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Mint Explainer: How will changes to the law affect India's mining sector?

The government has also made changes to land demarcation and classification rules for mineral blocks (Photo: Aniruddha Chowdhury/Mint)
The government has also made changes to land demarcation and classification rules for mineral blocks (Photo: Aniruddha Chowdhury/Mint)

Summary

  • Currently around only 1% of the global exploration budget is spent in India despite the country’s vast resource base

The government has decided to increase private participation in mining with the goal of attracting technology and capital to the sector. It made amendments to the Mines and Minerals (Development and Regulation) Act, 1957 during the recently concluded monsoon session of Parliament to allow the private sector to participate in the exploration and mining of critical resources such as lithium. Mint looks at how the changes could affect the sector.

What changes has the government made to the MMDR Act?

The government has amended the MMDR Act to allow private-sector participation in the exploration and mining of critical minerals such as cobalt, copper, graphite, lithium, molybdenum, nickel, phosphorus, potash, silicon, tellurium, titanium and tungsten. Most of these minerals could earlier be mined only by government companies, and limited exploration restricted their production. Now, the private sector will be able to secure a composite licence (for exploration and mining) for some of these minerals. Standalone mining companies will also get exploration licences to establish mineral blocks and generate revenue through the life of the mine (about 50 years).

What are critical minerals and what makes them so?

In July, the government released a list of 30 critical minerals for India. Some of these are rare while others have wide industrial and defence use. Until recently, India was dependent on imports for many of these critical minerals, which command a big premium globally.

What is the government’s plan for mining critical minerals?

The government has proposed auctioning about 90 mining blocks containing minerals such as lithium, cobalt, copper, nickel, titanium, phosphorus, gold and silver by the end of the year. Rules for auctioning these mining blocks are being finalised.

The government has also made changes to land demarcation and classification rules for mineral blocks that are expected to expedite the process of clearly demarcating mining areas and preparing the blocks for auction. The government has allowed states to use the PM Gati Shakti National Master Plan’s online records or records of any other government agency to demarcate land for mining blocks.

What is India’s potential in critical minerals?

India has 6.88 lakh sq km of obvious geological potential (OGP) areas, of which only about 1.97 lakh sq km has been identified as high potential area by the Geological Survey of India. Currently around only 1% of the global exploration budget is spent in India, making this activity extremely sluggish despite the country’s vast resource base. Bringing in specialised mining companies from the private sector is aimed at realising some of this vast, untapped potential.

How will private companies be granted exploration and mining licences?

The amendments empower the central government to exclusively auction mining lease and composite exploration licences for certain critical, high-value minerals. This is aimed at ensuring transparency and continuity in the process while giving confidence to private investors risking their investments in long-gestation projects. While the government will conduct auctions for these minerals, all revenues including royalties will be given to states where the mining takes place.

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