By Anurjay Dhal
BHUBANESWAR: With submission of suggestions and comments by all stake holders with Union Ministry of Mines over the issue of reforms in Mining and Mineral Development and Regulation Acts of 2015(MMDR Act-15) ended on Thursday, the Federation of Indian Mineral Industries (FIMI) has suggested to increasing mineral production and employment generation by redefining the norms of exploration for auction of mineral blocks and ensuring seamless transition from exploration to production.
In a 6 page note, copy of which is available with www.indianewsdiary.com, New Delhi headquarters , FIMI , said internationally for the grant of mineral concessions, by and large the system of FCFS is adopted. However, a few countries like China, Indonesia, Russia and Mexico who have adopted auction / bidding mechanism, the mineral blocks are offered for mining leases only after having completed the detailed exploration (G1 level) excepting Mexico where mining lease is granted based on G2 level of exploration
“The proposed amendments with regard to diluting the standard of exploration from existing G3 level to G4 level for auctioning of blocks for Prospecting Licence-cum-Mining Lease (PL-cum-ML) is not desirable. The blocks at G4 may only have a known geological potential, with no identified anomalies or target areas, which are essential for moving to a PL stage. Moreover, the geological, geophysical and other data is of a very preliminary nature. Thus, there is an extremely high risk of failure. The prospective investor will look forward to have detailed information with higher confidential level to enable him to have due diligence for taking informed decision for the further detailed exploration of level G2 and G1. Moreover, with a view to have competitive advantage in auction with wider participation, it is suggested that the level of exploration for auctioning of blocks for PL-cum-ML should not be diluted and should continue to be at G3 level. In the backdrop of the above facts, we feel that the proposal of lowering the current norms for exploration from G3 to G4 level for the purpose of offering the blocks on auction for Prospecting Licence-cum-Mining Lease may not be feasible to achieve the desired objectives of mineral development in the country,” FIMI said.
“The proposal to amend the Act for repealing Section 10A(2)(b) is not at all desirable which otherwise may prove to be counter productive for the mineral development of the country. As such the existing RP / PL holders have invested huge resources and put long years to undertake risky exploration activities and have helped India to discover valuable mineral deposits. Acknowledging their valuable contribution to the country, the Government had introduced Section 10A(2)(b) in 2015 to guarantee these concessionaries the right to mine the deposit. Unfortunately, despite the lapse of more than 5 years, State Government / Central Government have not taken any proactive action for converting any RP to PL or PL to ML under Section 10A(2)(b)” it said.
“Hence, any act on the part of the Government to remove Section 10A(2)(b) from the Act and put such mineral blocks for auction would amount to “robbing Peter to pay Paul”. In all such cases where the concession holders have satisfied the conditions of their RP / PL and have established the evidence of mineral content in the granted areas by conducting reconnaissance or prospecting at their own expense, have vested rights for mining lease. If the cases saved under Section 10A(2)(b) are cancelled, it will mean that Government of India has faltered on its Act and will lead to irreparable loss of investor confidence in Indian mineral sector, apart from multiple litigations in Courts resulting in such an exercise of the Government being rendered completely futile. It will also send a wrong signal to both domestic and international investors about certainty in India’s mineral policy. Hence this Section 10A(2)(b) should not be repealed and be continued to protect the rights of existing concessionaires and bring in provisions where existing concessionaires covered under Section 10A(2)(b) are immediately granted mining rights seamlessly,” FIMI said.
“As regard the proposal of scrapping Section 10A(2)(c), the Act provided only two years to applicants possessing Letter of Intent (LoI) to obtain statutory clearances and execute mining lease. Many of the genuine cases could not be converted into grant of ML within the stipulated timeframe of two years. Since grant of statutory clearances take up to 3–5 years and were beyond an applicants’ control, as many as 196 applications saved under Section 10A(2)(c) expired.It is gathered that many of such cases are sub-judice pending at various Courts including Hon’ble Supreme Court, hence it is suggested that Section 10A(2)(c) may be amended by extending the timeline for another five years till January, 2022 for grant of mining leases to such deserving concession holder,” it said.
On Captive and Non-Captive issue, FIMI said it welcome and agreed with the proposal 3(a) & (b) for removing thedistinction between captive and non-captive mines . “However, we do not agree with the proposal 3(c) for increasing the existing limit of allowing 25% of the minerals for sale by the auctioned captive mines to the level of 50 percent. This facility of allowing 25% of the minerals for sale by auctioned mines is effective for the mine which have been auctioned on or after 30.11.2017. As such effecting any change in the terms and conditions at which mines were auctioned will be against the law. Moreover, considering that the Government has agreed in principle to dispense with the concept of the captive mining, it is suggested that instead of revising the limit to 50%, the existing limit of 25% for sale of minerals by captive mine should also be withdrawn. Accordingly, the proviso inserted after Rule 6(4) of Mineral (Auction) Rules, 2015 with effect from 30th November, 2017 for allowing 25% of sale by auctioned captive mines should be repealed,” it argued.
“The present statutory payments including auction premium, royalty, DMF and NMET are based on Average Sale Price (ASP) published by IBM. The present system of ASP is a realistic price discovery mechanism, wherein the actual transaction price of top 10 non-captive mines in a State sold at arm’s length basis is captured. In short, ASP is the weighted average of the ex-mine prices of non-captive mines. According to us, the present system of ASP published by IBM is the most effective and transparent way to ensure price discovery and revenue to the exchequer. The Government may consider continuing with the ASP system. If the Government intends to introduce NMI, the fundamentals of the ASP system should be incorporated within NMI. In any case, NMI should exclude non-arm’s length and captive transactions to avoid loss to the exchequer.Considering the deficacy of capturing price of captive / end-use plants, National Coal Index (NCI) has not considered any sale of coal by the private players supplying to their own end-use plant or for sale of coal on commercial basis. NCI has only considered the notified prices of Coal India, SCCL, auction price of Coal India and import prices of coal which are at arm’s length basis and as such there is no impact of pricing of coal by the captive users or coal sold by private players in commercial coal mining. As NMI is expected to form the basis of all statutory payments such as auction premium, royalty, DMF and NMET, therefore allowing non-arm’s length transactions especially the transactions by captive players in NMI may lead to
distortions and substantial reduction in statutory payments, resulting in huge loss to the exchequer. Hence, we submit that the NMI should only capture the transactions made at arm’s length, i.e., sales by non-captive mines and only those sales by captive mines which are done at arm’s length. Any quantity of mineral used for captive purpose should not be considered in NMI,” FIMI said.
Clarify the definition of illegal mining it welcome the proposal of clarifying the definition of illegal mining by amending the Section 21(4) and Section 21(5) but it needs to be implemented retrospectively.It is well known fact that any production beyond environmental clearance by private or PSU miners was in the full knowledge of the State / Central Governments for which all the taxes and duties like royalty, sales tax, income tax etc. Were charged by the State / Central Government. The penalties imposed or proposed to be imposed under the existing Section 21(5) are huge and has wider ramifications on all minerals including minor minerals across all States. Being under severe financial crisis, industry including PSUs will also not be able to pay hefty penalties. Hence it is suggested that the proposed amendment should be effected retrospectively. In this context, we suggest the following may be added as Explanation below Section 21(5) of the
“Any mineral produced by the Lessee and duly reflected in the mining Returns or any mineral dispatched by the Lessee on which Royalty has been collected, cannot be considered illegal at a later date and no recovery under Section 21(5) can be made at a later date on account of violation of any provisions of MMDR Act 1957, or any Rules framed thereunder or any other Acts or Rules. The above raising of the mineral reflected in the mining Returns or material dispatched by the Lessee after paying the Royalty shall be considered as has been raised and dispatched with lawful authority. This interpretation of Section 21(5) comes into effect from the date on which Section 21(5) was inserted into the MMRD Act, 1957.”
“The proposal to standardize the norms of computation of the stamp duty on mining lease across the States based on the value of land under mining lease without reference to the value of minerals is a welcome step. However, it should be ensured that the imposition of stamp duty is uniform throughout all the States and should be charged only for the mineral-bearing land at reasonable level. The proposed norms of computation of stamp duty should be applicable for the fresh mineral blocks to be notified for auction and to be granted for allotment in future.VII ─ Amendment to DMF Rules and guidelines to increase the focus of DMF fund towards creating tangible assets in mining affected areas. The DMF funds should be exclusively and effectively utilized for benefit of the local community affected by the mining activities with enhanced focus on upliftment and development of mining areas. It is suggested that there should be mandatorily representation of associations like FIMI / mining lease holders in eachDistrict Mineral Foundation for effective implementation of The Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY). IX ─ Review of the functioning of NMET. The proposal of making NMET autonomous is welcome. It is suggested that private explorers should also be notified under sub-section 1 of Section 4 of the Act and be eligible for funding for carrying out mineral exploration activities,” FIMI added.
