New Delhi: On 22 March, Parliament cleared the Mines and Minerals (Development and Regulation) Amendment Bill, 2021, bringing in many reforms to India’s untapped mining industry.
In episode 709 of ‘Cut the Clutter’, Editor-in-Chief Shekhar Gupta explains why the MMDR Amendment Bill is crucial.
Untapped potential of mining industry
Introducing the bill in the Rajya Sabha Monday, Union Minister for Mines Pralhad Joshi said mining in India contributes to only 1.75 per cent of the GDP, while the share for countries like Australia and South Africa is about 7 per cent of the GDP. The minister added that India shares this potential.
India produces coal worth Rs 1.25 lakh crore, yet heavily imports it despite being the third largest storehouse of coal in the world. It also has 22,000 million tonnes of iron ore reserve — enough to last India another 100-150 years. Additionally, the mining sector in India produces over one crore jobs, said Gupta.
According to the Geological Survey of India estimates, India has 500 million tonnes of gold ore but that ore isn’t of good quality, which is why most gold mines have gone to seed. “Let’s take the ballpark figure of $30 billion a year — that is Rs 2.2 lakh crore or thereabouts, of import of gold every year. That is about a little less than half of all our petroleum and gas imports,” explained Gupta.
A lot of mining is also done illegally, said Gupta, which can be devastating for the environment. The laws around illegal mining are strict, and the smallest fault can invite closure of the mine — which invests a lot of power in the hands at many levels of bureaucracy and works as an “ATM machine” for the entire chain and then nobody worries about the environment, reinvestment or restoration of the soil, he added. “All these things have festered because of an outdated law.”
Reforms in the law
The new law brings in a number of reforms, Gupta explained. Now, PSUs (public sector units) which have old mining contracts will be given extensions on the basis of a payment. Earlier, one had to reapply for clearance after a lease expired. Now the clearances continue for the life of a mine, even after the expiry of the lease.
Restrictions on the end use of minerals by captive plants have been relaxed. Captive mines produce minerals for the exclusive use by the company that owns them, “…you can use 50 per cent of minerals on your plant if you’ve taken a captive mine and remaining 50 per cent can be sold in the market. This means there is incentive now for people with captive mining leases to produce more,” Gupta said.
This reform helps in many ways, explained Gupta. For example, manganese, which is a byproduct of iron ore production, currently cannot be used by captive mines for anything at all and just piles up by the side of mines because companies cannot sell or refine it. “This is a big change because while India imports oodles of manganese from countries like South Africa, Zimbabwe, its own manganese lies wasted,” he said.
The reform will also prevent hoarding of mines — since you can sell in the market, the incentive to hoard is gone.
The new law mandates that whoever takes a mining lease has to start producing within three years of taking such lease or the lease will be taken over and the mine will be re-auctioned.
Hoarding is quite an issue, currently, and data suggests that of the 2,904 mining leases, 1,900 — that is two thirds — are lying unused, non-working and unexploited. Even PSUs have 297 functioning leases right now of which 199 minds are non-functional and non working.
The new law also gives license of use of minerals along with the license for exploration, which gives an additional incentive for exploring more. “This is a good reform since this leads to a seamless exploration and production cycle which wasn’t there earlier,” Gupta said.
The new law states the Centre will take over the auction of mines if the state fails to do so over a certain period of time, which the Centre and state will determine among themselves. However, even if the Centre auctions the mine, all proceeds from it will go to the state only.
Gupta said this is sugar-coating a very bitter pill: “States are protesting (against) this because, you see, India’s mineral-rich states like Jharkhand, Odisha, Chhattisgarh, even Rajasthan aren’t run by the BJP, currently. So the states see this as an encroachment of their rights.”
The Centre, however, argues this is an incentive for the states to increase mining. According to the Centre, of the 143 mines allocated to the states for auction, only seven have been auctioned in the past six years.
Every mine owner has to give a percentage of the proceedings to the district mineral fund, which will be used to restore the place — Rs 45,000 crore have been collected under the fund of which less than half has been used. “Through this law, the Centre has empowered itself to tell states how best to use these funds,” Gupta said.
The National Mineral Exploration Trust which gets 2 per cent of mineral royalties has Rs 2,300 crore in its corpus of which it has been able to use only Rs 308 crore. “The central government now plans to empanel a bunch of private mining industry players, who will then be given incentives out of this fund to explore for more minerals in India,” Gupta explained.
Watch the full episode here: