MMDR AMENDMENT, 2021 – A SOCIO-LEGAL ANALYSIS

Introduction

The mining sector in India is regulated by the Mines and Minerals (Regulation and Development) Act (1957)[1]. The Act lays down the rudimentary legislative framework for mining activities, and is uniformly applied across all minerals, apart from a few exceptions (atomic and minor minerals). The government introduced a new amendment to this Act in March 2021. The proposed changes are dynamic and will have a tangible effect on the state of mining in the country. The questions that this paper aims to explore are the pros and cons of the proposed amendments, the legal validity of the amendment within the federalist framework, and the socio-legal impact.

Brief Explanation

The Mines and Minerals (Regulation and Development) Act (1957) is complex and thus to understand its nuances, the explanation of a few terms is necessary.

“Sale of mines by auctions” is generally a procedure employed by state governments to sell their mines through bidding to private players.

“Captive mining” refers to those mines that produce exclusively for the company who owns the mines.

“Non-Captive mining” refers to those mines that produce and sell their stock.

“Reconnaissance” means prospecting of mines via surveys.

History and Background

Mining comes under the Ministry of Mines currently headed by Prahlad Joshi. The MMDR Act was first passed in 1957 and has undergone Amendments previously in 2015 and 2016 under the NDA.

2015 Amendment

The 2015 Amendment primarily sought to accord greater transparency to the process of  “mining license allocations which used to occur by auction”. Via the auction system of according mining licenses, a certain amount of the revenue earned of any mine will be allocated to development of the area around said mine. The rates of auction, in addition to the royalty comes under the purview of the respective State government. The amendment also provides for a “National Mineral Exploration Trust” to be set up to explore and promote minerals apart from coal. The amendment proposes that the trust will have a starting fund of Rupees 500 crore and will be “funded by a 2% levy from mining license holders”[2].

The amendment increases the validity of mining licenses from 30 to 50 years. Renewal of licenses is not allowed, however re-auction is.

The bill contains a new license for “prospecting-cum-mining”, which serves to replace a 2-stage process. Through notification to the state government, the mining and “prospecting-cum-mining” licences can be transferred to another party, for which the respective state government has the liberty to charge a fee. Minerals such as iron ore limestone and bauxite do not require a prospecting-cum-mining licence. The mining licence will be auctioned. The “prospecting-cum-mining” licence will be necessary for non-notified minerals. 

The amendment proposed to make “illegal mining, trespassing and violation of norms cognizable offences” – punishable by 2 years imprisonment. The amendment empowers the respective state governments to set up special courts for such “mining” trials.

Criticisms of the 2015 Amendment

The 2015 amendment itself received several criticisms from state governments and lobbyists. They argued that it was the first step towards centralization of the mining industry – and reducing the power, jurisdiction and control of state governments over their own mines. Several opposition party members (including the Biju Janata Dal of Odisha) staged a walk-out in Parliament and argued that state autonomy is undermined in the new amendment[3]. The “prospecting-cum-mining” license also received significant criticisms as it seemed to serve no useful purpose as in general, mines would first have to be prospected and then after analysis and judgement, the mining license could be obtained. 50 years was critiqued as far too lengthy a time period for the validity of the mining license.

2016 Amendment

The amendment passed in 2016 had one key feature. It made an allowance to transfer captive mining leases, which were “not granted through auction”. The rationale behind this change is that it would enhance ease of doing business and liquidity, as there would be mergers and acquisitions of companies. The government justified the change by saying it would benefit banks (by increasing liquidity) and also the removal of the auction clause helps lessees and facilitates a quicker transfer[4].

Thus overall, there have been 3 amendments to the Mines and Minerals (Regulation and Development) Act (1957).

The Provisions of the New Amendment (2021)

The new Amendment makes several changes regarding the clauses of restrictions on end-use, sale by “captive mines”, and auctions, statutory clearances, extensions and more.

Adjustment of the “restriction on end-use of minerals”:

The act accords greater centralization for captive mines. Under the new amendment, the central government can reserve any mine for auction for a specific end-use (apart from coal and atomic minerals).

Captive Mines and their sale:

The Amendment empowers captive mines to sell “upto 50% of their annual production in the free market” , once they have met their own needs. 

The amendment provides that the central government is empowered to increase this upper limit via notification.

Auction by central government in certain cases:

The Amendment accords the central government with the power to decide a time-period for completion of the auction, which they will do in consultation with the respective state government.

In the scenario that the state government cannot complete the auction within the specified time-period, the central government has the power to conduct such auctions.

Statutory clearances transferral provision:

The provision is that the validity of the transferred statutory clearances lasts till the lease period of the new lessee.

Before the amendment the lessee had to apply for clearances within 2 years after the transfer obtained from the previous lessee.

Allotment of mines where the lease has expired:

The Amendment provides that mines where the lease has expired, could be allocated to a government company. It varies from case to case basis.

The respective state government can grant a lease for such a mine to a “government company for a period of up to 10 years or until the selection of a new lessee”, depending on whichever happens earlier.

Extension of leases to government companies:


The Amendment provides that the Central government will decide the period of “mining leases granted to government companies” and it could be subject to extension “upon payment of additional amounts”.

The prerequisites for lapse of mining lease:


The conditions for lapse are:

In the scenario that the lessee “is not able to start mining operations within two years”of the grant of a lease.

In the scenario that the “lessee has discontinued mining operations for a period of two years”.

The lease does not lapse “at the end of this period if a concession is provided by the state government upon an application by the lessee”.

The Amendment provides that the State government can only “increase the period for lapse of the lease once and upto a year”.

“Non-exclusive reconnaissance” permit:

The Amendment mandates a “non-exclusive reconnaissance permit” (for minerals other than coal, lignite, and atomic minerals)[5].

The Amendment removes the provision of reconnaissance[6].

What is The Government’s Rationale Behind Passing the Amendment?

The justification given by the government for the passing of the bill is that it brings in more transparency in mining and auctions and facilitates greater output from the mines. It also helps in generating greater liquidity for the mining process as whole, along with facilitating the creation of an “efficient energy market” and “reducing coal imports”.

Pros of the New Amendment

On analysis of the amendment from a constitutional and legal perspective, certain pros and cons come to surface. The pros range from making use of the potential of the mining industry in India, creation of employment opportunities, greater investment in mining sector, increase in State’s revenue etc. Some say the mining reforms are the “correct move” taken by the government.

Tapping the Potential of the Mining Industry

India has a similar mining potential like countries such as Australia and South Africa. Mining contributes to 7% GDP in these countries, however in the Indian economy mining only contributes to 1.75% of the GDP. India produces coal of Rupees 1.25 lakh crore. However, due to exceeding coal imports the coal is not utilised to its full potential in India. It has 22,000 million tonnes of iron ore reserve, which would ordinarily be enough to last India around 150 years, lest the imports reduce. The amendment also proposes to reduce illegal mining by increasing centralization of mines[7].

            One could argue that increased centralization could serve as a medium to unlock the potential of the mining industry. The States have varied parties, some of which belong to the opposition than the Centre. Sometimes, mining activities could fall prey to State-Centre and opposition party tactics and politics. Also, industry players have embraced the Bill as a welcome move, because sometimes States may display bias towards certain private players over others. The increased Central control could eliminate the bias and increase objectivity during bidding and auctions. The Centre can hold states accountable for under-utilisation of mines. Thus, this is one of the biggest positives of the Bill.

Reduction in Illegal Mining And Greater Employment Opportunities

One could also argue that increased centralization results in less illegal mining across states due to regulation by the central government on the matter. Mines whose licenses have expired, or mines in which illicit activities are taking place, such as child labour or environmental hazards, can come under the purview of the Central government. The government can take concrete action against illegal mining. Whereas if it is solely the prerogative of the respective state government, they might not be vigilant enough or might not regulate and administrate it efficiently[8].

            In terms of employment, the new bill will give a boost to employment in the mining sector. The mining sector already gives employment to One Crore people. For an economy struggling to revive itself after the effects of COVID-19, employment in mining and the subsequent boost to the economy bodes well for the people of India.

Captive Mines Benefit States

The pertinent point is that the Amendment lays down for no difference between captive and merchant mines. The amendment calls for auction of mines without “restriction of captive use of minerals”. In rudimentary terms, mines cannot be reserved for a specific end-use. The concession can allow for optimal mining. While, the lessee will be required to pay additional charges for the minerals sold in the free market, this amendment is based on the premise that the sale of minerals by captive plants will speed up the growth in “production and supply of minerals leading to commercial viabilities in mineral production and consequently generating added revenue to the States”[9].

            The captive mines could help in smoother auctions and transfer of leases as the Central government has removed the end-use restrictions on the mines. The provisions help in overcoming difficulties of the state machinery in conducting auctions. Mines also cannot be reserved for any purpose by States and thus it facilitates greater universalization for the mining industry. The mines can be used for any purpose and are free to sell.

Criticisms of the New Amendment

While the amendment has several pros and might seem like a step in the correct direction, there are other considerations, lacunae and loopholes in the Bill which have not been addressed. The respective State governments might challenge the validity of the Bill on certain grounds. It encroaches on the respective states’ discretionary powers. It also does not account for environmental impact, displacement of tribes and other communities in certain “mining zones”, and child labour issues.

Encroaching on The State’s Powers

The Amendment has encroached upon the State’s powers in certain respects. It has interfered with the federal structure of the constitution. The Centre has provided itself all-encompassing powers with respect to auction of mines, captive mines, the working of the District Mineral Foundation (DMF) etc. Clause 14(3) gives the Centre jurisdiction over the auction of a mine in case of failure by the state government to auction it. Clause 10(1) empowers the Centre to control the composition and working of the DMF. Thus, the DMF funds will be used as per the Centre’s guidelines, and the State governments are stripped of their power[10].

            An interesting point to note is that out of the States that are rich in minerals, many of them have opposition governments in power. Odisha (Biju Janata Dal), West Bengal (All India Trinamool Congress) and Tamil Nadu (All India Anna Dravida Munnetra Kazhagam) are some examples of mineral-rich states, with opposition parties in power. One could argue that this is a strong-armed attempt by the Centre to subsume the State’s powers. The Centre is possibly creating a monopolization by dissolving state powers in a crucial matter such as mining. 

Environmental Hazards

The Amendment extends the period of validity of mining leases from 30 to 50 years. This could be detrimental to the environment. This is because the impact on the environment depends on the process in which a mine is opened, closed and rehabilitated. Increasing the period of validity of licenses, could result in “thousands of mines” remaining open for long periods of time. This could contribute to a lot of pollution with every open mine. Mines should be closed and rehabilitated quicker for minimum environmental damage[11].

            This perpetual opening of mines will give rise to more “idle mines” – where the lessees will sit on tons of resources for half a decade. Economically and environmentally, a more sensible approach would be to reduce the period of the mining license, to ensure faster closure and rehabilitation of mines. The land can also then be restored to the rightful owners. The Amendment seeks to increase privatization and double the coal production over the next 5 years. However, the environment has not been taken into consideration. The Supreme Court in 2017 observed in 2 districts of Odisha that “rapacious mining” has been detrimental to the environment and the appropriate guidelines are not being followed due to interests of politicians[12]. The environment and climate change plan has to be on the top agenda for India. For a country that has come up with an India Cooling Action Plan, we must take similar steps to limit environmental hazards in core industries like mining too.

Displacement of Communities

The Amendment allows the Centre to “mine leases beyond the 10 square kilometer lease area”. The increase in mining activities and geographical area of such activities contributes to displacement of poor communities. Typically, these communities live around the mines. They never earn the profits of the mines and often contribute to the labour require for mining. The Amendment also removes the necessary consent from landowners to acquire land for mining purposes[13].

In the quest for privatization and maximization of output, various marginalized communities could be displaced. In states like Assam, Meghalaya and Tripura the sixth schedule exists for protection of tribal communities. However, this Bill does not provide adequate provisions or justifications to prevent the displacement of such communities.

Conclusion

In conclusion, this paper provides an overview of the newest amendment to the Mines and Minerals (Regulation and Development) Act (1957). This paper has attempted to explain the nuances and implications of the 2021 amendment. A brief discussion of the previous amendments serves to solidify the changes made in the new amendment. The paper also discusses the government’s rationale behind passing the new amendment, along with the pros and the criticisms of the new amendment.


[1] The Mines and Minerals (Regulation and Development) Act, 1957 (Act 67 of 1957).

[2] Staff Reporter, “Proposed Mines Bill for hefty penalty for violators” Live Mint, Nov. 18, 2014.

[3] Staff Reporter, “LS Passes Mines and Minerals Bill Amid Oppn Walkout”, The Indian Express, Mar.4, 2015.

[4] Staff Reporter, “Amendment to the Mines and Minerals (Development And Regulation) Act, 1957”, Business Standard, Mar. 10, 2016.

[5] The Mines and Minerals (Regulation and Development) Act, 1957 (Act 67 of 1957).

[6] MMDR Amendment Bill, 2021, available at https://www.drishtiias.com. (last visited on April 18, 2021).

[7] Shekhar Gupta, “Why MMDR Amendment bill will help unlock mining industry that has been under-performing”, The Print, Mar.24, 2021.

[8] Shekhar Gupta, “Why MMDR Amendment bill will help unlock mining industry that has been under-performing”, The Print, Mar.24, 2021.

[9] Staff Reporter, “Rajya Sabha passes MMDR Amendment Bill 2021”, Mint, Mar.23, 2021.

[10] Moushimi Das Gupta, “How the Modi Government’s changes to mining law could unshackle the sector in India”, The Print, Mar.23, 2021.

[11] Chandra Bhushan, “Why the new mining Bill needs a relook”, DownToEarth, Mar.18, 2021.

[12] C. Bhushan & T. Gopalakrishnan, “A case for enacting a Framework Climate Legislation In India”, Environmental Laws And Climate Action, 5 (2021).

[13] Chandra Bhushan, “Why the new mining Bill needs a relook”, DownToEarth, Mar.18, 2021.

Author: Tara Ranade

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