Mining Sector Reform in India: Mining Leases with Pre-embedded clearances

08062020 - Rajesh Deoliya  [rajeshdeoliya@gmail.com] To attract the investment in the mining sector, Government of India and State Governments are doing mammoth work to erase the hurdles in the way of commencement of mining operations. In recent past government of India has brought about several amendments in Mines and Mineral (Development and Regulation) Act-2015, Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules- 2016 and also in the Environment (Protection) Act,1986.These reforms will certainly help in bringing new investment because a project proponent or successful bidder is assured about the support of respective state government and it's authorities in commencement of project within the stipulated timeline.  It is a fact that the contribution of mining sector in the GDP and employment is almost decreasing due to lack of new investment. According to the Federation of India Mineral Industries (FIMI), which in a report states that the mining industry’s contribution (excluding petroleum and natural gas) to India’s GDP in 2018/19 was pegged at 1.63%, down from a peak of 1.93% in 2012/13. In comparison, mining contributed 7.5% to South Africa's GDP and 6.99% to Australia's GDP. (Source: Mining Weekly, 27th January,2020)  This is because we are not able to bring  virgin areas into production.   To attract investment in the mining sector, year 2015 onward drastic changes in the procedure of allocation of mining lease were made. The then existing preferential right (First cum First Serve) clause in grant of mineral concessions was scrapped for buoyant auction of mining lease. This change brought transparency in the grant of mining leases and assured premium to government in terms of revenue generation but the high payments to government in bidding  and delay in the projects due to delay in grant of permissions, approvals and clearances made things worst in favour of successful bidders. The government has realized the issues and came up with an amendment by an order of Ministry of Mines, Government of India dated 03.06.2020 paving way for grant of some of the mining leases having pre-embedded clearances for mining projects (lease). Initially this will be a pilot project i.e each state government will identify 5 mineral blocks in pre-embedded mode and others in normal auction mode in which all the clearances will be obtained by successful bidder.

The Pre-embedded clearances: In general, the auction blocks require following clearances/ permissions for commencement of mining operation: 1.    Forest Clearance 2.    Wild life clearance/ The NoC from Wild Life Conservator of Forest. 3.    Mining Plan approval 4.    Environmental clearance 5.    Consent to Establish 6.    Consent to Operate 7.    Explosive license 8.    Mine opening permission 9.    Permission for installation / trail operation of equipment 10.  Ground water clearance 11.  Railway Siding approval 12.  Power line from state DISCOM 13.  Approval for diesel storage 14.  Clearances related to the work under an existing transmission line or        shifting of the transmission line 15.   Gram Sabha consent 16.   NoC from Panchayat Apart from these some more permissions are also required which may also be part of pre-embedded clearances  17.  Aravali Certificate ( applicable in Aravali Hill range areas) 18.  NoC from revenue records. 19.  Transfer of Government land and falling in the mining lease are 20.  DGMS Permissions 21.  Approval of Rehabilitation / Resettlement plan 22.  Social Impact Assessment studies 23.  Land Acquisition. 24.  Stoppage of sale or purchase of land in the mine block area to protect the interest of successful bidder.

The Project Monitoring Unit (PMU): In the newly proposed system pre-embedded permissions for a mine block will be arranged by a PMU which will engage subject experts to obtain permissions like approval of mining plan, environmental clearance, forest clearance etc. The PMU will arrange the land rights for government as well as private land which will be transferred to successful bidder.    The expenditure incurred by PMU / state government in obtaining clearance will be charged from the successful Bidder.

The Pre- caution: Since the PMU will be a government body and project will be undertaken by a private body, precautions have to be taken in design of project concept and project budget. A project seems viable to PMU may not be viable to bidders. ii) Issues of Project Concept and Viability: The PMU has to do some preliminary work related to the project concept and its viability. Say for example, the mining plan and environmental clearance are production and technology specific, these are decided by a project proponent based upon his experience with technology, market conditions, financial capabilities, short term and long term business planning etc, for entire mine life. In the absence of such knowledge, the project concept designed by PMU may not be encouraging to project proponent and rather may result in distraction. iii) Issues in Production Design: The successful bidder may require change in the mine production immediately or after some time. The restriction of liberty of 25 percent change in the mine plan production is a limitation because if PMU takes clearance at high production than it will be almost difficult for project proponent to modify the business plan. A general tendency of a project proponent is to keep mine production at minimum possible level for first five year and then increase it in subsequent plan period in such a way to extract the entire mineral in the remaining life of mine. Approaching MoEFCC for change in production will again result in delay. For higher production the state government may not raise any objection but for lower production planning by successful bidder, the state government may not agree because of anticipated loss of revenue and changes in the Mine Development and Production  Agreement (MDPA) which is essential part of mine lease deed. Since the mine blocks are of commercial nature a bidder may not find ample orders for disposal of higher mineral production in the market. This will attract penalties, appropriation of performance securities which may lead to cancellation of mine too. If successful bidder decides for captive use then also the pre-decided production parameters may not be attractive. iv) Issues of Public Commitments: In public hearing the state government will do all the commitments on behalf of project proponent because project proponent will not be part of public consultation process which may result in conflict between successful bidder and community. This can be avoided by reasonable commitments and giving liberty to the successful bidder to modify commitments upon interaction with the community once project commences.

The Conclusion: The above discussion may appear negative but it is only about pre-cautions in deciding the project parameters for pre-embedded mine blocks in such a way that they are attractive to the bidders and achieve the goal of extraction of minerals from mine blocks. The pre-embedded mine blocks are expected to get good response. The process will save time in commencement of mining projects and deal with the issues of development of backward areas. Since government is involved in obtaining the clearances, the community may find the project more trustworthy and support it. The  success of these mine blocks will open the doors for government participation in other development projects also. So this is a welcome move by the government. *** Note: Readers are requested to share their thoughts and post in the comment box of             this blog to improve the content for the benefit of society.  IT is also requested to             share with those who are interested in the development of mining industry.    Disclaimer:  The views expressed here are of writer only and do not belong or express                      views to any organization, person associated with.