By Our Correspondent
NEW DELHI/BHUBANESWAR: The Ministry of Mines plan to delete the 10A (2b and 2c) Sections from the Mines and Minerals Development Regulation (MMDR) Act and also mulling over removal of the definition of captive and non-captive mines, will not only hit Gold Mining sector inIndia but also hit Steel market, particularly mineral bearing Odisha, will face the onslaught with Steel makers expressing apprehensions over the issue of captive and non-captive mines.
India remains hugely under-explored geologically, preventing the state from arriving at a more realistic value of its mineral wealth. Currently, only deposits with exploration data categorised as G2 under United Nations Framework Classification of mineral reserves are being auctioned.It has been proposed that this barrier be brought down to a more basic G4 or ‘reconnaissance’ level and composite leases be offered for areas with no exploration data.Responding to the industry’s complaint that it was over-taxed, the ministry has suggested royalty calculations be arrived at excluding all taxes and levies.
The Ministry has suggested bringing in early termination of captive leases from 2030 to 2025 and auction such mines without any first right of refusal. Another bold move that is being considered is that of transferring mines seamlessly whether it has been auctioned or allotted by the government. Under the current norms, only auctioned mines can be transferred and for non-captive mines, a transfer charge is levied equivalent to 80 percent royalty.
Section 10A (2) (b) allowed an entity to acquire a mining lease for the mines allotted prior to auction regime without any sunset clause and 10A (2) (c) allowed an entity to get the environment and forest clearance within 2 years of the auction of mines, highly placed sources in Union Mines Ministry said.
The ministry has also suggested that no mine should be auctioned as captive in future, doing away with the distinction between captive and merchant altogether. The auctions of iron ore and manganese mines in Odisha in January and February fetched an average premium of about 105%. That means, in addition to taxes and cess, a lessee would also pay the state Rs 105 for every Rs 100 of ore it sold over the next fifty years. Taking prevalent iron ore prices and everything else as constant, this works out to an additional annual revenue of about Rs 7,000 crore for the state, a report in The Economic Times said.
The 2015 amendment made two exceptions: Under Section 10A (2b) where reconnaissance or prospecting had been carried out successfully, the lessee could move up to a prospecting or mining lease respectively. Ironically, subsection 2c offered a window of two years, or until January 12, 2017, to those that had progressed beyond and held a letter of intent.
Changing the goalposts is now unfair to those who participated in the auctions, successfully or otherwise, taking into consideration the existing method of royalty calculations, officials said. “Royalty is charged on price inclusive of royalty because miners pass on the cost anyway. Any discounting of this would lead to a loss of revenue for the state. New lessees have offered premiums of five to six times of royalty presumably because they could afford to,” said an Odisha government official asking not to be named.
The FICCI on Sunday welcomed the proposed reforms in coal and mining sector by saying these measures will give a push towards government’s efforts for improving efficiencies in coal sector for augmenting domestic coal production and reducing the cost of power for the consumers. These measures will also help the government pursue its objective of attaining sustainable development growth plans, the Industry Body said.
Vipul Tuli, FICCI Power Committee Chairman and MD, Sembcorp Energy said that all of industry would welcome renewed efforts to tap India’s vast coal and mineral resources. “Modern, efficient, sustainable mining with cost effective evacuation will help create employment, attract investment, and enable downstream power and other core industries to become more cost effective in serving India’s needs,” he added.These measures will also help ensure more participation from the private players in the upcoming auctions of coal blocks for commercial sale and also help towards realizing the Government’s target to completely stop coal imports by power plants by 2024.
The policy change earlier last year allowing 100 per cent foreign direct investment (FDI) in coal mining is expected to provide a big thrust to foreign mining companies to enter India, bringing in their superior mining technology and increasing competition in the domestic market. Government is also looking for reform measures towards reducing delays in obtaining clearances and partnering with states to facilitate increase in private investment to boost the economy.
Prime Minister Narendra Modi, through detailed meetings held with senior government officials deliberated on the potential economic reforms in mines and coal sectors to give a boost to the economy in the backdrop of COVID-19 pandemic.
Auctioning of additional blocks, reduction in cost of mining and transportation, increasing ease of doing business, participation of private sector in exploration and mining and use of sea-routes for domestic supplies will be some of the next wave of reforms being planned by the Government for bringing in more investments, increasing employment opportunities and towards substituting imported coal with inventory of domestic coal with an objective of securing the country’s energy needs, he added.
There is a proposal is to define illegal mining under the MMDR Act. In the past, like in the case of Coal India, violation of environment/forest clearance has led to the state government of Odisha seek fine in the tune of Rs 20,000 crore in 2017. The amendment will clarify that mining within the mining lease area cannot be illegal under Section 21 (5) of the MMDR Act, sources added.
Earlier reports said, the Ministry of Mines is contemplating to delete the 10A (2b and 2c) Sections from the Mines and Minerals Development Regulation (MMDR) Act. Section 10A (2) (b) allowed an entity to acquire a mining lease for the mines allotted prior to auction regime without any sunset clause and 10A (2) (c) allowed an entity to get the environment and forest clearance within 2 years of the auction of mines, highly placed sources in Union Mines Ministry said.
Under these 2 provisions of MMDR Act, about 600 mines are stuck and the idea is to get these mines for auction. The ministry also intends to return mines held with PSUs for more than 3 years where mining is yet to begin and other non-operational mines to the state government for auction.
In a bold move, the Mines ministry is mulling over removal of the definition of captive and non-captive mines, it has suggested bringing in early termination of captive leases from 2030 to 2025 and auction such mines without any first right of refusal.Another bold move that is being considered is that of transferring mines seamlessly whether it has been auctioned or allotted by the government.Under the current norms, only auctioned mines can be transferred and for non-captive mines, a transfer charge is levied equivalent to 80 percent royalty.
The tax burden has been at a higher range in India for mining, the ministry intends to simplify royalty calculation and plans to bring an amendment to the Act. The amendment will allow calculation of royalty which will exclude taxes and levies.
Discussion is also being held with the finance ministry on levy of the stamp duty in a calibrated manner instead of the entire lease period of 50 years at one go. All levies and royalty are calculated on the average sale price which ministry believes, is not the actual representative of actual mineral price and hence it plans to bring a national mineral index.
There is a proposal is to define illegal mining under the MMDR Act. In the past, like in the case of Coal India, violation of environment/forest clearance has led to the state government of Odisha seek fine in the tune of Rs 20,000 crore in 2017. The amendment will clarify that mining within the mining lease area cannot be illegal under Section 21 (5) of the MMDR Act.
Some thrust is also on the aluminum industry, where the ministry is of the opinion assured availability of bauxite and coal will lead to cost competitiveness and import substitution. It has suggested the ministry of coal should delegate the power of auction to the state governments similarly like mineral auctions.
In the coal sector, the ministry has already enabled the provision for auction of coal mines for commercial sale but final rules for the auction are yet to be formulated as COVID-19 delayed the beginning of the auction process starting April 2020. The ministry is also looking at including a revenue-sharing model for auction of coal to boost production, enable single-window clearances, and reduce dependence on imported coal.
The focus of the government is to bring big reforms in the coal and mining sector to kickstart the economy which has been majorly impacted due to a long spell of lockdown on account of coronavirus spread.
Prime Minister Narendra Modi has also discussed ways to boost growth in the coal & mining sector with Pralhad Joshi and officials of the respective ministries. The major topics discussed were on bringing changes in the auction structure, greater participation from the private sector by way of reducing the cost of mining, ease of doing business leading to an increase in coal and mineral production.
Sources said that Ministry of Mines is looking at doubling employment from the current one crore to two crore and even double GDP contribution from Rs 4.1 lakh crore to Rs 8 lakh crore by 2024. The ministry has mooted for pre-embedded clearances for successful bidders as it requires 20 statutory clearances which take 2-3 years to obtain. The proposal is for the states to obtain clearances prior to the auction which will be transferred to the winning bidder. The ministry is already monitoring pilot projects in four states where mines are auctioned with pre-embedded clearances.
