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Confusion over nod to mining ordinance

Press Trust of India on Monday reported the Cabinet had approved an ordinance for the auction of iron ore and other minerals, a route the Centre had also used to bring about reforms in coal, insurance and land acquisition. But sources told Business Standard that, although an ordinance to amend the Mines and Minerals Development and Regulation (MMDR) Act of 1957 came up for discussion at the meeting, it might not have been cleared.

The Act governs the mining sector, vital for Prime Minister Narendra Modi’s ambitious ‘Make in India’ programme, as it contributes raw materials such as iron ore and bauxite for industries.

The sector is, however, grappling with allegations of illegality in allocation and exploitation of reserves, apart from long delays in clearance of applications.

The government has been working on an ordinance that seeks to introduce auctioning through competitive bidding of minerals and additional levy from miners in the form of benefit-sharing, as percentage of royalty, to be credited to district mineral funds (DMFs). While auctioning will induce transparency, royalty-sharing will compensate project-affected locals.

Industry, however, seems displeased at the proposed changes. “Auctioning will not be a practical and effective process for mineral mining, as it is difficult to gauge the amount of mineral present in a mine at the time of auction,” said a senior executive from a mining company, on condition of anonymity.

The Federation of Indian Mineral Industries (FIMI), which represents some large companies such as the Aditya Birla Group’s Essel Mining and the Rungta Group, termed auctioning a “retrograde step”. “There will be total turmoil in the initial stages,” said FIMI secretary general R K Sharma. In its representation to the ministry, the association has said no country has adopted the auction route for mineral development, adding auctions will be viewed with suspicion, as these cannot accommodate frequent price fluctuations.

The amendments to the law being drafted are also meant to allow transfer of mining leases, the allocation of leases covering far larger areas — up to 100 sq km — than the existing average of 10 sq km, and longer periods of up to 50 years. The changes in the law will allow the entry of large foreign miners such as Rio Tinto into India and ramp up raw material supply for steel and aluminium companies such as Tata Steel and Vedanta Resources.

In 2011, the United Progressive Alliance government had tabled a Bill to amend the MMDR Act, but the Bill lapsed with the dissolution of the 15th Lok Sabha. Later, the National Democratic Alliance government prepared a draft amendment Bill and put this in public domain, seeking comment. Subsequently, the mines ministry readied a new Bill, with a few changes to the earlier version.

Apart from the introduction of auctioning for allocation of iron ore and other minerals, the Bill also sought to attract private investment and latest technology and do away with administrative delays. While there were a few changes from the draft, the provisions of auctioning and DMF for the welfare of locals have been retained. The latest amendments seek to provide for a benefit-sharing levy as a fixed “percentage of royalty paid”, to be decided by the central government in case of major minerals and state governments in case of minor ones.

WINDS OF CHANGE

  • “Auction by competitive bidding” introduced for the first time in mineral mining
     
  • Setting up of District Mineral Funds to help affected people in nearby areas and to improve infrastructure
     
  • More powers to the central government – such as in setting the time limit for auctions
     
  • For the companies holding the mines already – Moratorium of five years for non-captive mines and 15 years for captive leases

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