Mining companies are prepared to resist an anticipated policy change that threatens to remove 524 mineral blocks from applicants who were extended the right only five years ago.
In 2015, the Narendra Modi Government introduced a 50-year mining rights auction scheme with an amendment to the Mines and Minerals (Development and Regulation) Act. At the same time, it allowed companies that had carried out geological exploration to pass automatically to the next stage – prospecting or mining. The other pending application had to expire.
Sources indicate that the Mining Ministry is now considering canceling these outstanding claims across minerals and states as part of the proposed major policy reforms. Among them are JSPL's iron ore deposits in Jharkhand, Deccan Gold's gold deposits in Karnataka, and Ramgad Minerals & Mining claims for rare earth deposits in Rajasthan.
The Government also wants to resolve once and for all 200 other cases that, according to those in the know, have not been resolved within two years of the 2015 amendment. Such "legacy problems," resolved by a further amendment, repealing Section 10 A(2)(b) and (2) (c) of the Act, would free more than 700 blocks that could then be auctioned to boost the sector's contribution to GDP. It also suggests auctioning off undeveloped deposits with public sector undertakings.
According to the Ministry 's report, 95 leases have been auctioned since 2015, which pledge to repay Rs 5.68 lakh crore to the exchequer alone over the life of the leases.
However, the companies that are to be affected by the Centre's move to remove this right left unaffected by the change of law only five years ago. They allege that the central and state governments have refused to entertain their claims and have stalled their progress.
“The move is counterproductive to both the purported agendas of the reform--of attracting investment and boosting mineral production. Canceling them will only result in these deposits being blocked in prolonged litigation,” the managing director of a leading mining company said, requesting not to be named.
More than 150 Lessees, including Bajrang Power and Ispat, Ultratech Cement and Rungta Mines, had moved to the High Court of their respective States after failing to sign an action within the two-year window provided by Section 2(c). They are now pending before the Supreme Court following the request by the Center for the transfer of petitions.
“If they failed, it was because of the MoEF’s inconsistencies - insisting on a moratorium over areas in Saranda forest, asking applicants to reapply online as late as November of 2016. A retrospective amendment to nullify their rights, after all the money and energy they have invested, will only project Indian mining policy as unpredictable,” said a lawyer for one of the petitioners.
Speaking on the basis of anonymity, some miners pointed out that while the Center had refused to act on applications, even for minerals such as gold in which the country is deficient, the same provision of the law had been invoked by the Karnataka Government to grant rights to limestone deposits. "If the government really wants to boost production, the quickest way would be to grant these legitimate claims," one of them said.
Experts claim that the new legislation has failed to promote innovation or draw foreign direct investment to the market. Junior explorers plan to move smoothly from exploration to mining. Rewarding risk without compromising on maximizing revenue remains a challenge for policymakers. This has become particularly tricky, according to senior ministry officials, after former coal secretary Harish Chandra Gupta had made the fall guy in the coal block allocation fiasco. Any grant not received by auction may be considered to be discretionary.
Notwithstanding the fate of Section 10 A 2(b) cases, those which survived the amendment — captive leases, PSU mines, and leases granted within the two-year window of January 12, 2015—will not be paid by the States with the additional premium.
“The Centre’s flip flop doesn’t send a good signal to investors and will only lead to a 'de-minetisation' of the sector,” said an official who did not want to be named, alluding to the Centre’s intervention to prevent Karnataka from demanding such a premium from state-owned NMDC.
To some, the 2015 Act passed its first real test earlier this year by auctioning 23 mines in Odisha. The average bid of 110 percent means that where the old lessee paid Rs 17.5 for royalties and other mining taxes for every Rs 100 of iron ore sold, the new lessee is promising to pay Rs 127.5.
The bitter corporate rivalry and recent aggressive lobbying to rationalize taxes and royalties cast doubts on the projected earnings of these promised premiums. The bonanza on which mineral-rich states depend, particularly for iron ore, is similar to the "notional loss" in the coal block allocation scam. It makes quite a few assumptions – that prices and demand will remain constant over the next 50 years, that scrap will not increasingly replace iron ore as a feed, or that technology will not dramatically change the way steel is produced.
