Abstract

The mining and mineral industry is a vital contributor to India’s economy as it forms the base for the use of fundamental raw materials for many import industries. The sector is characterised by a vast number of smaller mines and other large-scale mining centres, which contribute to the overall national production.

The mining sector in India is highly regulated with robust legal and regulatory mechanisms. The primary legislation regulating the sector in India is the Mines and Minerals (Development & Regulation) Act, 1957. The legislation has gone through multiple amendments to enhance the ease of doing business and mergers and acquisitions. The latest scheme of amendments came in the shape of the Mines & Minerals (Development & Regulation) Amendment Act, 2021. The primary objective of the Amendment is to simplify mining operations in India, and it tries to do that by increasing leniency within the industry and further enhance efficiency in the sector.

The present blog aims to analyse these changes brought in by the latest Amendment and understand its salient features. Further, the blog also tries to list down the impact of the changes being brought in by the Amendment and briefly elaborate on the after-effects the amended law will have on the mining industry in the country.

Introduction

The Indian Parliament, to secure minerals of the country and to liberalise a few stringent provisions, sought to amend the Mines & Minerals (Development & Regulation Act, 1957 (hereinafter referred as “Principal Act”).  The Bill was passed on 19.03.2021 by the Lower House and on 22 March 2021 by the Upper House of the Parliament. The Mines & Minerals (Development & Regulation) Amendment Act, 2021 (hereinafter referred as “Amendment Act”) received the President’s assent on 28 March 2021. The laws related to the mining sector of India, which plays one of the significant roles in the GDP growth of the nation, had earlier a few stringent and cumbersome provisions which have been done away with by the Amendment Act. Before starting with the description of the amendments and their impact upon the economy of the country let us, first, know about all such laws that govern mining sector.

The laws that govern mining sector in India include:

Mines Act, 1952 and Mines Rules 1955

Mines and Minerals (Development and Regulations) Act, 1957

Mineral Concession Rules, 1960

Mineral Conservation and Development Rules, 1988

Minerals (Other than Atomic and Hydro Carbon Energy Minerals) Rules, 2016

O‑shore Areas Minerals (Development and Regulations) Act, 2002

O‑shore Areas Mineral Concession Rules, 2006.

The scope of this blog is restricted to Mines and Minerals (Development and Regulations) Act, 1957 and the recent Amendment made to it.

Objective of the Amendment

The Amendment Act has sought to amend the Principal Act to meet the following broad objective and purposes:

To bring out the potential of the mineral sector;

To increase the revenue to the States;

To escalate the employment ratio and investment in the mining sector, including coal;

To maintain continuity in mining operations even after the change of lessee;

To increase production and time-bound operationalisation of mines;

To increase the speed of exploration and auction of mineral resources;

And lastly, to resolve long pending issues that have decelerated the growth of the sector.

For a better understanding of the nuances of the Amendment Act, a few terms are explained briefly below:

“Sale of mines by auctions” is usually a procedure employed by state governments to sell their mines through bidding to private players.

“Captive mining” refers to those mines produced exclusively for the company that owns the mines.

“Non-Captive mining” refers to those mines that produce and sell their stock.

“Reconnaissance” means prospecting of mines through surveys.

Salient Features of the Amendment Act

1. No limitations on end-use for captive mines:

The Amendment Act provides that no mine will be reserved for a particular end-use. Upon the insertion of Sub-section 5 to Section 8 and Amendment of Section 8A of the Principal Act, the captive mines (including captive coal mines) are now permitted to sell up to 50% of the minerals produced after meeting the requirement of the linked end-use plants. The captive mine holder will be required to pay an “additional” sum to be calculated in accordance with the newly inserted Sixth Schedule. Before this Amendment, the captive mines were not permitted to sell their stocks. Thus, by bringing this Amendment, the objective of increasing in production and supply of mineral and ensuring economies of scale in mineral production is achieved. [1]

2. Transfer of statutory clearances

Section 8B in the Principal Act has been substituted by way of the Amendment Act to liberalise the stringent and time-consuming provision, which required a repetitive process of obtaining clearance again for the same mine. This particular Amendment guarantees uninterrupted mining operations, preservation of minerals and avoidance of redundant, overlapping and superfluous process of obtaining clearances yet again for the same mine upon its transfer.  Thereby it has been clarified that all valid rights, approvals, clearances, licences, etc. granted to a lessee in respect of a mine (other than those granted under the provisions of the Atomic Energy Act, 1962) shall continue to be valid even after expiry or termination of the lease and such rights, approvals, clearances, licences, etc. shall be transferred to, and shall vest (subject to the relevant conditions) in the successful bidder of the mining lease selected through auction. It has also been illuminated that it shall be lawful for the new lessee to continue mining operations on the land till the expiry or termination of the mining lease granted to it, in which the previous lessee was carrying out mining operations.

This Amendment mainly 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. The general view is that a tremendous amount of time was spent seeking the same permissions/approvals afresh. This would facilitate the early commencement of the mining operations. At the time of discussions on the Bill in Parliament, it was highlighted that about 904 mines would expire in the next ten years, and if the new lessee is compelled to obtain statutory clearances all over again, it will cause unnecessary disruption.

3. Involvement of the Private Sector

In the Sub-section 1of Section 4 of the Principal Act for the words “such entity that may be notified for this purpose by the Central Government”, the terms “other entities including private entities that may be notified for this purpose, subject to such conditions as may be specified by the Central Government” has been substituted. It explicitly lays down that the Private companies with enhanced technology are now eligible to undertake mineral exploration activities, as against the old regime where only the public sector predominantly led this energy sector.

However, considering the actualities,although the mining potential in India is vast and the mining sector is the second largest employment generator after agriculture, India remains significantly under-explored compared to nations with similar potential, South Africa and Australia. So to do away with this laxity, the legislature came up with Amendment.

The Amendment to Section 9C of the Principal Act is highly significant in the above context as the National Mineral Exploration Trust (NMET) has been designated as an autonomous body. It is noteworthy that the NMET was established to fund regional and detailed exploration of minerals. A new sub-section (5) to Section 9C has been introduced in the Amendment Act, enabling the notified private entities to seek funding from the NMET.

All such insertion has been made only to facilitate the smooth flow of the economy and restrain the dominance of the public sector.

4. Non-exclusive reconnaissance permit:

Reconnaissance means preliminary prospecting of a mineral through specific surveys. The Amendment Act provides a non-exclusive reconnaissance permit (for minerals other than coal, lignite, and atomic minerals). The provision for permission has been done away with under this Amendment Act.

5. Termination of the mining lease

The Amendment Act has replaced the expression “mining operations” in Sub-Section 4 of Section 4A of the Principal Act with the words “production” and “dispatch”. Accordingly, the termination of the lease in this Section will have to be considered from the point of whether the leaseholder has undertaken or continued “production” and “dispatch”. The definitions of “production” (Section 3(aa)) and “dispatch” (Section 3(fa) have also been inserted in the Amendment Act. “Production” has been defined as the winning or raising of mineral within the leased area for the purpose of processing or dispatch;” and “dispatch” has been defined as the removal of minerals or mineral products from the leased area and includes the consumption of minerals and mineral products-based area.”

Prior to this Amendment Act, in terms of Section 4A(4) of the Principal Act, if a mining leaseholder failed to undertake mining operations for two years or having commenced mining operations, discontinued the same for a period of 2 (two) years, the mining lease would automatically be elapsed. However, the State Government always had the discretion, which is often used in light of the principles of the welfare of State enshrined under our Constitution, to order continuation of such leases where the mining leaseholder could not undertake or continue mining operations for reasons beyond the control of the leaseholder. Moreover, it was also open for the State Government to revive a lapsed mining lease provided the mining leaseholder made an application within 6 (six) months from the date of its lapse.

The Amendment Act envisages an extension for a period of one year in cases where the holder of a mining lease fails to undertake production and dispatch for two years either after the execution of the lease or having discontinued production and dispatch, for a period of two years after having commenced the same. It has also been clarified that this extension can only be granted once during the entire period of the lease.

Significantly, the Amendment Act does not allow for a revival of the mining lease after it lapsed. Therefore, the mining leaseholder will necessarily be required to apply to the State Government before the lapse of the mining lease.

6. The rights of specific existing concession holders and applicants under Section 10A

In Section 10A(2)(b) of the Principal Act, the following provisos have been inserted:

“Provided that for the cases covered under this clause including the pending cases, the right to obtain a prospecting licence followed by a mining lease or a mining lease, as the case may be, shall lapse on the date of commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2021:

Provided further that the holder of a reconnaissance permit or prospecting licence whose rights lapsed under the first proviso shall be reimbursed the expenditure incurred towards reconnaissance or prospecting operations in such manner as may be prescribed by the Central Government.”

Further, after Section 10A(2)(c) of the Principal Act, the following clause has been inserted:

“(d) in cases where the right to obtain licence or lease has lapsed under, clauses (b) and (c), such areas shall be put up for auction as per the provisions of this Act:”

For cases under Section 10A(2)(b), the Amendment Act provides that the Government shall reimburse the expenditure incurred towards reconnaissance permit or prospecting operations in cases where the rights lapsed. However, it has been visualised that the reimbursement sum may not be enough since the expenditure incurred by the mining lease holders is likely to be much more. [2]

The Amendment Act has also introduced Section 13(2)(u) to empower the Government to frame rules to prescribe the reimbursement of the expenditure incurred by leaseholders towards reconnaissance or prospecting operations. [3]

For cases under 10A(2)(c), unlike Section 10A(2)(b), a specific provision for lapsing of the rights has not been made. However, this is presumably because in terms of Section 10A(2)(c) of the Principal Act read with Rule 8 of the Mineral Concession Rules, 2016, the mining lease was required to be executed and registered on or before 11 January 2017, failing which the right for a grant of a mining lease stood forfeited. For this reason, the Government may argue that cases under Section 10A(2)(c) had already lapsed on 11 January 2017. Therefore, there was no need for a specific provision similar to Section 10A(2)(b) in the Amendment Act.

However, in the future, it has to be seen that how the pending cases against lapsing of rights and were there had been a grant of relief by the respective courts on the ground that the delay in execution of the mining lease was beyond their control and/or in fact, attributable to the Government will be dealt and how the judiciary applies its judicial acumen.

7. Transfer of mineral concessions

A new proviso to Section 12A(2)(b) in the Principal Act has been inserted, in terms of which the transfer of a mining lease would no longer entail the payment of any charges. However, it has also been clarified that the charges already paid for transfer shall not be refunded. The word “shall” makes it a mandatory provision.

Further, Section 12A(6) in the Principal Act, which provided that the transfer of mineral concessions shall be allowed only for concessions granted through auction, has also been removed. The objective appears to be to remove the restrictions on the transfer of mineral concessions for non-auctioned mines to attract new investment and technology in the sector.

Conclusion

On analysis of this Amendment Act, it is found that it has come up with such provisions and objectives which are intended to be boon for the nation, as it generates employment, relaxes the stringent provisions to facilitate easy entry and exit of the private sector, not only does this include the access of private companies but also enables foreign investment into this sector of energy, which had never been thought before and above all this Amendment Act will lead to the reduction of illegal mining which had been prevalent in this sector since time immemorial.

This illegal mining will be curbed to a great extent as the Amendment Act has increased penalties from Rs. 25 thousand per hectares to Rs. 5 Lakh per hectare and the term of imprisonment has been increased from 2 years to 5 years for contravention of Section 4(1) and 4(1A) of the Act. Further, any rule made under the Act may provide that any contravention thereof shall be punishable with imprisonment for a term which may extend to two years or with fine which may extend to five lakh rupees, or with both, and in the case of a continuing contravention, with additional fine which may extend to fifty thousand rupees for every day during which such contravention continues after conviction for the first such contravention. Thus, we can optimistically say that this amendment may help in reduction in illegal mining which is quite prevalent.  

However, this Amendment Act lacks in taking into concern one of the most crucial growing and alarming issues of the environment. This issue has been strongly raised and argued by various industrialists, environmentalists, lawyers and politicians. It is debated that the Amendment extends the period of validity of mining leases from 30 to 50 years, and this would be highly hazardous to nature as the open mines for such a long time would contribute to much pollution with every open mine. Mines should be closed and rehabilitated quicker for minimum environmental damage. Furthermore, there would be rise in competition in this market-leading to overexploitation of resources and conflict in the sector. [4]

Undoubtedly, the step taken by the legislature is acclaimed not just nationally but internationally. However, had it considered the above mentioned and other lateral issues, it could have been considered a perfect piece of legislation.

About the Author

Nitika Kashyap is an Associate Advocate at MV Kini & Co.

Editorial Team

Managing Editor: Naman Anand

Editors-in-Chief: Akanksha Goel & Aakaansha Arya

Senior Editor: Nutan Keswani

Associate Editor: Utkarsh Tyagi

Junior Editor: Deepa Shrisha

Preferred Method of Citation 

Nitika Kashyap, “The Mines and Minerals (Development and Regulation), 2021 (Amendment Act): Examined” (IJPIEL, 18 August 2021)

<https://ijpiel.com/index.php/2021/08/18/the-mines-and-minerals-development-and-regulation-2021-amendment-act-examined/>

Endnotes

[1] The Mines and Minerals (Development and Regulation) Amendment Bill, 2021, PRS Legislative Research, https://prsindia.org/billtrack/the-mines-and-minerals-development-and-regulation-amendment-bill-2021.

[2] Gaurav Juneja & Aayush Jain , Reforming The Mining Sector In India: An Analysis Of The Latest Amendments To The MMDR Act, Mondaq (02 June 2021) https://www.mondaq.com/india/mining/1075332/reforming-the-mining-sector-in-india-an-analysis-of-the-latest-amendments-to-the-mmdr-act.

[3] Hemant K. Batra, Understanding the Mines and Minerals (Development and Regulation) Amendment Act,2021 Financial Express (09 April 2021) https://www.financialexpress.com/industry/understanding-the-mines-and-minerals-development-and-regulation-amendment-act-2021/2230056/.

[4] India: Minerals and Mining Laws and Regulations, 8 Ct. Uncourt 30 (2021).