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This article has been written by Shatakshi Arora, a student of Hidayatullah National Law University, Raipur.

Introduction

Today India has the fourth largest coal reserve in the world despite the fact that we imported 235 million tonnes (mt) of coal last year, out of which 135 mt valued at rs. 171,000 crore could have been met from domestic reserves. Despite having abundant resources India’s state-run coal giant has been unable to meet the increasing demand. The government has made all its efforts for progressively liberalizing the coal sector of the country over the last several months to attract new investments, and getting rid of this archaic end-use restriction was a key step (see here).[1]

With the outset of a new era in the Indian coal and mining sector, the Parliament passed the Mineral Laws (Amendment) Act, 2020 which amends the previous Mines & Mineral (Development and Regulation) Act, 1957 and the Coal Mines (Special Provisions) Act, 2015. These acts form the basic framework to regulate the mining sector in India; they promote ease of doing business in the country. Initially, the principal legislation in the country that governed all the mining-related activities was the Mines and Mineral (Development and Regulation) Act, 1957. It gave basic terminologies and set the basis for differentiation between various minerals. Certain kinds of minerals that are delegated to the state government to formulate regulations on them but the majority of the minerals came under the purview of MMDR Act. After the parliament passed the amended legislation there were additions to it by the legislation and the judiciary following the prevailing situation and recently “the government allowed new leases to mine for 2 years before getting fresh clearances.”

This was aimed at ensuring the ease of doing business and continuance in the supply of the required minerals to the industries. For a long time the ministry made various modifications and brought about changes to the act. Giving full autonomy to the leases will give rise to malpractices like harming the environment; therefore the environment ministry has also notified that the new leases will require obtaining fresh clearances through an “expeditious mechanism”. Due to the increase in global warming and air pollution, the environmental laws regarding such activities are now stricter; they ensure that any such activities are less fatal. We shall further discuss the salient features of the amended Act, why there was a need to amend the old laws and then critically examine the probable future of the Mineral Law (Amendment) Act, 2020.

Salient Features of the Act

In India two subsisting laws that regulate the overall mining sector of the country; they are the Mines and Minerals (Development and Regulation) Act, 1957 and the Coal Mines (Special Provisions) Act, 2015. MMDR Act, 1957 is the sole regulator of all mining-related activities that take place in the country. CMSP Act, 2015 provides for the auction and the allocation of the coal mines in the country, even though the allocation of such 219 coal mines was quashed by the Supreme Court in 2014 but the power vests on the act. CMSP Act, 2015 contains 3 schedules in it: Schedule I contains the list of all the mines that contain various sorts of minerals, the other two schedules are the sub-classes of the mines listed in Schedule I. Schedule II contains those mines where the construction has started before the Supreme Court’s 2015 order. Schedule III are those mines which are designated for some specific end-use. The Mineral Law (Amendment) Act, 2020 replaced the two above mentioned legislations to give it a more comprehensive form. Following are the key features of this Act:

Abolition of limitations on the end-use coal

The previous legislation had a restriction on the end-use of coal for certain activities only. The provision said that the companies that acquired the coal mines in an auction under schedule II and III have to use the coal produced for power generation and steel production and not for private consumption. With the implementation of the new law, the companies will have the liberty to conduct any coal mining operation either at a personal capacity or for any other purpose as the direction given by the central government. 

Eligibility for auction of Coal and Lignite Blocks

The law previously required a prior experience for a person in some kind of mining activities to participate in the auction of coal and lignite minerals. But the amended law clarifies that a person needs to possess any prior experience in any sort of mining activity to participate in the auction. This way the number of participants increases in a particular auction and encourages entrepreneurial skills. 

Combined license for Prospecting and Mining

Prospecting is a primary stage of analysis of territory by exploring, locating or finding a mineral deposit, fossils, precious metals or mineral specimen and Mining is the extraction of such minerals from the deposits for industrial use. For both these processes, there were two different licenses provided known as prospecting licenses and the mining lease. This Act adds a new type of composite license known as prospecting license cum mining lease. The provided license will be considered valid for both mining and prospecting activities.

Advance action for auction

To ensure that the mining activities are performed in continuance this Act gives power to the state government to auction the entire mining lease before the expiry. Earlier, except for a few minerals the government did not have the right to auction the mining lease before the expiry of the lease period. 

Transfer of the statutory clearances to new bidders

The Act now provides that the approvals, licenses and clearances given to the previous bidder shall be allowed to extend to the successful bidder in the auction for two years. During these two years, the new lessee can continue the mining activities but he has to obtain all the approvals and statutory clearances within these two years. 

Approval from the Central Government

This Act gives power to the state government to grant the licenses for mining activities or allocate the mines without the prior approval of the central government on lease except for a few cases, such as, when the allocation has been done by the central government or the mining block has been reserved for a specified purpose such as conservation.

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Reasons for Introducing it

Today the whole world is facing a global recession because of the widespread pandemic. This virus has cajoled the biggest of economies of the world to knuckle down before it. Implementation of this act can be a significant step towards boosting the falling economy of the country. This will increase the ease of doing business in the country and can improve the balance sheets by reducing the coal imports. The previous bill gave complete autonomy to the government regarding this matter, but with the introduction of the law, it will give equal opportunities to the private sector as well. The government will ensure strict regulation of the environmental laws concerning the law so that the given opportunities are used for the betterment only.

By the introduction of this bill, the production of coal shall increase which will reduce the dependency on imports for such minerals. This will also bring transparency regarding the allotment of mines or mining leases so that the principle of natural justice prevails. The two-way license that the previous act gave was very exhaustive as the producer had to first get a license for prospecting an ore and then if found one will again have to get another license for the mining of the same and with the introduction of the new act, there will be a composite license for all such activities. Analyzing all these shortcomings there was a need to bring in new legislation that can work upon it and can also save the country during this recession period. 

Critical Analysis

Environmental Concerns: 

On one hand where all the developed countries are moving away from fossil fuels especially coal; India is coming up with a new law that boosts the demand for such fuels. In a recent case of Goa Foundation vs Sesa Sterlite LTD & Ors (see here) the Supreme Court prioritized the environmental clearances and held that fresh environmental clearances are required by the successful bidders so that the environment is preserved. The new law is somehow promoting the use of fossil fuels instead of renewable ones and putting the environment at risk. [2]

Over Exploitation of the minerals:

This Act gives liberty to the private sector to invest and use some minerals for any purpose; this can lead to over-exploitation of the minerals present there. As the private individual is often concerned with the amount of profit it generates and that will cause an increase in competition and hence increase in the demand of the coal which will pave its way to over-exploitation of the resources.

Composite License is useless:

The society of geoscientists and allied technologists have stated that this composite license shall be a useless one as no individual would apply for a license of mining until they have found the mineral reserve through prospecting. 

Health Concerns:

Health is one of the most important aspects that has always been looked into before the formulation of any new law and this law contradicts one such principle. Growing of the mining sector shall increase the production of coal in the industry and burning of coal produces fatal matter like sulphur dioxide, nitrogen dioxide and mercury. This will be a threat to the lives of people living in that region. 

There are various other points such as this law will jeopardize India’s commitments in the Paris Agreement and that can be a huge diplomatic setback. It will also undermine the labour guidelines as the private individual wants more profit generation and fewer input costs. In this way, the law will also affect various human rights.

Probable Future of the Act

On one end where this Act addresses the energy demand by expanding its capacity to generate power by the use of coal to achieve the government’s objective of the “Electricity for all” and on the other there is a huge threat of over-exploitation of such minerals by the private sectors. This law will bring a huge amount of FDI as this act increases investment and domestic production of such minerals reducing the dependency on imports, but the government needs to be cautious about production and usage of minerals by private individuals. This provision will end the monopoly of the public sector companies and give equal opportunities to all. With two crucial steps such i.e. the convenient eligibility criteria for participating at the auction and removal of end-use restriction shall be a welcome step towards liberalization. 

Looking away ahead with such an amendment there is a need to assess the corresponding rules and guidelines to give the proposed law its full effect. Concerning this, there is a need to make necessary changes in the other equivalent laws such as Mineral Conservation and Development rules, 2017, Minerals (other than Atomic and Hydrocarbons energy minerals) Concession Rules, 2016 etc. Coordination among the state and the central government is necessary so that the regulations are implemented properly. The government should also ensure that increased amounts of investment are made in green energy so that the dependency on thermal energy can be reduced. Strict compliance with the regulation and the continuous monitoring of the activities should be done so that the private players are not tempted towards over-exploitation of the resources and there is no adverse effect neither on the human beings and nor the environment due to the mining activities. 

Conclusion 

Mineral Law (Amendment) Act, 2020 is a significant step towards attracting private individuals and giving them equal opportunities in the mining sector that will promote ease of doing business in the country. No doubt that this will lead to a huge amount of coal production and reduce the dependency on imports but will increase the dependency on fossil fuels which is fatal for the environment and will adversely affect the people also. Everything has its pros and cons so there is a need to analyze the present situation with the provisions of the act so that steps are taken to safeguard the environment while ensuring the economic growth of the country.

References

  1. ‘RSTV: laws in the making – the mineral laws (amendment) bill, 2020’ (Insights on India, 31 March 2020) <https://www.insightsonindia.com/2020/03/31/rstv-laws-in-the-making-the-mineral-laws-amendment-bill-2020> accessed on 20 April 2020
  2. Goa Foundation vs Sesa Sterlite LTD & Ors (2014) 6 SCC 590

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