The new mining bill will empower state governments to hand out leases, take up prospecting and exploration activities before mines and call for bids for commercial utilisation of mineral deposits such as coal and iron ore.
The Group of Ministers (GoM), which vetted the draft Mines and Minerals (Development and Regulation) Bill 2011 a fortnight ago, has given its nod for authorising and incentivising state governments take up "prospecting and exploration, so that adequately prospected ore bodies can be put on bid."
Prospecting is the act of physically searching for minerals or mineral specimens.
The Cabinet is expected to discuss the Bill in the next 15 days.
The draft Bill has stipulated that miners of major and minor minerals will set aside an amount equal to the royalty paid by them to states for the development of the region being mined.
This will cost the mining industry around Rs 9,000 crore a year.
"The draft Bill provides for the state government to notify and invite applications in the form of competitive offers for grant of a prospecting licence over an area where reconnaissance has been conducted," a source, who did not wish to be identified, said.