Abstract
One of the core sectors aiding the growth of the Indian economy is the mines and mineral industry. This sector has played a crucial role in the development of other sectors in the country. While the world is still faced with the challenges posed by the COVID-19 pandemic, the mining regime has geared itself to tackle the mineral security in the nation by amending the Mines and Minerals (Development and Regulation) Act, 1957, by way of introducing the Mines and Minerals (Development and Regulation) Act, 2021, which has been published in the Official Gazette on March 28, 2021.With the aim of boosting and nourishing a self-reliant India, the prime legislation has once again been amended with, inter alia, the primary objective of easing the process of carrying out mining operations in India. The Principal Act covers the following:
- administration of mining leases
- objective for which the lease is granted
- well-being of the people living in the areas of mines
The increased leniency within the mining regime can be gauged by way of the reduced compliance requirements on new lessees and the possibility of extensions in the time periods of mining leases under circumstances that warrant the same. These reforms will contribute to an overall increase in the efficiency of mining activities and by extension, encourage new investments in the mining sector which forms an essential part of the backbone of the Indian economy.
This article aims to highlight the changes that have been made by the Mines and Minerals (Development and Regulation) Amendment Act, 2021 and seeks to analyze their implications on the current legal regime regulating the mining sector in India. Through the course of this article,insight has been placed on the eclipsed problem prevailing in the preceding legislative framework while scrutinizing the same with the recent changes that have been made by the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
Introduction
One of the core sectors aiding the growth of the Indian economy is the mines and mineral industry. This sector has played a crucial role in the development of other sectors in the country. The legislative framework surrounding mines and minerals has been amended several times to make the sector more industry-friendly. As the world still tackles the challenges posed by the COVID-19 pandemic, the mining sector has geared itself to tackle the mineral security in the nation by amending the Mines and Minerals (Development and Regulation) Act, 1957 (from now on referred to as the “Principal Act”). This Government of India has introduced the Mines and Minerals (Development and Regulation) Amendment Act, 2021 (from now on referred to as the “Amendment Act”), and notified in the Official Gazette on March 28, 2021. The prime legislation has once again amended with, inter alia, the primary objective of easing the process of carrying out mining operations in India.
The mining sector contributes around 7 to 7.5% of the Gross Domestic Product of countries like South Africa and Australia, whereas it is only 1.75% in India.[1] In terms of the percentage of land which contains mineral reserves, 17% of the nation’s land contains mineral reserves, but mining for the same is being done only on 0.25% of that area.[2] There are various reasons for this, some of which have been rectified by employing the Amendment Act. India has explored less than 10% of its Obvious Geological Potential (“OGP“) so far.[3] Whereas, in Australia and South Africa, 70-80% of their OGP is mined.[4] Owing to such factors and lack of proper exploitation of the country’s mineral reserves, a large portion of the mineral needs of the country is fulfilled through imports of the same. It has been observed that while the mineral production in India stood at Rs. 1.25 lakh crore annually, the import of minerals stood at double of that value at Rs. 2.5 lakh crore.[5] This amount is a concern for a country like India, with vast reserves of mineral wealth lying unexplored due to various exigencies. Procedural ones are sought to be eased a bit by the Amendment Act. The amended provisions vary from including new definitions to make the Principal Act more consistent by reducing compliance burdens on lessees. The Principal Act covers the following:
- administration of mining leases;
- the objective for which the lease is granted; and
- the well-being of the people living in the areas of mines
The principal object behind the Amendment Act is to streamline the process of auctioning the licenses of mines which, as per the extant regime, was believed to be a watered-down form of auction. Through the means of the changes, the Amendment Act targets the involvement of the private sector, both domestic and foreign, into the mining industry by easing the norms or doing away with some of them in certain instances. Additionally, specific provisions have also enhanced the role of the Central Government. The article touches upon some of the recently enacted provisions and the changes introduced through the Amendment Act vis-à-vis comparison with the old provisions of the Principal Act.
Understanding The Key Amendments: Ironing out the Modifications and Reforms
In order to effectively understand the sectoral regime change, this Section seeks to highlight certain key amendments that have been introduced by way of the Amendment Act:
Amendment of Section 3: Introduction of New Definitions –
The legislature has introduced certain key terms such as “composite licence” and “mineral concessions, amongst a host of new terms. As per the Amendment Act, a “composite licence” [6] shall comprise of a prospecting licence-cum-mining lease which is a two-stage concession granted to undertake prospective operations followed by mining operations in a seamless manner. Additionally, the word “mineral concession” [7] means either a reconnaissance permit, prospecting licence, mining lease, composite licence or a combination of any of these, and the expression “concession” shall be construed accordingly. This definition of mineral concession has been added through the Amendment Act as the same was not defined under the Principal Act while at the same time was widely used within the Principal Act. By introducing these new terms, the legislature has intended to make the Principal Act consistent, thereby reducing the risk of any other potential complexities.
Amendment of Section 4 and 9C:
Involvement of Private Sector-
Section 4(1) of the Principal Act has been amended with an objective of allowing private entities, as may be notified by the Central Government with enhanced technology, to undertake mineral exploration activities in India. By introducing this amendment, the legislature aims to bring new technology and expertise available with the private sector.
In this regard, it may be noted that Section 9C of the Principal Act has been amended by way of which the National Mineral Exploration Trust has been designated as an autonomous body. As per the previously existing legal framework National Mineral Exploration Trust was established to fund regional and detailed minerals exploration. The Amendment Act enables the notified private entities to seek funding from the National Mineral Exploration Trust.
Amendment of Section 4A: Condition for Lapse of Mining Lease–
As per the previously existing legal framework, a mining lease could only be terminated if the lessee has not started any “mining operations” within two (2) years of the grant of a lease or has suspended the mining activity for two (2) years. However, the State Government had the power to order the continuation of the mining lease where the mining leaseholder could not undertake or continue mining operations for reasons beyond the control of the mining leaseholder. In this regard, the State Government had the power to revive a lapsed mining lease provided the lessee had made an application of mining lease within 6 (six) months from the date of its lapse.
The Amendment Act has substituted the word “mining operations” with the words “production” and “dispatch”. It is noteworthy that in order to terminate a mining lease, the State Government has to consider if the holder of the lease has undertaken or continued “production” [8] and “dispatch” [9]. Further, it has replaced this stipulation by providing that the mining lease will not lapse at the end of the periods, as mentioned above provided the lessee of the mining lease applies for an extension and is subsequently granted an extension by the State Government. However, it has to be noted that the threshold period for lapse of the lease may be extended by the State Government only once for up to one (1) year. The Amendment Act does not allow for a revival of the mining lease after it has lapsed. Hence, the lessee of the mining lease will necessarily be required to apply to the State Government before the lapse of the mining lease. Checks and balances have been put in place viz. this Section is restricted to a situation wherein the holder of a mining lease can only apply for the lease if it could not initiate its obligations of production and dispatch due to reasons beyond its control.
Amendment of Section 5: (Grant of Lease to Government Companies)–
Section 5 of the Principal Act underwent an amendment to include a further proviso after the existing ones. The proviso stipulates that for the minerals specified under Part B of the First Schedule, and where the grade of such mineral in such area is equal to or above such threshold value as may be notified by the Central Government, no composite or mining license is to be granted to any person other than the Government, government company or corporation [10]. The addition of this proviso clearly shows the Central Government’s intent in holding a monopoly over the mining rights of atomic minerals specified under the Part B of the First Schedule.
Amendment of Section 8: Extension of Leases to Government Companies and Sale of Minerals by Captive Mines–
Earlier, under the Principal Act, it was provided that the period of mining leases granted to government companies would be as prescribed by the Central Government. Additionally, the Amendment Act provides that the period of mining leases may be extended on payment of the additional amount as prescribed in the Fifth Schedule of the Amendment Act. It is important to note that this extension is applicable for mining leases other than those granted through auction.
Another reform introduced via this Section is providing captive miners with a right to sell coal or ignite up to fifty per cent (50%) of the total coal or ignite produced annually after meeting the requirement of the end-use plant linked with the mine in the manner prescribed by the Central Government.[11] However, the Central Government is entitled to further increase this threshold through a notification by providing reasons to it in writing. Further, the lessee will have to pay additional charges specified in the sixth schedule for minerals sold in the open market. Besides this, the sale of coal is subject to restrictions because it is not allowed from the coal mines allotted to a company that has been awarded a power project, based on a competitive bid for tariff (including Ultra Mega Power Projects).
As the Amendment Act states, there is hope that this step would ensure a level playing field between the Government-owned mines and auctioned mines.
Amendment of Section 8A: Sale of Minerals by Captive Mines–
Section 8A of the Principal Act lays down the procedure for the periods of the grant of mining leases for minerals that are not under the ambit of Part A and Part B of the First Schedule, thereby creating a distinction from Section 8 of the Principal Act, which deals exclusively with granting periods of mining leases for minerals covered under Part A of the First Schedule to the Principal Act.
Through this amendment, after meeting their own needs, the captive mines relating to minerals not covered under Part A and Part B of the First Schedule can sell up to fifty per cent (50%) of their annual production in the open market in a manner prescribed by the Central Government.[12] To avail of this course of action, the lessee must pay extra charges as specified in the Sixth Schedule. The provisions of the Sixth Schedule can be amended by the Central Government in the manner as has been provided in the Amendment Act. Additionally, the Central Government may increase the numerical threshold through a notification by providing reasons in writing.
Substitution of Section 8B: Transfer of Statutory Clearances and Allocation of Mines with Expired Leases–
Through this amendment, the legislators have attempted to reduce the burden of compliance requirements on the lessee. Under the previous regime, upon expiry of a mining lease, mines were leased to new persons through auction. The statutory clearances issued to the previous lessee were transferred to the new lessee for a period of two (2) years. The new lessee was required to obtain fresh clearances within these two (2) years. The Amendment Act has simplified the compliance burden by providing that the transferred statutory clearances will be valid throughout the lease period of the new lessee, essentially providing for the continuation of all the rights, approvals, clearances and licenses associated with the mining of minerals on the transfer of the lease pursuant to a new auction.[13] Furthermore, a government company may take over a mine having an expired lease in certain instances. This includes a situation where, first, the auction process for granting a new lease has not been completed, or second, the new lease has been terminated within a year of the auction.
With the prior approval of the Central Government, the State Government may grant a lease for such mines to a government company for a period not more than ten (10) years or until a new lease is selected through the auction process, whichever is earlier. Additionally, such a government company shall be deemed to have acquired all valid rights, approvals, clearances, licences and the like vested with the previous lessee.[14]
The basic idea behind truncating the compliance burden and granting such extensions by reducing the burden of compliance requirements on the lessee is to ensure efficiency and continuity in the utilisation of mines and prevent the repetitiveness of acquiring clearances, time and again, for the same mine. Further, to draw new investment and bring new technology and entrepreneurs into the mining sector, the Amendment Act eliminates the restrictions on transferring mineral concessions for the non-auctioned mines.
Amendment of Section 10B and 11: Re-Auction of Mines and Removal of End Use Restrictions–
By this amendment, the auction or re-auction process, as the case may be, has to be completed within a fixed period by the State Government and as the Central Government may direct, for granting mining licenses where first, the State Government has failed to conduct the auction successfully in respect of any mineral; or second, upon completion of such auction, the mining lease or letter of intent for grant of mining lease has been terminated or has lapsed for any reason whatsoever.[15]
On the foregoing, however, if the State Government fails to endeavour such directions, then the Central Government may step in and conduct the auction process itself to grant mining lease. After that, upon intimation of the details of the preferred bidder by the Central Government to the State Government, the State Government shall grant the mining lease to such preferred bidder in such manner as may be prescribed by the Central Government.[16] The same procedure is made applicable for the grant of composite license of any mineral by inserting a proviso in Section 11(5) of the Principal Act. Over and above, the Principal Act through the proviso to Section 10B(6) empowered the Central Government to reserve any mine (excluding those of lignite, coal, and atomic minerals) to be leased through an auction for a particular specific end-use. Such mines have been termed ‘captive mines’. However, by the amendment in Section 10B(6), these end-use restrictions have now been removed. The amendment removes the provision of reserving specific mine or mines during an auction under Section 10B(6). In its present form, the proviso to Section 10B(6) explicitly mentions that no mine will be reserved for captive purpose in the auction, which serves to eliminate restrictions based on the end-use of the mine or mines.
Omission of Section 10C: Removal of Non-Exclusive Reconnaissance Permits–
The Principal Act provided a non-exclusive license for scouting the area to determine the area with mineral potential (except minerals such as coal, lignite, and atomic minerals). This non-exclusive reconnaissance permit entails preliminary prospecting of a mineral in a given area through specific surveys. That said, the Amendment Act has removed the provision altogether for this permit. The primary reason for such omission of Section 10C from the Principal Act is that while the Non-Reconnaissance Permits were issued within 30 days of the application for the same, they expired upon issuing a tender for prospecting and mining. Post-expiration, no incentive was given to the permit holder in the auctioning of mining and prospecting licences even though they might have been successful in discovering minerals at the site put for auction.
This was a significant hurdle for the private sector. While the Government made specific changes to the regime through the Mineral Laws (Amendment) Act, 2020, there was still reluctance from the private sector, both domestic and foreign, to enter the mining sector. This amendment omitting Section 10C is a welcome change that has removed a significant hurdle in private sector involvement in the mining industry.
Amendment of Section 11: Auction by the Central Government in Certain Cases–
The Amendment Act empowers the Central Government to prescribe a time period within which the auction process must be completed in consultation with the State Government. If the State Government fail to do so within this period, then the prerogative to conduct auctions will lie on the Central Government. As per this amendment, subject to the State Government’s failure in notifying the particular area for mining, the Central Government is empowered to direct the State Government to do so within the time period set by Central Government in consultation with the State Government.[17] In addition, if the State Government still fails to notify the area, then the Central Government has been conferred with the authority to notify the area of mining itself.
Through the means of amending Section 11 of the Principal Act, the Central Government has provided for itself a proactive role in the process of granting leases for prospecting licence-cum-mining in instances where the State Government does not fulfil its role. The amendments made to sub-sections 4 and 5 of Section 11 of the Principal Act demarcate the role of the Central Government if the State Government fails to fulfil its obligations. The inclusion of the said amendments to the Principal Act can also be seen as a way for the Central Government to intervene in instances where the notification of the area for grant of licence or the completion of the auction has not been done by the State Government. The Central Government can intervene and prescribe a time period to fulfil the same, thereby ensuring time-bound notifications and auctions. The basic idea behind the said amendment is not to leave a mine idle.
Amendment to Section 12A: Transfer Charges–
Under Section 12(6) of the Principal Act, which is now omitted, transfer charges were applicable for transferring the mining lease (granted otherwise than through auction and where the mine is used for the captive purpose). The Amendment Act, in this regard, provides that the transferee of the mining lease is not required to pay the transfer charges. At the same time, however, it also states that a refund of the amount/charges already made for this purpose would not be given.
Decrypting The Implications of Introducing the Amendment Act: A Critical Analysis
Majorly, the legislative intent behind introducing the Amendment Act was to address the shortcomings within the Principal Act. This has been effectuated by way of numerous reforms, prime among them being efforts to ensure consistency within the Principal Act and easing the process of carrying out mining activities. This can be seen by virtue of the introduction of new definitions in the Amendment Act. Further, the increased leniency within the mining regime can be gauged by way of the reduced compliance requirements on new lessees and the possibility of extensions in the time periods of mining leases under circumstances that warrant the same. These reforms will contribute to an overall increase in the efficiency of mining activities and, by extension, encourage new investments in the mining sector, which forms an essential part of the backbone of the Indian economy.
Conclusion
Through this article, insight has been placed on the eclipsed problem prevailing in the preceding legislative framework while scrutinising the same with the Amendment Act. As can be clearly understood, this Amendment Act is a much-needed piece of legislation in the Indian mineral sector in a scenario where several irregularities have been highlighted in the past. The provisions so amended and the ones introduced by the Amendment Act have laid down a comprehensive scheme to rectify some of the Principal Act’s deficiencies. In addition, the needs of the mining sector vis-à-vis the private sector have been considered by the Amendment Act. The provisions included will allow the Principal Act to become more investor-friendly, with increased involvement and limit heavy dependence on mineral imports. Having looked at the essential provisions that the Amendment Act has brought into the mining regime and analysed their project impact on the mining sector, there are certain suggestions which the authors would like to present.
With the increased involvement of the Central Government as laid down by the provisions of the Amendment Act, there might occur instances of conflict between the State and Central Government concerning the role of the other. Keeping such an eventuality in mind, the author suggests setting up a regulatory body at the Centre with branches in the states to ensure that the disputes that may arise are either avoided or resolved promptly. Such a regulatory body, if constituted, would ensure better cooperation between the Centre and the States, allowing for effective implementation of the provisions of the Amendment Act.
Further, the present infrastructure of the country needs to be updated, keeping in mind the presence of a more efficient regime of mining. As a result of the timely completion of auction processes and allotment of tenders, the production and transportation of the minerals will also increase. Thus, transportation facilities, be it for within the country or for import purposes, will have to be made more efficient and modern. Also, the technology involved in the mining sector needs to be updated. All such improvements concerning the infrastructure or the regulatory framework will reduce dependence on imports to meet the country’s mineral needs and allow for more exports. These improvements shall create more opportunities for more foreign investors to enter the Indian market owing to the lesser restrictions than before and lead to better fiscal benefits. These developments would also contribute towards generating more employment, enhanced economic growth and, above all, would ensure that the benefit of the public is given the foremost consideration.
The objective of streamlining and ensuring optimal usage of minerals and further strengthening this sector can only be achieved if, in practice, the intention behind these amendments is executed sincerely.
About the Author
Abir Lal Dey is a Partner at the L&L Partners, Mumbai.
Sakshi Mishra is an Associate at L&L Partners, New Delhi.
Editorial Team
Managing Editor: Naman Anand
Editors-in-Chief: Akanksha Goel & Aakaansha Arya
Senior Editor: Naman Anand
Associate Editor: V. Shanthan Reddy
Junior Editor: Swadha Sharma
Preferred Method of Citation
Abir Lal Dey & Sakshi Mishra, “The Mines and Minerals (Development and Regulation) Amendment Act, 2021: Uncovering the Changing Landscape of the Mining Regime in India” (IJPIEL, 23 June 2021)
<https://ijpiel.com/index.php/2021/06/24/the-mines-and-mineral-development-and-regulation-amendment-act-2021-uncovering-the-changing-landscape-of-the-mining-regime-in-india/>
Endnotes
[1] https://www.constructionworld.in/energy-infrastructure/coal-and-mining/india-clears-way-for-major-reforms-in-metals—minerals-sector/26311; https://indianexpress.com/article/india/ls-passes-mmdr-amendment-bill-7236580/
[3] https://www.brookings.edu/research/indias-mineral-exploration-legacy/
[4] https://www.drishtiias.com/printpdf/the-big-picture-mines-minerals-amendment-bill
[5] https://indianexpress.com/article/india/ls-passes-mmdr-amendment-bill-7236580/
[6] Section 3(a) of the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
[7] Section 3(a) of the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
[8] As per Section 3(fa), the term production or any derivative of production means the winning or raising of mineral within the leased area for processing or dispatch
[9] As per Section 3(aa), the term dispatch means removing minerals or mineral products from the leased area and includes the consumption of minerals and mineral products within such leased area.
[10] Section 5 of the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
[11] Section 8(5) of the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
[12] Section 8A (7A) of the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
[13] Section 8B of the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
[14] Section 8B of the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
[15] Section 10B(4) of the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
[16] Ibid.
[17] Section 11(4) of the Mines and Minerals (Development and Regulation) Amendment Act, 2021.
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