The Union Cabinet approved a slew of reforms in the mining sector this week. While the fine print and official confirmation is yet to come, the industry is elated at the steps taken by the Centre. However, there could be concerns on the implementation at the state level and environmental impact.
“Directionally it is a good set of reforms, but since implementation of the same is with state governments, the key lies in how each state government executes it at its end. Even today for a final go or no go—in terms of approvals, it takes about 3-4 years and this scares away investors,” said Ritabrata Ghosh, assistant vice president (Corporate Ratings & Industry Research) at ICRA Ltd.
This paper reported on Wednesday that the Union Cabinet is learnt to have approved a reform package for the mineral mining sector which would entail amendments to three existing Acts, pricing formula for minerals, exploration of mines and several taxes and duties levied on mining. Officials said this is expected to boost production and private investment in the sector.
The Centre has removed any distinction between captive (self-use) and merchant (commercial sale) mines. The Centre would amend the Mines and Minerals (Regulation and Development) Act, 1957 (MMRDA) to enforce the reforms.
Government officials said the amended MMDRA would be placed in the Parliament in the upcoming session.
A senior executive with a primary steel producing company said, removing the distinction between merchant and captive mines seems like a good move for corporates. “It will allow captive owners to sell too in the market. But unless the policy is implemented and we have the official document in hand, we would not like to comment much at this juncture,” he said.
Under the proposed reforms, captive mines would be allowed to sell 50 per cent of the minerals excavated in a year. The Centre has also proposed to give 50 per cent rebate in the quoted revenue share, for the quantity of mineral produced and dispatched earlier than scheduled date of production. The Centre has proposed to amend the section 10A(2)(b) & 10A(2)(c) of the MMDRA in order to unlock more mines for auctioning. This would entail Centre auctioning the pending mining leases as well.
R K Sharma, secretary general, Federation of Indian Mineral Industries (FIMI), said, “It is a move in the right direction. This will lead to more resource development as auctions are made attractive. FIMI welcomes this move.”
But as more mines come under the auction, there are concerns that the environment and social impact of mineral mining would also increase significantly.
Kanchi Kohli, said with the shift from captive to commercial use, without any end use restrictions, it will be virtually impossible to regulate the footprint, as minerals will be transported to places wherever mine developers find demand and higher rates of returns.
“Environmental laws are designed to lay down conditions based on disclosures made prior to mineral extraction so that approvals can be granted or rejected based on the level of impacts. With the new set of proposed changes, this will be impossible to predict or monitor and the impact areas are likely to constantly shift and evolve. It is clear that the present amendments have not undergone an evaluation of their environmental viability or social consequences,” she said.
The Centre has also proposed to reallocate non-producing blocks of public sector utilities so as to increase the number of mines into production. It is learnt that the Centre would also ask PSUs to facilitate production from those mines which were auctioned in March 2020 but have started production even after transfer of valid rights, clearances, etc.
As part of the mining reforms, the Centre will amend the Indian Stamp Act, 1899, in order to bring uniformity across the States in calculation of stamp duty. The MEMC Rules (Minerals (Evidence of Mineral Contents) Rules, 2015) will also be amended for inclusion global exploration standards.
“With such changes on commercial mining and revenue sharing, the measure of mining efficiency will shift from total tonnage of mined ores to profit/hour of mining operations as a leaseholder or as nation,” Saurabh Bhatnagar, partner and national leader, metals & mining, EY India said.