This article is written by Insiya Kothari, studying at Indore Institute of Law. It outlines the relevant sections of the 1957 Act recently amended and analyses the overall impact and consequences on the mining sector.

Introduction

The Mines and Minerals (Development and Regulation) Amendment Act 2021 was introduced in the Lok Sabha on 15th March 2021 and subsequently passed by the Rajya Sabha on 22nd March 2021. This Amendment modifies significant sections of The Mines and Minerals (Development and Regulation) Act, 1957 that regulates the mining sector in India. The reforms made are in the provisions related to statutory requirements, removal of end-use restrictions for captive mines and the division between captive and non-captive mines, transfer by auction of mineral-concessions, National Mineral Exploration Trust (NMET), National Mineral Index(NMI), the inclusion of private sector, Section 4 (1), Section 8 (B) of the Mines and Minerals (Development and Regulation) Act, 1957 and so on.

This Bill has several objectives. Primarily, it is attempting to harness the potential of the mineral sector by increasing employment rates and increasing investment levels within the mining and coal industry. It is looking to increase revenues generated by the mining sector. In addition, a methodology is developed to enhance transparency in the overall auction process, and in order to raise the levels of exploration and auction for mineral resources. Finally, it wishes to resolve ramifications that have been occurring in the past. With the backdrop outlined, let us get into a detailed study of the recent amendments made herein.

Key regulations of the Act

The 1957 Act deals with mainly three concerns of the mining leases, purpose for granting these leases and its auction procedures along with ensuring the welfare of the inhabitants of a mining site. As per the Act, there are two categories of operational mines, namely; captive mines and open mines. The former is almost always associated with some specific purpose. For instance, an iron ore mine provides all of its ore extractions to a predetermined steel plant and nowhere else.

Another example could be a limestone mine that provides raw materials only to a predesignated cement plant so that the purpose of the mine, in that case, is to facilitate only specific industries/sectors for a fixed period. Alternatively, the latter is also known as non-captive mines. The minerals extracted from these mines are sold in open markets or used for their consumption. The reform made within this background allows all mines to sell 50% of their minerals in the open market with one caveat. The company has to pay an additional amount of money to the state government for selling its products in the open market. Thereby, the reforms get rid of the end-use restrictions on these mines. 

During the auction of a mine, the lessee obtained a fresh set of statutory permissions. The 2021 Bill sets aside this step as redundant. So, now the previously obtained set of statutory clarifications move to the new persons selected through the auction process for regulating operations at the mining site. Further, if the state government does not conduct an auction that it is supposed to hold for an extended time, then the Central government has the power to step in and make the auction possible.

A glimpse at the new amendments

1. Transfer of statutory clearances – 

• Section 8(B) of the 1957 Act deals with the transfer of statutory clearances. It specifies that once a mining lease owned by a lessee expires, it moves to new persons. 
• Under the 2021 amendment, statutory allowances will be considered legitimate even after an end to the mining lease period or till the exhaustion of mineable reserves. After the government conducts an auction, it moves to a fruitful bidder in the auction. Thus, all rights relating to the mining lease move on to the effective bidder after the successful auction.

2. Removal of end-use restrictions for captive mines –

• The recent change permits captive mines (including fettered coal mine shafts) to sell up to half (50%) of the minerals created after meeting the prerequisite of the connected end-use plants. The earlier prescribed end-uses were power generation or steel production. The confined mine holder will be required to pay an extra amount calculated according to the recently embedded Sixth Schedule. Additionally, the difference between captive and open mines is no longer present such that now mines will not be limited to any specific purpose or industry.

3. Transfer by auction of mineral concessions –

• The reforms have eliminated the limitation imposed on the transmission of mineral concessions, and presently mineral concessions are relinquished without any transfer charges. It enables ease of doing business in India. A new provision gets added to Section 12(A) that provides that a mining lease does not entail the instalment of any fee whose transfer is in question. In any case, the charges previously paid for the move will not be eligible for a discount.

4. Omission of Section 10C –

• Hereunder, the court has settled all forthcoming cases under Section 10A (2) (b) by nullifying the Section related to the Grant of non-exclusive reconnaissance permits for mining leases. So that when a company wanted to probe a large area to find out the mineral potential or content, various methods such as aerial surveys, seismic machines, and photography were employed. For this, the provisions required the company to obtain a non-exclusive license for the same. The change made to this provision removes the non-exclusivity part of the license and ensures ease of operations.

5. Insertion of two new schedules
6. The Fifth Schedule

New Schedules get in place after ‘The Fourth Schedule’ that bears the ‘Notified Minerals’ list. The insertion of ‘The Fifth schedule’ provides the scope of identifying extra amounts payable on the grant of a lease for specific categories of minerals, namely, iron ore and chromite; copper; coal and lignite; and other minerals.

2. The Sixth Schedule

The Sixth Schedule, on the other hand, is laid down to determine the additional amount payable for different minerals such as Bauxite, Chromite, Limestone and is divided into three subheads; namely –

(i) non-auctioned captive mines (other than coal and lignite)

(ii) auctioned captive mines (other than coal and lignite)

(iii) For coal and lignite

This amount is also known as royalty payable to the government and other stakeholders who govern the mining sector in India. These stakeholders have many vested interests apart from the state government in the mining industry and thereby require royalty as a form of assurance of their subsequent interests.

Difference made by the reforms 

Earlier during 2015, the award of mineral assets was through the ‘the early bird gets the worm’ strategy. This arrangement of allotment of mineral concession was optional. Here, the decision-making was not straightforward. The course for the restoration of mining leases was causing a hindrance in drawing in more investment in the mining area. The allotment of mineral concession was not creating any income to the government other than sovereignty.

The difference made is crucial in determining the potential growth of the mining sector in India in the coming years. The reforms helped resolve the complexities around self-use mines by promoting the commercial sale of minerals. It also allowed captive mines to sell 50% of their minerals mined during a whole year. This move came after the auction of coal mines to privately owned businesses for business mining. The deal was effective as the Center granted 19 mines to a mixed bag of companies. And it led to the decline of the syndication of state-possessed Coal India Limited (CIL), 42 years after the nationalization of coal mining in India.

Moreover, the Center intends to make up for the mineral concessions which would get dropped under this correction. The pay would come from the National Mineral Exploration Trust (NMET).

Impact on the mining industry

The productivity and efficiency levels of mining operations in India help assess the impact these reforms have brought within the sector. The state government has been trying to push these changes since mid-2020. While a large section of these reforms is considered moderate, most of them have been debatable over some time.

The Union Mines Minister, Mr. Pralhad Joshi previously stated that mineral reforms are necessary. However, the implementation and auction of non-coal mines lie with the states. Indeed the reforms form an integral aspect of developing and upgrading the coal and mining sector. He also claims that approximately 55 lakh direct and indirect employment opportunities would show up in the mining sphere in the coming years. These reforms may impact other sectors such as the cement, aluminium, steel industries, and others that depend on ores and minerals extracted from mines. The reforms are a significant measure to guarantee no lack of mineral accessibility in the country. It worked with a consistent transfer of every substantial right, endorsement, clearances, and license in the industry.

Challenges faced and the way forward

For the proper realization of the mining reforms, certain barriers have to be overcome. These hurdles are in the form of environmental concerns such as approving mining sites through Environment Impact Assessment in order to preserve the biodiversity of our ecosystem. Another major obstacle to overcome is deciding the scope of intervention of the Central Government in State matters. The State may object to the fixing of royalties for extensions of mining leases along with being concerned when the Central Government directs the expenditure of the District Mineral Fund. There are also complications with the rehabilitation and compensation issues for the tribal communities associated with the mining sites. To strengthen the framework of the mining sector, it is pertinent to introduce an independent regulatory body for better governance and restructuring.

Conclusion

These recent amendments help generate more employment in the mining sector by increasing transparency in its operations at different levels. The relative importance of the recent amendments varies from one segment to the other. While the move to make auctions of mining platforms more effective may be subtle, the motive of bringing in private industries in the sale and operation of the mining sector may or may not be fruitful. It is so because these private entities might make a profit out of the situation rather than help develop it.

Additionally, these changes pave a positive pathway for the mission of making India self-reliant. One of the contributing factors that make the reforms worthy of national acceptance is that it allows for renewal/working/sale of even the expired mining leases. They also solve the legacy issues associated with the restrictive policy of captive mines. In other words, the aim is to reduce the complexities of the law by simplifying the working mechanisms for the industries by giving them a clean slate. However, the problem arises when these changes are not implemented fully such that there is no commercial mining, no auction taking place or no transparency in the process whatsoever. These problems lead to scams and must be avoided through reforms such as the Amendment Bill 2021.

References

1. https://prsindia.org/billtrack/the-mines-and-minerals-development-and-regulation-amendment-bill-2021
2. https://www.mondaq.com/india/mining/1059778/the-new-mines-and-minerals-development-and-regulation-amendment-act-2021-to-bring-noteworthy-changes
3. https://mines.gov.in/writereaddata/UploadFile/MMDR%20Act,1957.pdf
4. https://mines.gov.in/writereaddata/UploadFile/mmdr28032021.pdf
5. https://mines.gov.in/writereaddata/UploadFile/MMDR%20Act,1957.pdf
6. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1739167
7. https://www.business-standard.com/article/economy-policy/boost-to-production-and-pvt-investment-as-mining-reforms-get-green-signal-121011301250_1.html
8. https://mines.gov.in/writereaddata/Content/EngMineralLawsMines24721.pdf

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