the sector to return to its previous output, India may once again, in the short-term, become a net importer of iron ore despite being rich in resources.

The auctions regime has been extolled for bringing large revenues to state governments, but the high bids are unsustainable to maintain, and states may not receive these notional earnings. This regime would also deter foreign investors, who would prefer jurisdictions with lower taxation. There is also the question of the impact on local communities’ welfare if mining companies have fewer resources available to invest in their development due to the high auction bids commitment.

Some changes to the system can help resolve these issues. For example, it would be useful to have an auction calendar with multiple blocks available for bidding at a set time annually, which would allow companies to plan for their mineral security needs. Additionally, there could be a relook at the royalty system, which is an additional payment on top of the auction commitment.

We should be mindful of the importance of deep-seated minerals in India (such as lead, zinc, copper, diamond, and gold) and how a different policy regime would encourage further exploration and production. If more exploration had been done earlier, including deep-seated minerals, there would have been more mining blocks on offer, and oddities with auction bids could have been avoided.

The Centre for Social and Economic Progress (CSEP) held a webinar on April 15, 2021, to discuss India’s mineral auction regime and its impact on government revenue, mining operations, and the national economy.

Development through mining a major poll issue in Rajsamand

The Hindu | April 16, 2021

Congress’ Tansukh Bohra pitted against BJP’s Deepti Maheshwari for the seat in upcoming Rajasthan Assembly by-election

A robust development of infrastructure, matching with the nearby temple town of Nathdwara, through the mining sector and an effective utilisation of the District Mineral Foundation Trust (DMFT) connect the local populace with employment generation in Rajsamand. These are also the key factors during the campaign for the upcoming Assembly by-election here.

The southern Rajasthan district has about 1,500 quarries of marble, granite and minerals and their owners contribute ₹150 crore annually to the DMFT for the benefit of areas affected by mining-related operations. People’s resentment over under-utilisation of DMFT funds and diversion to other towns has prompted the ruling Congress to field mining industrialist Tansukh Bohra as its candidate.

On the other hand, Bharatiya Janata Party (BJP) candidate Deepti Maheshwari expects to carry forward the legacy of her mother, the late Kiran Maheshwari, who was elected from the constituency thrice between 2008 and 2018 and was a Minister in the Vasundhara Raje government. The BJP also hopes to get “sympathy votes” with the Maheshwari family member being in the fray.

‘People will select BJP’

BJP MP from Rajsamand Diya Kumari, camping in the town to address Ms. Maheshwari’s election rallies, told The Hindu that the Union government had been “responsive” to the demands raised in the constituency and had been doing its bit in different sectors. “The people here will once again repose faith in BJP. They are fed up with the Congress government, which has no clear policies or intentions,” she said.

The Congress has made an attempt to influence the local mine owners and workers with the credentials of Mr. Bohra. The mining baron, who enjoys a clean image, has been involved in philanthropic activities. Nitish Surana, managing Mr. Bohra’s election office, said the Congress candidate had made large contributions to the government hospitals and built several school buildings, besides developing the amenities at cremation grounds.

“There is no anti-incumbency wave in Rajsamand, even though the BJP has been traditionally winning this seat. Much will depend on how the Congress projects itself and influences the voters,” Ajay Singh, a youth from the nearby Kelwa village, said. Interestingly, the Congress has asked Mines & Petroleum Minister Pramod Jain to camp in the region till the polling day on April 17.

The Congress has also assured the voters that it would formulate a plan to develop the Chittorgarh-Rajsamand-Kumbhalgarh triangle as a new tourism circuit and widen the Khara feeder to bring more water to the historic Rajsamand lake, built by erstwhile Mewar ruler Rana Raj Singh in 1660.

Controversial remarks

Some controversial remarks made by senior BJP leader Gulab Chand Kataria, who is also the Leader of Opposition in the State Assembly, about legendary warrior king Maharana Pratap during the poll campaign earlier this week led to an embarrassment for the party.

As the Rajput outfits expressed an outrage, Mr. Kataria tendered an apology twice to the electorate.

Among the total of 10 candidates contesting in the constituency, the BJP faces a challenge from its rebel leader Suresh Joshi, who has entered the fray as an Independent in the name of protecting the honour of the region.

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