The only people who seem to be happy are the beneficiaries of captive mining, a practice that has distorted the growth of the mining industry in India, prevented the development of world-class mining companies in our country and has off and on resulted in mining scams, the latest being the one on coal block allocations under the United Progressive Alliance government. Besides, since the leases of the captive miners will expire at the end of the prescribed period of 15 years - five years for non-captive miners - the focus of the existing leaseholders will now be on extracting as much good quality ore as possible without so much as concern for scientific mining or environmental sustainability.
There are some provisions in it that are welcome: allowing transferability of mineral concessions, increasing maximum areas for prospecting and mining leases and a few procedural improvements in the disposal of applications and revision cases. However, two of the core provisions of the amending law appear flawed and are likely to create implementation nightmares.
One is the provision to grant prospecting licence-cum-mining lease through auction. This proposal no doubt, is a direct consequence of the Supreme Court's judgment in the 2G spectrum case where the Court observed that the state was "duty-bound to adopt the method of auction" while allocating natural resources. It would have been more appropriate to have explained to the apex court the difficulties inherent in this approach.
First, one participates in the auction of a property when its value can be estimated, not for exploring a mineral where the extent and value of the deposits lying underground are yet to be ascertained.
Then there are inherent uncertainties associated with the discovery and exploitation of mineral deposits and very low success ratio of discovery becoming a profitable mine. Also, mineral exploration requires long-term engagement of professional mining companies (prospectors) involving sophisticated technology and large capital. Sometimes, three or four prospectors work in an area before the reserves are proved and someone decides to develop the mine.
In these circumstances, opening mineral resources to auction may help speculative (but unprofessional) bidders who seek to realise maximum profit at the cost of scientific development of mineral deposits and environmental sustainability.
It is for these reasons that no major mining nation uses competitive bidding or auction for allocating mineral resources.
Additionally, in our country, most minerals found near the surface and easily extractable - the amending law's 'notified' or bulk minerals like iron ore, manganese and bauxite - have been explored and are now being exploited. The priority in exploration now has to be on base and precious metals - such as copper, zinc, lead, nickel, gold and platinum-group of minerals - lying in difficult terrain and greater depth below the surface. Many of these metals are essential to a range of new and 'green' technologies, in greater demand worldwide. The government and semi-government agencies that mostly do exploration (of surface minerals) in India do not have the resources, expertise and advanced technology required for the purpose. The capital-intensive nature of developing new sites involves great risk, which only professional (foreign) companies can undertake; and their exploration is focussed on specific mineral commodities with priorities determined by the price trend of minerals.
The auction method is inappropriate for these companies and their explorations. To claim that their concerns can be overcome by production or revenue sharing is to betray a lack of basic knowledge of the nature of mineral exploration.
The top exploration destinations in the world today have been Latin America, Africa, Australia and even south-east Asia. India is skipped and does not figure in the list because of its governance and policy hassles. Bureaucratic initiatives like setting up a National Mineral Exploration Trust in order to promote exploration is not likely to improve matters.
In this scenario, it is somewhat fanciful to expect that professional foreign mining companies will come into the country for mineral exploration. After all, even more than two decades after the mining sector was opened for foreign investment no worthwhile foreign company (except Rio Tinto) has come into India; neither has much exploration work been done. In fact, no new mineral deposit has been discovered in our country over the past 40 years.
The second provision of the amending law is the proposal to have a government-sponsored District Mineral Fund for carrying out development programmes for local communities in mining areas. The creation of alternative assets in the form of physical and social infrastructure in place of the damaged natural capital (minerals) of the community is the miner's obligation and not that of the government.
The miner's responsibility is limited to his project area and its immediate environs, not for the entire district where local development work must be undertaken by public agencies. A district-approach for pooling miners' contributions may lead to the diversion of funds for expenditure in non-mining areas of a district and for non-essential projects. The usual evils of local bureaucracy are likely to bedevil the whole operation. Government officials rarely visit remote areas where mining enterprises work and have institutional infrastructure to execute development work.
In these circumstances, it would have been more beneficial and effective if mining enterprises were put under a legal obligation to undertake local development work in their respective project areas, through partnership arrangements with local communities in the form of "trusts" , "foundations" and consortium (small mines), as is practised in many mining nations. Their performance could then have been made subject to a compulsory government or social audit.
The author, a retired civil servant, is an honorary senior fellow, at the Institute for Studies in Industrial Development, New Delhi