BackMining gets a second life but niggles remain
In the long run, if the amended law works well, investments will flow into the mining sector as a transparent allocation of mining leases is prescribed
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Last week, news reports said the government is rejecting the winning bids of four coal block auctions, ostensibly because they were low. If true, it highlights that shades of grey are likely to persist in the mining arena, despite claims that the auction design was foolproof. The government also passed a bill last week, which makes crucial amendments to the mining law. Most of these provisions were part of an earlier ordinance but it does have a few amendments, one of which is critical for existing operational mines.
Under the earlier ordinance, new mine leases came with the condition of paying up to one-third of their royalty into a state-administered district mineral foundation. The bill, however, extends this to all existing mining lease-holders. Moreover, the quantum can be as high as the entire royalty payment. This is likely to affect all mining firms, depending on the rate of contribution specified by the state government, with metal firms feeling the brunt, while power companies may get away by passing it on to consumers.
Under the new bill, iron-ore, bauxite, limestone and manganese have been moved into a new classification as these are available on the surface, and assessing their potential is easier. New mining rights for these minerals can be issued only by auctions by the states. For the rest in the list, the state governments can either issue non-exclusive reconnaissance permits or can issue, only by auction, prospecting-cum-mining licences. Mining of coal and atomic minerals remain under the purview of the central government.
The new bill also prescribes a long tenure for leases—for coal and lignite, a minimum of 20 years and a maximum of 30 years, and renewable by 20 years. For other minerals, mining leases will be issued for a period of 50 years, after which the mines will be re-auctioned. All existing and valid leases have been given automatic extensions of varying periods.
In the long run, if the amended law works well, investments will flow into the mining sector as a transparent allocation of mining leases is prescribed. By extending the existing mining leases, the government is ensuring that the mining leases that may expire or are up for renewal are not arm-twisted into bidding in auctions. That prevents disruption in the existing mine output.
But the report of the Select Committee in Rajya Sabha has said the amendment does not take a holistic view of the problems facing mining, including “regulation and development of mining, on the one hand, and people’s involvement, tribal interests, environment issues and other germane matters". That seems a valid criticism. After all, the problems associated with mining that have resulted in protests, litigation, investigations and adverse judicial judgements are not just about arbitrariness in allocations. They are also about the implementation of the existing laws and the impact of mining on environment and the people staying in and around these areas.
Members of Parliament have also criticized the law, saying that it encroaches on the powers of the state government. They have even raised the fear that it can be challenged as being unconstitutional. The government has said it will take care of the states’ concerns while formulating rules for the law’s implementation. That is yet another aspect to watch out for as that will determine how the law is implemented, and may have some surprises as well.
One can also say that the amendments vest states with the discretion to set the rate of contribution to the district fund and also its use. This leaves open the prospect of unhealthy lobbying and of potential diversion of funds to activities other than development of the district. The government may also need to acquire land for giving new mining leases, which, in turn, depends on what shape the pending land acquisition legislation takes.
In the near run, metal firms will see input costs increase as a result of the contribution to be made to the district fund. This hit comes at a time when both demand and metal prices are under pressure. But the automatic extension of the existing mines is a relief. In the long run, the allocation of mines should become smoother, and if the prospecting-cum-mining lease auctions are a success, then one can see a fresh wave of investments flowing into mining.
But ensuring that mining is done in a sustainable manner, and displaced people are not left hanging dry is not just a humanitarian requirement but also to ensure that mining activity picks up at the ground level.
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