MMDR ACT,2015: Proposed amendments in Indian Mining Regulation

04052020

- Rajesh Deoliya

At the time of writing this piece, the news in the air is that the ministry of mines, Government of India is in process of amendment of certain sections of Mines and Minerals (Development and Regulation) Amendment Act-2015. i.e MMDR,2015.  The issue with this act is that it has not been able to fulfill the requirements for which it was made. The Act has seen frequent amendments. One may say that this shows government's readiness to remove the blockades for smooth operation of mines and mineral regime, but in other way it can also be said that the Act was made in hurry without considering the ground difficulties of its successful implementation. The MMDR, 2015 has been the paradigm shift in the regulation and development regime of mining industry in the country from its predecessor, the MMDR,1957 ( section 11). The First Come- First Serve" criteria of grant of Mining Lease / Prospecting License changed into the " Auction " process. The Supreme Court in its famous 2 G Judgment dated 02.02.2012 and Ashok Chawla Committee favored the grant of mineral concessions through " Auction Process". Industry also took the decision in  sporting manner considering ease in obtaining mine blocks and took part in the bidding of in aggressive manner but soon the mood evaporated and poor responses raised alarm bell in the government to appropriate the provisions of Act in a manner to encourage wider participation for development of mining sector. The signals which are now coming to public indicate some major changes hence it would be imperative to have an insight on these rumors assuming them as certain.  

i)       Deletion of 10A (2b and 2c) Sections from the  MMDR,2015:

In the MMDR,1957 the mining leases were granted through  a) prospecting license  (PL) culminating in grant of mining lease after proving of existence of mineral during prospecting, and b) direct mining lease in certain cases, where existence of mineral in an area is already proved. The process of grant of mineral concession was based on " First Come- First Serve basis" ( FCFS) with preferential rights. However, in the wider interest  state governments were also granting mineral concessions to those who were not qualifying in " FCFS"  criteria and far behind in the queue. Such grants were common and frequently challenged in the courts for non-transparency and favoritism. To avoid this, grant of mineral concessions through auction was introduced in MMDR,2015 and accordingly, the Mineral Auction Rules were also framed. To bring existing mineral concessions into auction premise, government brought the section 10A2(b) and (c). The 10A2(b) included  mineral concessions of PL route while 10A2(c) included mineral concessions where "Letter of Intents" for grant of mining leases were issued prior to the enactment of the MMDR,2015 i.e 12.01.2015. The Act gave only 2 years time famously called as sunset clause i.e upto 12.01.2017 to the 10A2(c ) cases to convert letter of intents  into a valid mining lease by securing environmental clearance (EC) within this period ( later relaxation in EC was given). The cases of prospecting license falling in 10A2(b) got immunity as PL takes time in proving the existence of mineral. In today's context the 10A2(c) has no relevance because the timeline has elapsed and letter of Intents have either became null and void or converted into valid mining leases. But there are many cases lying for disposal in 10A2(b) before various state governments. Since more than five year's time has gone by and many PLs have not converted into mining leases. The central and state governments have concerns and desire to delete the 10A2(b)  to make them available for fresh auction to prospective bidders to expedite mining activities.  It is said that about 600 mines can be opened through this route to boost the local economy. But in low demand market, bleeding economy, bidding premium, tight time schedules for commencement of mining operations, high land cost, Adivasi land related issues, high market value of land, difficulty in getting permissions for utilization of surface or ground water  for  project etc; where are bidders?. The existing holders of 10A2(b) mineral concessions should be encouraged to commence mining operations instead of  cancelling them and pushing them for auction, calling litigation.        

ii)         Removal of captive and non-captive mines clause:

 At present the minerals concessions are either for captive use( related to end use plant)  or for non- captive ( i.e commercial mining. It will be a good step if it is left to the successful bidder of mining lease  to decide the end use of  mineral. The high price offer in the bidding will ultimately force a successful bidder to set up a captive unit or enter into a long term agreement with an end use plant for supply of mineral.

iii)         Termination of captive leases from year 2030 to 2025 and auction such mines without any first right of refusal:

The MMDR,2015 in section 8 A prescribed expiry of captive mines on 31.03.2030 after that these mines would be granted through the auction with right of refusal to present lessee. The central government seems to be in hurry to bring many such operating mines into auction fold  but as opined above it may not be feasible. The mining lease holders have already done huge investment in development of these mines and in turn contributed to local economy. Instead of reward the change in the expiry period from year 2030 to 2025 will be a sort of a punishment. Apart from this the state governments may lose revenue from these working mines. Imposition of such condition will foreclose the mines and mine owners go to court for legal remedy, which is a long process. Such frequent change will also generate mistrust in the government and bar investors to make investment decision in the mining sector. An extension of time after year 2030 to such mines would be a better and industry friendly option.

iv)         Transfer of mines seamlessly:

Mining industry should also be considered a business at par with other businesses where transfer, change of ownership, equities are common business transactions but in case of mining lease it has restrictions and attracts premium in the form of 80 percent of Royalty, huge performance security and upfront amounts which is additional burden upon transfer to new lessee. The mining is the major contributor to the local economy. Absence of easy transfer method resulted in suspension of mining operations by ML holder.  The transfer of mining leases should be allowed  seamlessly without any premium or additional financial burden.

iv)         Stamp duty issues:

The registration of mining lease requires payment of stamp duty.  The great variation in the stamp duty charge from one state to other state at the time of execution of mining lease deed has become a big hindrance in development of mining leases. In some cases it is in hundreds of crore rupees which was only few lakhs in pre-auction era. The stamp duty charges are sometimes becoming more than the performance security and upfront amounts. The stamps duty calculation in the auctioned mining lease cases has to be rationalized in such a way that bidding premium and  value of mineral resources based on average  sale price of  mineral are excluded in deciding the stamps duty.     

v)         Illegal mining issues:

In the Common Cause judgment ( WP(C) 114 of 2014 (Common Cause vs UOI & ors) Supreme Court  observed irregularity in mining operations and held  that a)  mining  without a valid environment clearance  is an illegal operation,  b)  miners to adhere  the mining plan as well as  to environment laws,  c) punitive action in  illegal mining cases  as fine and  jail term  and return of the mineral or its value in compensation of the MMDR Act. This has been the matter of great concern to the mining companies as in the near vicinity of a mining lease( where lease holder has no control)  if somebody has mined a mineral than in the absence of evidence, it's blame was put over the adjacent mine owner, production related violation was also part of illegal mining while they may be violation of the approved quantity.  However, some real illegal mining by the valid mining lease holders may also be there.  In Coal, bauxite, iron ore, high grade limestone, gemstone mining areas etc.; such illegal mining is very common. The Coal India Ltd and other companies have been fined in thousands of crores of rupees for illegal mining. These fines have affected the financial position of mining companies.  A proper definition of "Illegal mining" is need of the hour for the proper development of minerals and mining industry.

vi)         Increasing employment potential in mining sector:

The mining sector in recent years is one of the worst hit area, the contribution to the GDP is decreasing. Since, new mines are not coming up, job potential to mining professional is reduced. Due to this, the mining sector has become unattractive to young professionals. It is pertinent to give some proportion of the new mining leases to young mining professional without auction as means of self employment instead of giving all mining leases to corporate sector. 

There is need to look mining sector in such a way that the sector is opened to everybody, not only restricted to financial majors. Ease of doing business encompasses making large scale participation of general public also, the present Act does not involve people who have net worth few lakhs or few crores rupees. The Act will require more new amendments in future and fear is that, it may lose its soul. 

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