Decoded: Why the industry is unhappy with amendments to mining law

On March 19, the Lok Sabha passed the Bill to amend the Mines and Minerals (Develop­ment and Regulation), or MMDR, Act. Coal and mines minister Pralhad Joshi said the amendments would create 5.5 million jobs and open the mining sector to private players who would bring in state-of-the-art technology. So, what are these amendments and why is the industry not happy about them?

What are the new amendments to the MMDR Act?

The MMDR Act was enacted in 1957 to regulate mineral mining in the country. It has since been amended from time to time to me­et the needs and demands of the mining industry. The latest amendments come with the Bharatiya Janata Party-led central government opening up key sec­tors for greater private investment.

Speaking in Parliament, Joshi said, “The contribution of the mining sector to the GDP is only 1.75 per cent.” One per cent growth in the mining sector, he said, generates almost 100,000 jobs in direct employment and 500,000 in indirect employment. “India produces minerals worth Rs 1.25 lakh crore per year and imports minerals worth Rs 2.5 lakh crore per year,” he added.

The first notable amendment is in Section 10A (2)(b) & 10A (2)(c) of the Act and pertains to the permits and leases given to mine owners. Under this, the existing pending leases for mining would be auctioned as well.

This also covers mines where a prospective mining licence was given but the mine was caught in legacy, legal or regulatory issues. All such pending mines would also be auctioned. And so will non-producing mines allotted to gover­n­ment companies. If any government company wants its mining lease extended, it would have to pay for it. All this has been done to increase the mines to be offered under auction.

Another reform is the distinction between captive (self-use) and mer­chant (sale in open market) mines. More mine owners would be able to sell the excavated material in the open market. Captive mines will be allowed to sell up to 50 per cent of the minerals excavated during the current year.

What about the amendments to allied Acts?

As part of the mining reforms, the Centre will also amend the Indian Stamp Act, 1899, to bring uniformity across states with respect to the stamp duty levied on mines. The Minerals (Evidence of Mineral Contents) Rules, 2015 (MEMC) will be amended to include globally accepted mine classification standards such as CRIRSCO, JORC, etc, as also the latest UNFC standards.

With a lot of existing mine allocations getting cancelled, the Centre has also proposed to compensate for the same. The compensation would come from the National Mineral Exploration Trust (NMET). NMET receives Rs 800 crore annually via the royalty paid by mineral mine owners. The Bill proposes to make NMET an autonomous body in order to boost exploration.

Why have the amendments been brought in now?

Boosted by the success of the opening up of commercial coal mining, the Centre is now hopeful of inviting significant investor interest in mineral mining as well. The Centre amended the Coal Mines (Special Provisions) Act, 2015, in May 2020 to open coal auctions for non-mining, MSME and foreign companies. The Centre awarded 19 coal mines to private companies for commercial mining and sale in November 2020.

The move is also aligned with the latest push for Aatma­nirbhar Bharat under which manufacturing in India would be incentivised. And the Centre is of the view that with more foreign companies coming in, the sector will see the latest technologies which, in turn, will increase efficiency in mining.

So then why is the mining industry not happy?

In a note on the mining reforms, the Federation of Indian Mineral Industries (FIMI) said: “The cancellation of saved cases under Section 10A(2)(b) implies that Government of India has faltered on its Act and is bound to lead to irreparable loss of investors’ confidence in Indian mineral sector, apart from multiple litigations in Courts resulting in such an exercise of the Government being rendered completely futile.”

FIMI is of the view that cancellation of existing mining licences would hurt the sector, and so the Centre should rethi­nk this. Rather than cancel them and offer them for auction, the federation said the Cen­­tre should ease the mining process for existing delayed mines.

In 2015, the Centre had initiated the auction of mineral mines. According to FIMI data, of the 103 mines that were auctioned, 61 were Greenfield blocks and the remaining 42 were operational Brownfield mines. FIMI said after five years, not even one Greenfield block has come to a stage of mine development or production.

Though it has supported the amendments, the Indian Steel Association also wants the government to consider protecting the rights of the licence holders who have already completed prospecting and have filed the applications with the states for mining lease.