Government promulgates ordinance to enable new mining leases

The government on Monday promulgated the MMDR Amendment Ordinance, 2015, in a bid to address the emergent problems in the mining industry in the wake of the Supreme Court judgement cancelling all mining leases awarded over the past 10 years (See: Supreme Court cancels allocation of 214 coal blocks, spares 4).

The ordinance is intended to remove discretion in the grant of mineral concessions and to replace it by auction as the sole method of allotment.

The SC judgement has adversely affected second and subsequent renewals of mining licences, resulting in a drastic fall in output in the mining sector, leading to import of minerals by users of those minerals.

The ordinance, which seeks to amend certain provisions of Mines and Minerals (Development and Regulation) Act, 1957, is aimed at enabling new mining leases whose numbers have fallen substantially in the last few years.

As per the ordinance state governments will continue to grant mineral concessions, but all grant of concessions would now be through auctions, thereby bringing in greater transparency and removing discretionary allotments.

This would mean that the government will get an increased share from the mining sector.

Unlike in the 1957 Act, there would be no renewal of any mining concession. Instaed, the tenure of the mineral concession has been increased from the existing 30 years to 50 years. Thereafter, the mining lease would again be put up for auction (and not for renewal as in the earlier system).

The cancellation of mining leases and the consequent delays in the second and subsequent renewals of licences has led to closure of large number of mines. The ordinance addresses this issue  by providing the mining leases to be deemed to be extended from the date of their last renewal to 31 March 2030 (in case of captive miners) and till 31 March 2020 (for the merchant miners) or till the completion of the renewal already granted, if any, whichever is later. Thus, no mining lease holder is likely to be disadvantaged.

Thus the ordinance would immediately permit such closed mines to restart operations.

There is provision to establish District Mineral Foundation (DMF) in the districts where mining takes place. This is designed to address the long standing grievance of civil society that the people affected by mining are not cared for. There is a separate provision for contribution to the DMF not exceeding one-third of the royalty rate in the respective minerals.

The ordinance proposes to set up a National Mineral Exploration Trust created out of contribution from the mining leaseholders. This would allow the government to have a dedicated fund for undertaking exploration. In addition, the transferability provision (in respect of mining leases to be granted through auction) would permit flow of greater investment to the sector and increase the efficiency in mining.

The MMDR Act specifies 10 minerals (like iron ore, manganese, bauxite, copper, gold, etc) in respect of which state government needed to obtain prior approval of the central government before grant of mineral concession. The amendment removes the need for such ''prior approval'' from the central government, thereby making the process quicker and simpler.

Similarly, approval of mining plan by the government would no longer be mandatory as a provision has been added under 5(2)(b) permitting the state governments to devise a system for filing of a mining plan obviating need for approval by the government.

The ordinance also provides that the tenure of any mining lease would now be 50 years in place of 30 years in the existing Act.

Further, the central government has been given powers to intervene where state governments do not pass orders within prescribed timelines, to eliminate delay.

In order to check illegal mining, the penal provisions have been made more stringent. Higher penalties and jail terms have been provided in the ordinance. Further, a provision has been made for constitution of special courts by the state government for fast-track trial of cases related to illegal mining.

Provisions of the MMRD Act Amendment Ordinance are as follows:

  • All mineral concessions will be granted only through auction (Section 10 B &11);
  • Direct auction for mining leases for bulk minerals; auction of prospecting licences-cum-mining leases for deep-seated minerals (Section 10 B & 11);
  • Uniform lease period of 50 years; no renewals; auction at the end of lease period; will solve issues arising out of all SC judgments on second and subsequent renewals (Section 8 A (1), (2), (3) and (4));
  • Transition period of minimum 15 years for captive mines and 5 years for other mines; no sudden stoppage as a result of amendment (Section 8 A (5) and 8 A (6));
  • Central government empowered to prescribe deadlines for various processes and to issue binding directions to states (Section 20 A);
  • Central government to frame separate rules for atomic minerals (Amendment to Section 11 (B));
  • Previous approval of the central government will not be required for grant of mineral concession except for atomic minerals, coal and lignite (Amendment to Section 5(1));
  • Enabling powers for reservation for the public sector to continue (Section 17 A (2A));
  • Higher penalties and jail terms for offences; special courts may be constituted, if necessary (Amendment to Section 21(1) & (2));
  • District Mineral Foundation to take care of people and areas affected by mining (Section 9 (B));
  • National Mineral Exploration Trust to be set up for impetus to exploration (Section 9 (C));
  • Easy transferability of concessions obtained through auctions so as to attract private investment and FDI (Section 12 (A));
  • Powers to central government to intervene even where state governments do not pass orders within prescribed time lines; this will eliminate delay (Amendment to section 30).