Forming the backbone of the economy, the mining sector is a key driver of economic growth. The sector currently contributes 2.5 per cent of GDP. Its contribution to GDP needs to double (4-4.5 per cent) in order to attain the goal of becoming a $5 trillion economy by 2025. Speaking at a recent India Infrastructure conference, Alok Chandra, economic adviser, Ministry of Mines, shared the government’s perspective on the mining sector; the impact of the National Mineral Policy, 2019 (NMP); amendments in the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), and the Coal Mines (Special Provisions) Act, 2015 (CM [SP] Act); and future government initiatives. Excerpts…
National Mineral Policy, 2019
In a significant development in the mining sector, in February 2019, the union cabinet approved the NMP, 2019, replacing the extant NMP, 2008. The aim is to put in place a more effective, meaningful and easy-to-implement policy that brings in further transparency, balanced social and economic growth, better regulation and enforcement, and sustainable mining practices. The key features of the policy include offering the right of first refusal to reconnaissance permit (RP) and prospecting licence (PL) holders, encouraging the private sector to take up exploration, auctioning in virgin areas for a composite RP-cum-PL-cum-mining lease (ML) on a revenue share basis, encouraging merger and acquisition of mining entities, transferring MLs and creating dedicated mineral corridors to expand private sector mining areas. Besides increasing the share of the private sector, the government has also invited participation of international mining companies to bring new and advanced technologies into the country.
The NMP, 2019, also proposed granting infrastructure status to the mining sector to enhance availability of funds for the private sector and for acquisitions of mineral assets in other countries by the private sector. The policy stated that the long-term import-export policy for minerals will help private companies in planning better and enhancing the stability of their business. In order to give more opportunities to the private sector, the policy also mentioned the rationalisation and auction of reserved areas given to public sector undertakings. Further, the NMP, 2019, aims to harmonise taxes, levies and royalties in line with world benchmarks to help the private sector.
Amendments in MMDR Act, 1957 and CM (SP) Act, 2015
In another noteworthy move, the union cabinet promulgated the ordinance for the amendment to the MMDR Act, 1957, and the CM (SP) Act, 2015, in January 2020. The amendments in the acts will enhance the ease of doing business, democratise coal mining by opening it up to anyone willing to invest, offer unexplored and partially explored coal blocks for mining through PL-cum-ML, promote foreign direct investment in the coal mining sector (by removing the restriction and eligibility criteria for participation), and allow successful bidders/allottees to utilise mined coal in any of their plants, subsidiaries or holding companies, besides attracting large investments in the coal mining sector.
In order to enhance the exploration of deep-seated minerals, a facilitating environment has been envisaged to allow non-exclusive RP holders of deep-seated minerals or any minerals of national interest to apply for a composite licence (PL-cum-ML) or an ML. This will enhance the exploration of such minerals.
Further, three state-owned metal and miningfirms – National Aluminium Company Limited, Hindustan Copper Limited and Mineral Exploration Corporation Limited – have formed a partnership to acquire reserves of strategic minerals such as lithium and cobalt. The development came in light of the government’s initiative to promote and step up the use of electric vehicles since lithium and cobalt are key minerals used to make batteries that power these vehicles.
In sum
One of the critical challenges faced by the government is with respect to those MLs that are expected to expire in March 2020. In this regard, the central government is collaborating with the respective state governments to carry out the auctions on a priority basis. Simultaneously, the government has also made a contingency plan to meet any shortfall in production, particularly of iron ore, so as to avoid disruptions in supply.
Going forward, the government is expected to think of new ventures in the mining sector, procedures to grant pre-embedded clearances (since it takes three-four years to start the production process even after securing the ML) and simplifying the approval process.