India clears way for major reforms in metals & minerals sector

India clears way for major reforms in metals & minerals sector

The Mines and Minerals (Development and Regulation) Amendment (MMDRA) Bill’s passage is expected to not only kickstart structural reforms in India’s mining sector but a...

The Mines and Minerals (Development and Regulation) Amendment (MMDRA) Bill’s passage is expected to not only kickstart structural reforms in India’s mining sector but also ensure mineral security. A review with industry reactions. __________ The passage of the Mines and Minerals (Development and Regulation) Amendment Bill, 2021, by Parliament’s upper house, Rajya Sabha, is expected to clear the way for long-pending structural reforms in the mining sector to ensure the “mineral security” of the nation. This amends the Mines and Minerals (Development and Regulation) Act, 1957. The Bill was earlier passed by the lower house, Lok Sabha, on March 19. “With the Parliament passing Mines and Minerals (Development and Regulation) Amendment Bill, 2021, the stage is set for big-bang reforms in the mining sector. These reforms will make mineral mining sustainable and drive economic activities in the country,” Union Minister of Coal, Mines and Parliamentary Affairs Pralhad Joshi said in a tweet after the passage of the bill on March 22. The Bill effectively quashes the distinction between captive and non-captive mines to allow the sale of up to 50% of the minerals excavated during the current year from the former. Its provisions are also going to result in more mines being offered for auctions going forward. Upping sector’s contribution to GDP Presently, the mineral sector contributes only 1.75% to India’s GDP, while the country imports minerals worth Rs 2.5 trillion annually. In sharp contrast, the sector contributes nearly 7-7.5% of the GDP in countries like South Africa and Australia that are as mineral-rich as India. Take coal for instance. Despite possessing the world’s fourth-largest coal reserves, the country imports the commodity. Coal import rose by 15.1% to 23.63 million tonnes (MT) in December 2020 compared to 20.52 MT during the corresponding period in 2019, revealed government data. Similarly, the country also has 500 MT of gold reserves yet it imports 983 tonnes of yellow metal worth around Rs 2.29 trillion every year. This state of affairs is largely owing to only 10% of the country’s obvious geological potential (OGP) area of 0.571 million sq. km being explored. The Narendra Modi-led National Democratic Alliance (NDA) government has targeted to enhance mineral production by up to 200% over the next seven years under the National Mineral Policy, 2019. The amended bill removes restrictions that allowed the Central Government to determine where the production from a mine could be used. Except for mines of atomic minerals, 50% of produce from captive mines can now be sold in the open market. It also defines the mine as a legal and not a physical entity. This would allow for seamless transfer of all statutory clearances even if the mine changes hands from one lessee to another. The amended bill also empowers the Central Government to sell a mine if the state government fails to do that within a stipulated timeline. The revenue earned from such a mine will be going to the concerned state’s exchequer. Mining companies are now required to commence production within two years of obtaining a lease. Or else the lease would be annulled. Notes of dissent During the discussion on the Bill in Rajya Sabha, several opposition leaders alleged that the clauses entitling the Centre with the power to auction a mine if the state government failed to do so and the authorisation to determine the composition and functioning of the District Mineral Foundation (DMF) made light of the spirit of federalism. They went so far as to suggest Bill’s review by a select committee. Seconding the dissenting voices, Amar Gupta, Partner, J Sagar Associates, told Infrastructure Today, “There is no clarity on what would constitute a challenge or who would adjudge it. While this may achieve the Central Government's stated policy goals, there can be genuine complaints of federal overreach. The proposal does assure that the revenue shall accrue to state governments, greater clarity is, however, needed on how that assurance will be achieved.” Giving the example of the goods and services (GST) regime that had left several states unhappy due to a severe backlog of monies owed to states, he said greater clarity would make these amendments widely acceptable. However, dismissing such concerns, Joshi assured that the bill would not reduce the powers of states and would help generate more jobs. “I assure you that not a single iota of the state's power will be snatched or taken away by this bill,” he told Rajya Sabha. According to the government’s estimates, the reforms are expected to result in 5.5 million direct and indirect opportunities for employment. Joshi also announced the government intended to make the National Mineral Exploration Trust (NMET) an independent and professional body to finance mineral exploration. A significant reform: Industry Companies in the metals & mining space acknowledged that the reforms would play a significant role in enhancing the mining sector’s contribution to the employment and GDP of the country. Tuhin Mukherjee, Managing Director, Essel Mining & Industries, called the amendments a step forward for enabling the mining & metals sector’s contribution to India’s economic growth. “With these reforms in the Indian mining & minerals sector, the government has embarked on increasing the sectoral contribution to the Indian GDP and also to increase the competitiveness, ease of doing business and creating a favourable investment environment for the sector,” said Mukherjee. He added that these amendments would increase the mine development and mineral production in the country and would enhance the self-reliance for mineral-based industries. Rahul Sharma, Deputy CEO, Aluminium & Power, Vedanta, opined, “Amendments in the Mines and Minerals (Development and Regulation) Act are reflective of the fact that the government considers mining sector as a key contributor to the vision of Atmanirbhar Bharat. These amendments shall result in the enhancement of mineral production across the spectrum, creating more jobs and will be a major boost to critical industries like cement, aluminium and steel, which are primarily dependent upon key raw materials provided by the mining sector. A renewed focus on exploration will attract huge investments.” He also applauded the government’s move for promoting ease of transfer for non-auctioned captive mines to increase mineral production from such mines in the country. Pankaj Satija, Chief Regulatory Affairs, Tata Steel, remarked, “The amendment for transfer of all statutory clearances till the exhaustion of mineable reserves would lead to faster operationalisation of mines by the successful bidders and would ensure raw material sufficiency for end-use sectors.” Sumit Deb, Chairman & Managing Director, National Mineral Development Corporation (NMDC), said, “The introduction of composite licence regime would enhance mineral exploration and production in the country, alongside attracting investments both from domestic as well as foreign investors.” Deb acknowledged the reform of exploring the possibility of making NMET an autonomous body, for better fund utilisation of NMET funds and increasing the mineral exploration in the country, aligned to the changing requirements. At the time of the story going to print, the Bill awaits the President’s assent to bring the bill into law. - Report by Manish Pant

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