Centre proposes to take over mine auction, some states oppose
The amendment also empowers the Central government to auction mines, which the states have failed to auction. Of the 143 such mines listed for auctioning, states have auctioned only 7 since 2015, the amendment said.
The Union mines ministry has proposed amendments to the Mines and Minerals (Development and Regulation) Act, 1957, allowing captive mine owners to sell up to 50% of the approved capacity in the open market and also giving itself the power to auction mines that the states have failed to auction.
The changes have been opposed by some states that see it as another attempt by the Centre to take over mining auctions and impose central rules on a matter in state domain. Except for coal, states are allowed to auction other mines in consultation with the mines ministry. Parliament in September 2020 approved an Ordinance promulgated in June to improve revenue from the mining sector and the Centre now wants states to carry out these changes too.
In a note to amend the law circulated to all states, the mines ministry said the new amendments have been proposed in the law after consultation with Union ministries and state governments to improve revenue from the mining sector and to reduce dependence on imports.
The ministry has proposed a new provision in the law to allow sale of 50% of minerals from captive mines in open market after meeting the need of the plant with which the mining block is attached.
Under the captive mines scheme, the mineral can be mined only for the plant to which it is attached. No royalty is charged for minerals mined from captive mines.
With the change in law, the government is looking at increasing production, especially from the captive coal mines. There are 194 captive coal blocks in India that were auctioned between 1993 and 2011, and which have coal reserves of 44 billion tonnes.
“This (market sale) will help to increase production of coal from captive mines, increase coal availability in the market leading to reduction in import of coal. This will also ensure additional revenue to the states and lead to Atmanirbhar (self-reliant) Bharat,” the ministry’s proposal said.
India has the world’s fifth-largest known coal reserves, or nearly 10% of global reserves, and is the world’s second-largest producer of the mineral. There has been increasing demand from climate change activists that India should declare a deadline year by which it will stop using coal. China has already said that it will stop doing so by 2050.
To improve revenue, the ministry has fixed up to 2.5 times of the existing royalty for allowing commercial sales from the captive mines. A decision on how much mineral from each captive mine can be sold will be taken by the mines and coal ministries, the note says.
Licence holders currently pay a royalty of ₹50 to ₹250 for a tonne of coal depending on its quality and ₹800 per tonne of asbestos. For several other minerals, the royalty is charged on ad valorem (percentage of the sale price) basis as per the rates published by Indian Bureau of Mines. The ad valorem royalty ranges from 0.4% per tonne for bauxite to 12% for copper.
A mines ministry official said that streamlining of the auctions would help in better utilisation of mines and ensure flow of minerals for industries to improve production. “There are many indirect benefits as it improves overall tax collections for the Centre and states and also creates additional employment avenues,” he said.
The ministry justified changes in the auction rules saying that it would “ensure continuous supply of minerals in the country and more number of mineral blocks are required to be brought under auction on a regular basis.” Any delay in auction will have substantial impact on the availability as well as prices of minerals, the note said.
Another amendment proposed is to empower the Central government to auction mines, which the states have failed to auction. Of the 143 such mines listed for auctioning, states have auctioned only 7 since 2015, the amendment said. According to mines ministry officials, the states were getting about ₹10,000 crore as revenue from these mines.
“Further, mining lease in relation to 334 blocks expired on 31 March 2020, out of which 46 are working mines. The Ministry of Mines is pursuing with the state governments since early 2019 for early auction of these blocks ensuring continuity in production of minerals. Only 28 blocks have been auctioned till date,” added the ministry.
A ministry official who was not willing to be named said that the delay in auctioning by the states is causing a huge revenue loss to the states. “The Centre wants to help the states to get their money, especially in the time of pandemic when the revenue has gone down and expenditure has increased for state governments. The mining reforms are aimed at ease of doing business and improve foreign direct investment in the mineral sector,” the official added.
Some states have opposed the proposal.
A senior official of Chhattisgarh's mining department said there are various reasons, including the feasibility of a mine and the net mineable reserves as against the estimated resources in a mine and market conditions apart from the time needed for technical preparations, for delay in mine auctions. “Like Centre, every state is interested in auction of mines but limitations are there for both Centre and the state. Under cooperative federalism, the states should be allowed to exercise their right to bring their mines to auction after considering all the associated parameters,” he said.
On the mines ministry’s proposal, Shankar Sinha, Jharkhand’s director, Mines, said, “The state government was finalising its own policy on the issues listed in the mines ministry’s proposal. Once that is done, we would send our suggestions to the Central government. Jharkhand government in June 2020 moved Supreme Court against the Centre’s decision to auction coal blocks for commercial mining in several states without taking states on board as it would have adverse impact on local population and price fetched may not be adequate.
Odisha mines minister Prafulla Mallik said they have reservations on certain provisions of the proposed changes in the law as it takes away the state power to auction mines. “We have questions regarding why the Centre wants to take over auctions and have sought clarifications,” he said, while supporting the ministry’s proposal to hike rates for sale of minerals from captive mines. Odisha mines secretary Surendra Kumar said the state has already sent its reply to the mines ministry.
In Goa, the Goa Mining People’s Front, a collective of Mine Worker Unions has also opposed the proposal. “The Centre taking over the auctioning could lead to legal hurdles in resuming mining in Goa, which is stuck since 2018 when the Supreme Court cancelled all mining leases,” said Puti Gaonkar, the president of the GMPF. The Goa Mineral Ore Exporters Association (GMOEA), an association of mine owners, has also written to the ministry opposing the proposal giving powers to the Centre to auction mines.
Reacting to the proposal, Goa Foundation Director Claude Alvares, said the Centre forcibly auctioning the mines at less than market value would amount to ‘cheating’, while referring to mineral resources as a shared inheritance, owned by state governments as a trustee for the people.
“How would states then fulfil their duties as public trustees to conserve the shared inherited mineral wealth if they have no control over it. How would states meet intergenerational equity? These proposals violate the principle of subsidiary and the federal structure of our Constitution,” he said.
(With inputs from Vishal Kant in Raipur, Debabrata Mohanty in Bhubaneswar and Ritesh Mishra in Raipur)