After commercial auction success, govt plans further mining reforms

Private sector likely to get entry into mineral exploration

After running commercial coal mining auctions, the Union government is now going to come up with a comprehensive package of reforms in the non-coal mining sector.

This would include offering mines for merchant sales and not linking them to production for captive use.

It would also allow existing captive miners to sell surplus minerals in the open market. Besides, the private sector would be allowed to access money from the National Mineral Exploration Trust (NMET) to do preliminary exploration.

The trust receives around Rs 800 crore annually from royalty but the money can be accessed only by public sector undertakings (PSUs).

A senior government official told Business Standard the proposals would be vetted by the Prime Minister’s Office once inter-ministerial discussions were over.

“We have brought reforms in the coal sector and we want to bring them in mining as well. But implementation and auction of non-coal mines is with the states. In 40-45 days, we will come out with other mineral reforms,” Union Minister of Coal, Mines and Parliamentary Affairs Pralhad Joshi had last week told the paper.

The Union government earlier this year removed captive use for auctioning coal mines. Though it is in favour of removing this criterion for other minerals, the legal provisions currently leave it to states to identify mines for auction.

Auctioning mines was introduced through an amendment to the Mines and Minerals (Regulation and Development) Act (MMRDA) in 2015.

Officials said the new measures were intended to give liberal terms to existing captive miners as well to move towards a vibrant market. These would include allowing easier transfers of mining leases when the lessee companies are sold.

At the same time, the timelines and monitoring of those for starting production would be tightened so that there is no delay.

Currently, about 52 blocks auctioned under the Act have not started production due to various reasons.

“There are only internal timelines currently but states should have intermediate timelines and for that some of the systems put in place for coal will be transferred to these minerals as well,” said an official.

The ambiguity surrounding the levy of stamp duty – whether it should be on the value of the land or on the value of the mineral – would also be removed through uniformly setting rules, he added.

The current rules of the NMET, set in June 2015, would also be changed, allowing private sector entities to undertake exploration. Lease holders are mandated to contribute 2 per of the royalty to the NMET. This fund is used for intensifying mineral exploration to bring mineral deposits to a mineable stage.

Only five notified central public sector undertakings currently carry out prospecting operations without obtaining the prospecting licence. These are Rashtriya Ispat Nigam Ltd, Steel Authority of India Ltd, National Mineral Development Corporation, Kudremukh Iron Ore Company, and Manganese Ore (India) Ltd.

Geological Survey of India (GSI), primarily engaged in regional exploration, is entrusted with taking up detailed mineral exploration at G2 and G1 levels of UNFC (UN Framework for Classification for Resources) from 2015-16 onwards while Mineral Exploration Corporation Ltd has been strengthened to carry out exploring the deposits identified by GSI.

The entry of private entities is expected to give a boost to exploration and make NMET function on the lines of the Directorate General of Hydrocarbons, said an official.

Unlike coal and certain other major minerals that are managed by the Union government, minor minerals are regulated by states.

According to section 3(e) of the MMDRA, “minor minerals” mean building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral the Central government declares “minor”.

Major minerals are those specified in the first schedule of the Act though there is no official definition. Hence, whatever is not declared a “minor mineral” is treated as major.

The Centre notified 31 minerals as “minor” in February 2015.

This increased the number of “minor” minerals from 24 to 55.

It will empower states to frame their own rules for grant and regulation of these 31 minerals. States are allowed to prescribe the method for granting mineral concessions, rates of royalty, and contribution to the district mineral fund for these minerals.