Ostensibly, the mining amendment bill passed by Lok Sabha on Tuesday seeks to increase transparency in India's mining sector, by replacing discretionary allotments of mines with competitive auctions. But a careful reading shows that the possible outcome of the bill might differ sharply from its stated intention.
The amendments to India's mining law were first made by the Narendra Modi government through an ordinance in January. A day after it promulgated the Mines and Minerals (Development and Regulation) Amendment Ordinance, 2015, the government put out a press note which said:
In pursuance to this, Section 11 (5) of the amended law states that mines shall be given out through competitive bids: "For the purpose of granting prospecting licence-cum-mining leases, the State Government shall select, through auction by method of competitive bidding."
So far, apart from coal, mineral grants for all major minerals like iron ore, bauxite, manganese, were made by the centre on the recommendations of state governments which enjoyed wide discretion in choosing applicants.
But Section 10 A of the amended law cancels all pending applications for mining grants to pave way for competitive auctions except for those mines for which reconnaissance permits and prospecting licences have already been granted.
This is a significant caveat. In most parts of India, the presence of mineral reserves has been mapped, say mining activists, and permits and licences have been issued for their exploration. "Take the case of iron ore deposits in Chhattisgarh," said Sudeip Shrivastava, lawyer and activist. "Except for the district of Kawardha, where deposits were found recently, RPs and PLs have been issued for all other deposits in the state."
The status of iron ore deposits as listed on the website of the government of Chhattisgarh showed this was indeed the case. "By amending the law in this manner the government hasn't made mines available for competitive bidding," Shrivastava said, "but instead saved them from it."
Automatic extensions
Another way that the ordinance saves mines from auctions is by automatically extending existing mining leases by five-15 years. Normally, a mining lease is granted for 30 years. If the company holding the lease has not violated any conditions, it can get a renewal of 10 years, and even a second renewal.
But Odisha government decided not to extend second renewals to several iron ore and manganese mines. Keen to move to an auction-based model which could help it earn more revenue from the mines, it notified mining auctions in the first week of January. "But before the notification could be implemented, the centre has extended the leases through its ordinance," said Deepak Kumar Mohanty, the director of mines, Odisha. "We will have to abide by it."
Those mining ore for captive use in their factories get to keep their mines until 2030, while those mining for commercial sale get time until 2020. The lifetime of a mining lease has been extended from 30 years to 50 years. The centre has argued that the extension was necessary to allow for a smooth transition to auctions.
Jumping the gun
But the amendments not only postpone the auctions, they also potentially make them less effective.
So far, mining rights were granted in a step-by-step process. Once the presence of minerals was discovered in an area, state governments issued prospecting licences to companies interested in exploring them further. After the company arrived at an estimate of the mineable reserves, it gained the first right to mine it, for which it had to apply for a formal mining lease.
The ordinance has collapsed the two steps into one. Now, companies do not need to get a prospecting licence first. They can directly bid for a prospecting licence-cum-mining lease.
This means that at the time of making a bid for, say a bauxite mine, a company will not know the quantum of mineral available to be mined. "Without prospecting, it would be difficult to assess mineable reserve," said Mohanty. "It is not clear then what would be the parameter of auctioning."
"The ordinance creates a fait accompli where even before the economic potential of a mineral-bearing tract has been assessed," said Shrivastava, "it would be gone."
Federal reversal
For a government that claims to believe in greater federalism, the speed and manner in which it has amended the mining law shows disregard for the states. The United Progressive Alliance government held extensive consultations with the states while drafting a new mining law but could not build consensus on it within its own cabinet.
In contrast, the Modi government has pushed the amendments with lightening speed, but in the process, it has bypassed the states. Not only has it extended the period of future leases to 50 years, it has also retrospectively extended the period of existing mining leases to 50 years. This has reduced the room for manoeuvre available to the states to use their mineral reserves according to the needs of their economies.
The only state to have vociferously objected to the amendments is Odisha. The other important mineral-bearing states like Chhattisgarh, Jharkhand and Goa are ruled by the Bharatiya Janata Party.
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The amendments to India's mining law were first made by the Narendra Modi government through an ordinance in January. A day after it promulgated the Mines and Minerals (Development and Regulation) Amendment Ordinance, 2015, the government put out a press note which said:
“Essentially, Government intended to remove discretion in grant of mineral concessions. All mineral concessions are granted by the respective State Governments. They will continue to do so but all grant of mineral concessions would be through auctions, thereby bringing in greater transparency and removing of discretion. This should also mean that the Government will get an increased share from the mining sector.”
In pursuance to this, Section 11 (5) of the amended law states that mines shall be given out through competitive bids: "For the purpose of granting prospecting licence-cum-mining leases, the State Government shall select, through auction by method of competitive bidding."
So far, apart from coal, mineral grants for all major minerals like iron ore, bauxite, manganese, were made by the centre on the recommendations of state governments which enjoyed wide discretion in choosing applicants.
But Section 10 A of the amended law cancels all pending applications for mining grants to pave way for competitive auctions except for those mines for which reconnaissance permits and prospecting licences have already been granted.
This is a significant caveat. In most parts of India, the presence of mineral reserves has been mapped, say mining activists, and permits and licences have been issued for their exploration. "Take the case of iron ore deposits in Chhattisgarh," said Sudeip Shrivastava, lawyer and activist. "Except for the district of Kawardha, where deposits were found recently, RPs and PLs have been issued for all other deposits in the state."
The status of iron ore deposits as listed on the website of the government of Chhattisgarh showed this was indeed the case. "By amending the law in this manner the government hasn't made mines available for competitive bidding," Shrivastava said, "but instead saved them from it."
Automatic extensions
Another way that the ordinance saves mines from auctions is by automatically extending existing mining leases by five-15 years. Normally, a mining lease is granted for 30 years. If the company holding the lease has not violated any conditions, it can get a renewal of 10 years, and even a second renewal.
But Odisha government decided not to extend second renewals to several iron ore and manganese mines. Keen to move to an auction-based model which could help it earn more revenue from the mines, it notified mining auctions in the first week of January. "But before the notification could be implemented, the centre has extended the leases through its ordinance," said Deepak Kumar Mohanty, the director of mines, Odisha. "We will have to abide by it."
Those mining ore for captive use in their factories get to keep their mines until 2030, while those mining for commercial sale get time until 2020. The lifetime of a mining lease has been extended from 30 years to 50 years. The centre has argued that the extension was necessary to allow for a smooth transition to auctions.
Jumping the gun
But the amendments not only postpone the auctions, they also potentially make them less effective.
So far, mining rights were granted in a step-by-step process. Once the presence of minerals was discovered in an area, state governments issued prospecting licences to companies interested in exploring them further. After the company arrived at an estimate of the mineable reserves, it gained the first right to mine it, for which it had to apply for a formal mining lease.
The ordinance has collapsed the two steps into one. Now, companies do not need to get a prospecting licence first. They can directly bid for a prospecting licence-cum-mining lease.
This means that at the time of making a bid for, say a bauxite mine, a company will not know the quantum of mineral available to be mined. "Without prospecting, it would be difficult to assess mineable reserve," said Mohanty. "It is not clear then what would be the parameter of auctioning."
"The ordinance creates a fait accompli where even before the economic potential of a mineral-bearing tract has been assessed," said Shrivastava, "it would be gone."
Federal reversal
For a government that claims to believe in greater federalism, the speed and manner in which it has amended the mining law shows disregard for the states. The United Progressive Alliance government held extensive consultations with the states while drafting a new mining law but could not build consensus on it within its own cabinet.
In contrast, the Modi government has pushed the amendments with lightening speed, but in the process, it has bypassed the states. Not only has it extended the period of future leases to 50 years, it has also retrospectively extended the period of existing mining leases to 50 years. This has reduced the room for manoeuvre available to the states to use their mineral reserves according to the needs of their economies.
The only state to have vociferously objected to the amendments is Odisha. The other important mineral-bearing states like Chhattisgarh, Jharkhand and Goa are ruled by the Bharatiya Janata Party.
