The Ins and Outs: Mines and Minerals Development and Regulation

India is well endowed with natural resources, particularly minerals, which serve as raw materials for many industries, paving the way for rapid industrialisation and infrastructural development. This, in turn, is set to facilitate the economy’s ascent along the road of sustained growth and a five trillion-dollar economy. In order to realise the mineral wealth of the country, extensive amendments have been made to the Mines and Minerals (Development and Amendment) Act, 1957 (‘MMDR Act’) by the MMDR Amendment Act, 2021 and the corresponding Rules with the objectives of generating employment and investment in the mining sector, increasing revenue to the States, improving the production and time-bound operationalisation of mines, etc. 

Further, to facilitate State Governments in identifying more blocks for auction and increase the availability of minerals across the country, the Ministry of Mines had introduced a series of amendments to ramp up the auction of mineral blocks for composite licencing.  To this effect, recently, the Government notified the Mineral (Auction) Amendment Rules, 2022 that allowed global positioning system for the identification and demarcation of the area where a composite licence is proposed to be granted. The Union Cabinet had also approved the amendment to the Second Schedule of the MMDR Act in March, 2022 to specify the royalty rates of certain minerals, including potash, emerald and platinum group of metals to ensure better participation in the auction of Mines.

This Article studies the series of amendments made to the MMDR Act and related Rules while analysing their impact on the developmental activities of the sector.

Analysis of the Amendments

 

Removal of the Distinction Between Captive and Non-captive Mines

Earlier, the Act empowered the central government to reserve any mine (other than coal, lignite, and atomic minerals) as a captive mine which would be used for a specific purpose only. The present Amendment removes this distinction between captive and non-captive mines. Now, the mines will not be limited to just a specific purpose/industry/sector. Thus, no mine will be reserved for a particular end-use. All future auctions will be without any end-use restrictions. The amendment would “facilitate an increase in production and supply of minerals, ensure economies of scale in mineral production, stabilise prices of ore in the market and bring additional revenue to the States…

 

Sale of Minerals by Captive Mines

Earlier, as per the Act, the ores extracted from captive mines were only used by captive industries. The present Amendment provides that captive mines (other than atomic minerals) may sell up to 50% of their annual mineral production in the open market after meeting their own needs. The central government may increase this threshold through a notification. The lessee will have to pay additional charges for minerals sold in the open market. The sale of minerals by captive plants will aid and expedite growth in mineral production and supply, leading to commercial viability in mineral production and, as a result, additional revenue for the states. 

Transfer of Statutory Clearances

Earlier, the Act provided that upon expiry of a mining lease (other than coal, lignite, and atomic minerals), mines are leased to new parties through auction. The statutory clearances issued to the previous lessee are transferred to the new lessee for a period of two years. The new lessee is required to obtain fresh clearances within two years. The present Amendment replaces this provision and instead provides that transferred statutory clearances will be valid throughout the lease period of the new lessee. This amendment ensures continuity of mining operations, even with the change of the lessee and helps to avoid the repetitive process of obtaining clearances again for the same mine, which would facilitate the early commencement of the mining operations. 

 

Auction by the Central Government in Certain Cases

Under the Act, states conduct the auction of mineral concessions (other than coal, lignite, and atomic minerals). Mineral concessions include mining leases and prospecting license-cum-mining leases. The present Amendment empowers the central government to specify a time period for completion of the auction process in consultation with the state government. If the state government is unable to complete the auction process within this period, the auctions may be conducted by the central government. This amendment ensures that no mine is left idle and increases mining in the country.

 

Allocation of Mines with Expired Leases

The Amendment adds that mines (other than coal, lignite, and atomic minerals) whose lease has expired may be allocated to a government company in certain cases. This will be applicable if the auction process for granting a new lease has not been completed, or the new lease has been terminated within a year of the auction. The state government may grant a lease for such a mine to a government company for a period of up to 10 years or until the selection of a new lessee, whichever is earlier. This Amendment increases revenue for the states.

 

Lapse and Extension of Mining Lease

The erstwhile Act provided that where the mining operation is not commenced by the lessee within 2 years of the grant of a lease or the mining operation has been discontinued for two years, the mining lease shall be deemed to have expired for such period. The new amendment substituted the earlier provisions of Section 4A with a new provision stating that the mining lease will not lapse at the end of the said period if a concession is granted by the State Government upon an application by the lessee. It also provides for the extension of the mining lease by declaring that the State Government can extend the threshold period of lapse of the lease only once and up to one year. This ensures continuity in mining operations.

 

Removal of Non-Exclusive License Regime

In the earlier act, companies had a non-exclusive licence for the reconnaissance of the area to find out mineral potential. The amendment removes the non-exclusive licence permit.

 

Simplification of Exploration Regime

As per the new amendment:

  • Mineral Blocks for Composite Licences can be auctioned at the G4 level of exploration instead of the G3 level as per the earlier standard.
  • Mineral Blocks for surficial minerals can be auctioned for the grant of a mining lease at G3 level instead of G2 level.
  • Private entities may be notified under Section 4(1) of the Act to conduct exploration.

 

Transfer of Mineral Concessions

Restrictions on the transfer of mineral concessions have been removed and now mineral concessions can be transferred without any transfer charge.

 

District Mineral Foundation (DMF)

It is a non-profit body established to work for the interest and benefit of people and areas affected by mining or mining-related operations. State governments were tasked with establishing DMFs in each mining district of their respective states, as well as prescribing the composition and operation of DMFs, including the use of funds. The new Amendment Act, 2021, empowers the Central Government to direct the composition and utilisation of the funds from the District Mineral Foundation. This ensures the optimization of funds for the development of mining areas. 

 

Conclusion 

Present amendments in the Mines and Minerals (Development and Amendment) Act, 1957 (‘MMDR Act’) and the corresponding Rules do nullify several restrictive and covert provisions that existed in the erstwhile Act of 1957. The new regime will be instrumental in increasing mineral production, improving the ease of doing business in the country, and increasing mineral production’s contribution to GDP.

The amendments have also successfully capacitated the State governments to notify 40 mineral blocks of G4 level of exploration for grant of composite license, out of which 6 mineral blocks have been successfully auctioned, as of April 2022.  [1]

However, like any other public policy and legislation, implementation of the Act and Rules with proper coordination among central and state governments is the key to achieving reforms in the mining sector and sustainable development. 

References: 

[1] https://pib.gov.in/PressReleasePage.aspx?PRID=1814233#:~:text=The%20Mineral%20(Auction)%20Amendment%20Rules%2C%202022%20were%20notified%20on,to%20be%20granted%20through%20auction.

 

Image Credits: Image by Анатолий Стафичук from Pixabay

Present amendments in the Mines and Minerals (Development and Amendment) Act, 1957 and the corresponding Rules do nullify several restrictive and covert provisions that existed in the erstwhile Act of 1957. The new regime shall be instrumental in boosting mineral production, improving the ease of doing business in the country and increasing contribution of mineral production to Gross Domestic Product (GDP).

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