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On the eve of May 12th, the Prime Minister, brought tidings and an exceptional present for the sluggish Indian Economy. The PM announced a relief package worth 20 lakh crore rupees with an aim to uplift the economy and provide relief to those most battered by the onslaught of the fiscal crisis brought about by the fear inspiring COVID-19. This package, as per the PM, was aimed towards making India ‘Atma Nirbhar’ i.e. Self-Reliant without becoming a ‘self-centered’ economy. The PM zealously stated that this monument of self-reliance will stand tall upon the five pillars of demand, demography, infrastructure, technology and economy. The PM stated that the goal of the government was of ensuring the holistic development of the economy by leaps and bounds. He also added that this relief package would focus mainly upon the parameters of law, labour, land and liquidity.
True to his words, the Finance Minister appeared before the inquisitive lenses, the very next day, to discuss the first of five tranches of the anodyne economic policies. The Government thus presented before the world the details of the relief package which in totality amounted to 10% of the Indian GDP, making it one of the most inspiring packages around the globe. The Finance Minister brought relief for many sectors such as the MSMEs, the NBFCs, the migrant labourers, the DISCOMs, the Corporate Employees and Employers, the mining industry and the others, to name a few. These reliefs were distributed amid well-structured and detailed tranches consisting of one or the other sectors. The relief package had been thought on for quite some time, making certain sections call it ‘too late’. However, the details and orientation of the package are self-evident and praiseworthy.
In this explanatory we would be focusing upon the mineral sector aspect of the fourth tranche of the relief package presented by the Finance Minister on the 16th of May 2020. The fourth tranche entailed a stimulus of a little over Rs. 63,000 crore, of which, surprisingly, the cost to the exchequer is only about Rs. 8,100 crore. The focus was more on industrial reforms but it should be mentioned that many of these measures have already been mired in implementation issues. This set of the assuaging policies focused upon 8 sectors including mineral mining, civil aviation, space exploration, defence investment, social infrastructure, atomic energy, coal and power distribution. The mineral sector was in much need of attention and reformation. This pending reformation was required at the present instance for increasing foreign investment to bolster the economy.
What are the reforms which have been introduced?
While delivering the fourth tranche of the relief package the Finance Minister had remarked that, “Many sectors need policy simplification. Once we decongest sectors, we can also provide the necessary boost for growth and employment.”
Through this stimulus package, the government not only aims towards the recovery of a somewhat stagnant economy but also the reformation of many outdated laws and processes. In such tiring times, the government wishes to open up the economy and smoothen the creases for foreign investors. Just like the panacea of the 1990s economic crisis was the opening of the market to the world, similarly the government is planning to rein in the free hand of the market or the laissez faire. The government has opted for privatizing the mineral sector.
Through the fourth tranche, the government has introduced commercial mining of coal on a revenue sharing basis in India. The companies in the private sector have also been allowed to carry out exploration. This has effectively ended the government monopoly on coal. For the aforementioned purpose, the government has decided to auction nearly 50 blocks of coal. On the mineral front, the government has announced composite exploration cum mining cum production regime. To rein in the free market in the mineral sector, the government has decided to auction nearly 500 mining blocks of certain major minerals.
The government had also said that coal gasification and liquefaction will be incentivized through rebate in revenue share. Infrastructure worth 50,000 crore has been promised by the government for these purposes. On the liberalization announced for other minerals, as per rules, all concessions will have to be granted by the respective state governments through e-auctions. The mineral index happens to be a creative new proposal with an already prepared base as the data for mineral-wise, state-wise reserves in leasehold and freehold areas is already available in the voluminous National Mineral Inventory compiled by the Indian Bureau of Mines. The government has also removed all differences between the captive and non-captive mineral mines to allow transfer of mining leases and transfer of surplus mineral.
Relevant legal provisions
The mining sector in India operates as a federal structure ensuring the efficiency of work and the grass root level implementation of laws and policies. Under the seventh schedule to the Constitution, the administration of mining sector falls under entry 54 of the union list to the extent, necessary in public interest, as declared by the Parliament. However, the same topic is mentioned under entry 23 of the state list subject to the power of the center.
Under entry 54, the Parliament enacted the Mines & Minerals (Development and Regulation) Act in 1957. The MMDR Act happens to be the principal legislation governing the mineral sector exclusive of petroleum and natural gas in India and governs the development of minerals and the regulation of mines. This Act was amended as recently as 2015 and 2016 to bring about a transparent and non-discretionary regime regarding the process of acquisition of mineral concessions.
As per Article 294 and 295 of the Constitution of India, the State governments hold the rights and obligations attached to the properties and assets of the governments that previously ruled the area within the boundaries of the State. However in the case of Threesiamma Jacob v. Geologist, Department of Mining and Geology, the Apex court had recognized the rights of private land owners to own subsoil and mineral wealth. The issue of mineral ownership is not completely answered as issues relating to payment of loyalties by private landowners are pending before the Supreme Court. These judgments can however form the basis of private ownership of mineral blocks and shift focus from the previous captive consumer end user ownership.
The legal relevance
It can be said that most of the reformations announced by the government recently are but an assimilation of previously discussed and enacted legislations. The renewed push for commercial mining happens to be a proposal over two years old. A way to auction coal mines/blocks for sale of coal has already been provided under the provisions of the Coal Mines (Special Provisions) Act, 2015, and the Mines and Minerals (Development and Regulation) Act, 1957. This Act was approved by the government in early 2018 and an order was issued on February 27, 2018. Subsequently, the Coal Ministry had informed that it had identified “15 large coal blocks” for the pilot round of bidding in December that year. As early as in January this year, the Cabinet cleared an ordinance to introduce the amendments needed to relax conditions in the two laws to open up the sector to commercial mining.
The coal gasification and liquefaction projects had also already started in the form of revival of the Talcher unit of Fertilizer Corporation of India Limited via a Joint Venture/Special Purpose Vehicles of nominated PSUs for manufacturing of urea through Coal Gasification route. This project had already been cleared in December last year. Gas Authority of India Limited, Rashtriya Chemicals and Fertilizers Limited and Coal India Limited entrusted PDIL to carry out a feasibility report for the production of ammonia through the coal gasification route.
Thereby, it can be concluded that the legal adaptations and modifications had been initiated beforehand and the 2018 amendments are a base, necessary to understand the objective and reasoning of the later modifications. The 2018 rules were laid down to increase the efficiency of mining works by prescribing a timeline for general exploration. These rules were also aimed towards ensuring that the mineral extraction process is not affected due to lease time limits. The 2019 ordinance and the present day announcements construct upon this base by further simplifying laws. The now redundant provisions of the mining laws will have to be either modified or abrogated. As the monopoly of the government ends, some new rules and laws would be required to be enacted in the coming days to ensure the rule of law. Till such time, the judgments of the Apex court and the objectives and directions of these reform measures could be taken as a new base.
It is not hard to decipher that the relief measures mentioned under the fourth tranche of the acclaimed relief package are in actuality reformation measures, privatizing the government dominated minerals sector. The labour unions have called the government out for this action and accused it of clandestinely passing such ordinances and reformations without having due discussions with various stake holders. They are of the view that the government, under the shadow of the ongoing pandemic, have modified the existing structure at this time to get away with it without any protest or accountability. To some extent, the concerns raised by these unions are valid and important. An elected government must show faith in the democratic process of due discussion. However, it can be argued that the time was for action and not discussion, which happens to be usually coloured with politics.
These reforms will not have an immediate effect upon the economy of the country and will take at least half a year to a year to accrue and be visible. Therefore this so called relief stimulus will not have any direct bearing on the present economic situation, which happens to be quite contradictory to its purpose. These reformations could have come at a later time and should not have used up the space and the opportunity in the relief stimulus. However, it can also be argued that the reformations were required at the present time due to the ongoing Sino-American trade war which could open up some interesting opportunities for India. The Chinese manufacturing hub might undergo a recession as companies decide to shift their base of operations. With lucrative and seamlessly efficient bureaucratic processes, these companies might set up their base in India.
The benefits of these reformations would also include transparency, increase in foreign investment, creation of more jobs, increase in government revenue and many more. The drawbacks would be the same as those that plagued the Free Market economies resulting in the Great Depression of the 1930s. The free forces of the market can at times result into the breakdown and collapse of the sectorial economy. It should always be remembered that India is a labour intensive market having a surplus of unskilled labourers. As a labour intensive sector is privatized, most of these labourers might become unemployed due to a rise in demand for skilled labourers. This unleashes its own Pandora’s Box in terms of macroeconomics. On the social front the rights and interests of these workers might also be threatened as such.
Whilst it is indisputably true that the intricate web of mineral sector laws needed to be reformed for saving the economy, the same could have been done after taking the stakeholders into confidence, after following the due process of a democratic discussion. The timings of these reforms are also somewhat murky with many parties casting aspersions on the intention of the government. What fruits this move bears is yet to be seen, but what has always been known is that India has a resilient, adaptive economy with a modern age developing legal philosophy and system i.e. a very conducive environment for leading the global industrial front.
Author: Shivani Panda from Amity Law School, Delhi.
Editor: Avani Laad from Symbiosis Law School, Pune.