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Business News/ News / Centre plans to set up Offshore Areas Mineral Trust

Centre plans to set up Offshore Areas Mineral Trust

Centre to charge a sum equivalent to 10% of the total royalty paid on the sales of minerals produced in these areas

The ministry has so far identified around 35 off-shore mineral blocks on both the East and West coast. (Photo: Mint)Premium
The ministry has so far identified around 35 off-shore mineral blocks on both the East and West coast. (Photo: Mint)

New Delhi: The Centre plans to set up an Offshore Areas Mineral Trust (OAMT) Fund by charging a sum equivalent to 10% of the total royalty paid on the sales of minerals produced in these areas, two persons aware of the development said.

The amount will be over and above the royalty paid to the Centre for each mineral category produced in a block in offshore areas, the first person quoted above said.

The proposal is expected to be included in new rules for this mineral category that are being finalized by the union mines ministry post inter-ministerial and stakeholder consultation.

The ministry has so far identified around 35 off-shore mineral blocks on both the East and West coast. About 10 of these blocks are expected to be put under auction immediately after the new government assumes office.

OAMT, which will set up a non-lapsable fund under the Public Account of India to promote mining in offshore areas, will begin once production starts in these blocks. The Offshore Areas Mineral (Development and Regulation) Act has proposed a four-year timeline for the start of production and dispatch from an auctioned mineral block after the execution of composite licence or production lease.

“OAMT is being set up on the lines of National Mineral Exploration Trust (NMET) where about 2% of royalty is collected for surface minerals for building a fund to support exploration and development of mines. Against a lower percentage of royalty for other minerals, higher 10% payout is proposed for offshore minerals given complexities of exploration and mining in these difficult areas and production from these blocks is yet to commence," said the second person quoted above.

The OAMT fund will support activities for the benefit of project-affected persons, while also promoting R&D and exploration activities for offshore minerals. This assumes importance given that the entire earnings from mining in offshore areas including royalty payouts will accrue to the Centre with states being kept out. So, royalty, auction premium and other revenues from the production of minerals from offshore areas shall accrue to the Union government.

The plan stems from the focus that extraction of minerals from these areas will serve India's strategic interests and give it a stronger hold in its territorial waters that otherwise also sees constant threat of ingression by neighbouring countries.

Queries sent to the ministry of mines remained unanswered till press time.

“Higher duty on mining and production is one of the reasons while auctions of mineral blocks have not received encouraging response from private miners. Also, auction of blocks for exploration is not required rather junior mining companies should be offered blocks on nomination to keep exploration and production of minerals economic," said R.K. Sharma, secretary general, Federation of Indian Mineral Industries (FIMI).

"The move by the central government is consistent with the constitutional scheme and a progressive policy. The Trust Fund should create a corpus of funds earned from sharing in the profits generated by private miners of minerals which would be available to the government to facilitate exploration and development efforts," said Amit Kapur, joint managing partner, JSA Advocates.

Offshore mining or deep-sea mining refers to the process of retrieving mineral deposits from the ocean bed lying below 200 metres. The process of extraction of minerals involves taking giant suction pipes to the seabed and stir up metallic objects and mineral deposits. These metals are needed to produce wind turbines, solar panels, batteries, and smartphones.

The government proposes to harness 79 million tonnes of heavy minerals lying untapped along India's 7,517-km long coastline. The auction will be for lime mud within the EEZ (exclusive economic zone) off Gujarat and Maharashtra coasts, construction-grade sand off Kerala coast, heavy mineral placers in the inner-shelf and mid-shelf off Odisha, Andhra Pradesh, Kerala, Tamil Nadu, and Maharashtra.

Phosphorite in the Eastern and Western continental margins, polymetallic Ferromanganese (Fe-Mn) nodules and crusts in Andaman Sea and Lakshadweep sea will also be put under auction to the private sector.

Parliament enacted the OAMDR Act, 2002, to provide for development and regulation of mineral resources in offshore areas which include the territorial waters, continental shelf, exclusive economic zone, and other maritime zones of India. The Act was amended in 2023 to bring private sector explorers and miners into mining of these critical resources as well as introduce new production licence and composite licence for the private sector. Under composite licence a block holder will explore a block and get to mine the block post exploration.

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Subhash Narayan
Subhash is the infrastructure editor at Mint and tracks the momentous developments taking place in the space that is fast changing the Indian landscape. He feels that reporting has been a passion that provides the necessary adrenaline rush and keeps you going.
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Published: 12 Mar 2024, 07:13 PM IST
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