Mining reforms: Industry gives a thumbs up, environment concerns remain

Under the proposed reforms, captive mines would be allowed to sell 50 per cent of the minerals excavated in a year

Though the fine print and official confirmation of the mining sector reforms the Union Cabinet approved on Wednesday are yet to come, industry players are elated at the steps taken. There are, however, concerns over implementation at the state level and the environmental impact of mining.

“Directionally, it is a good set of reforms. But since implementation is with state governments, the key lies in how each state executes it at its end. Even today, for a final go or no go, in terms of approvals, it takes about three-four years, and this scares away investors,” said Ritabrata Ghosh, assistant vice president (corporate ratings and industry research) at ICRA.

The Cabinet is learnt to have approved a package for the mineral mining sector that would entail amendments to three existing Acts, pricing formula for minerals, exploration of mines, and several taxes and duties levied on mining. Officials said this is expected to boost production and private investment in the sector.

The Centre has removed distinctions between captive (self-use) and merchant (commercial sale) mines. It will also amend the Mines and Minerals (Regulation and Development) Act, 1957 (MMRDA). Government officials said the amended MMDRA will be placed before the Parliament in the upcoming session.

A senior executive with a primary steel producing company said removing the distinction between merchant and captive mines seems like a good move for corporates. “It will allow captive owners to sell in the market too. But we would wait for an official announcement,” he said.

Under the proposed reforms, captive mines would be allowed to sell 50 per cent of minerals excavated in a year. The Centre has also proposed a 50 per cent rebate in the quoted revenue share for the quantity of mineral produced and dispatched earlier than scheduled date of production. That apart, it could amend sections 10A(2)(b) and 10A(2)(c) of the MMDRA to unlock more mines for auctioning. This would entail Centre auctioning pending mining leases as well. R K Sharma, secretary general, Federation of Indian Mineral Industries (FIMI), said, “It is a move in the right direction. This will lead to more resource development as auctions are made attractive. FIMI welcomes this move.”

But as more mines come under the hammer, there are concerns that the environmental and social impact of mining would increase significantly.

Kanchi Kohli, senior researcher at the Centre for Policy Research, said with the shift from captive to commercial use, without any end-use restrictions, it will be virtually impossible to regulate footprint, as minerals will be transported to places wherever mine developers find demand and higher rates of returns. “Environmental laws are designed to lay down conditions based on disclosures made prior to mineral extraction so that approvals can be granted or rejected based on the level of impacts. With the new set of proposed changes, this will be impossible to predict or monitor and the impact areas are likely to constantly shift and evolve. It is clear that the present amendments have not undergone an evaluation of their environmental viability or social consequences,” she said.

The Centre has also proposed to reallocate non-producing blocks of public sector utilities to increase the number of mines into production. It is learnt that the Centre would also ask PSUs to facilitate production from mines that were auctioned in March 2020 but have not started production even after transfer of valid rights, clearances, etc.

As part of the reforms, the Centre will amend the Indian Stamp Act, 1899, in order to bring uniformity across the States in calculation of stamp duty. The Minerals (Evidence of Mineral Contents) Rules, 2015, will also be amended for inclusion global exploration standards.

“With such changes in commercial mining and revenue sharing, the measure of mining efficiency will shift from total tonnage of mined ores to profit/hour of mining operations as a leaseholder or as nation,” said Saurabh Bhatnagar, partner and national leader, metals & mining, EY India.