Boost to production and pvt investment as mining reforms get green signal

Source: Business Standard, Jan 14, 2021

New Delhi: The Union Cabinet is learnt to have approved a reform package for the mineral mining sector which would entail amendments to three existing laws, pricing formula for minerals, exploration of mines and several taxes and duties levied on mining.

Officials said this is expected to boost production and private investment in the sector.

The Centre has removed the distinction between captive (self-use) and merchant (commercial sale) mines. The Centre would amend the Mines and Minerals (Development and Regulation) Act, 1957 (MMDRA) to enforce the reforms.

Senior officials said the amended MMDRA would be placed in Parliament in the upcoming session.

Under the proposed reforms, captive mines would be allowed to sell 50 per cent of the minerals excavated in a year. The Centre has also proposed to give 50 per cent rebate in the quoted revenue share, for the quantity of mineral produced and dispatched earlier than scheduled date of production

The Centre has proposed to amend the section 10A(2)(b) & 10A(2)(c) of the MMDRA in order to unlock more mines for auctioning. This would entail Centre auctioning the pending mining leases as well. Section 10A(2)(b) pertains to the leases where reconnaissance permit (RP) or prospecting licence (PL) were granted and 10A(2)(c) relates to grant of mining leases (ML).

The Centre plans to compensate for the mineral concessions which would get cancelled under this amendment. The compensation would come from the National Mineral Exploration Trust (NMET). NMET receives Rs 800 crore annually via the royalty paid by mineral mine owners. The Centre has also proposed to make NMET an autonomous body in order to boost exploration.

The move comes after auction of coal mines to private companies for commercial mining and sale was successful with the Centre awarding 19 mines to varied set of companies.

With this, the monopoly of state-owned Coal India Limited (CIL) ended, 42 years after coal mining was nationalised.

The Centre amended the Coal Mines (Special Provisions) Act, 2015, in May 2020 to open the coal auction for non-mining, MSMEs and foreign companies. This paper reported recently, the Centre would announce opening up of mineral mining sector similarly and amend the MMDRA for the same.

“We have brought reforms in the coal sector and we want to bring them in mining as well. But implementation and auction of non-coal mines is with the states. In 40-45 days, we will come out with other mineral reforms,” Union Minister of Coal, Mines and Parliamentary Affairs Pralhad Joshi had told the paper in November.

Federation of Indian Mineral Industries (FIMI) in a recent note, however, had asked the government to review the auction strategy for mineral mining. “Auction has neither served public good nor led to fair allocation of resources. The sole focus to maximize revenues for the States has adversely affected long-term mineral development in the country and socio-economic benefits in mining areas,” R K Sharma, Secretary General, FIMI said.

As part of the mining reforms, the Centre will also amend the Indian Stamp Act, 1899, in order to bring uniformity across the States in calculation of stamp duty. “Effective tax rate (ETR) on mining in India is 64 per cent which is highest in the world where in other countries it ranges between 34-38 per cent. One such tax is stamp duty which is computed in different ways in different states. We will simplify it,” said an official. A committee would also be set up to resolve the “double taxation” issue in the mining sector.

The MEMC Rules (Minerals (Evidence of Mineral Contents) Rules, 2015) will be amended for inclusion of the globally accepted classification standards like CRIRSCO, JORC, etc. and latest UNFC classification.

The Centre has also proposed to reallocate non-producing blocks of the public sector utilities (PSUs) so as to increase number of mines into production. There will also be charges levied on extension of mining leases of PSUs. But, there will not be any charges on transfer of mineral concessions for non-auctioned captive mines. It is learnt that the Centre would also ask PSUs to facilitate production from those mines which were auctioned in March 2020 but have started production even after transfer of valid rights, clearances, etc.

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