New area limits for mining to make resource auctions attractive
The Union government is preparing to set out area caps for mining as it aims to carve out smaller mining areas to attract more investors. The move will also prevent vast tracts of land irregularly ending up with a few miners, which would undermine the very purpose of auctioning mineral concessions through a fair and transparent mechanism. The changes would be made through a legislative exercise where the Centre would empower itself to decide the size of mines of different minerals to be awarded by states. Mint examines the need for such changes and how it will help improve the investment climate and make auction process transparent.
What is the proposal on defining area limits for mineral mining?
The Ministry of Mines has proposed to fix mineral-wise area limits for states in the statute. Under it, depending on the kind of mineral mined, states can set aside 25-400 sq. km for a prospecting licence (PL) which is to establish the presence of mineral in a given block, and 10-25 sq. km for a mining lease (ML), which allows companies to actually start mining and production for a defined period of time. The area limits will be applicable for all minerals including iron ore, diamond, bauxite, gold, copper, limestone, atomic minerals and states will auction mines following these limits. Any changes would be permitted with only expressed directions of the Centre.
What is current regulation with regard to area limits for mining?
Section 6 of the Mines and Minerals (Development and regulation) Act, 1957 provides maximum area limits for acquiring mineral concessions by a person in respect of any mineral or prescriber group of associated minerals in a state. The limit is 10,000 sq km for reconnaissance permit (RP), 25 sq km for PL and 10 sq km for ML. The limit is for all minerals and there is no mineral wise area limit. The section also empowers Central government to increase these area limits for a particular mineral for a particular region which has been increased several times on request from the state governments. The frequent changes in area limits under this regulation distorted the entire system. The new changes would attempt to change this.
How new area limits are proposed to be fixed?
Centre proposes to amend the MMDR Act, 1957 and prescribe mineral-wise area limits in a new schedule (Seventh Schedule). This is expected to give stability to the proposed area limits and desist frequent amendments in it as certain changes would require legislative process and parliamentary approval. The new area limits have been defined based on the recommendations of a mines ministry constituted committee chaired by the Director General of Geological Survey of India (GSI) with experts from IBM (Indian Bureau of Mines).
How will the changes help improve investment climate in the mining sector?
Irregular distribution of large mining areas to companies defeating the very purpose of auction of mineral concessions through a fair and transparent mechanism. This will change will new area limits for mining. Smaller mineral areas are expected to bring in more investors into mineral blocks and help to ramp up mineral production in the country to meet the rising demand. Also, such limits are expected to give impetus to growth of the mining industry where large-scale sustainable production is imperative along with equitable distribution of natural resources.
Will the new area limits affect existing mining operations?
The new area limits are expected to be made applicable prospectively. It has been decided that area limits specified in the new schedule to MMDR Act will not be applicable for earlier PLs and MLs and where the letter of intent upon auction has been issued or reservation of mineral areas has been made in accordance with the present area relaxation but would be in violation of the proposed area limits. Such contracts will continue till the expiry of concession period or termination with area limit initially allowed. But any new concessions entered thereafter would have follow area limits specified in the Act.