Mines ministry can allocate leases on first come, first served basis, says AG

Written by Rishi Raj | Ashish Sinha | New Delhi | Updated: May 2 2012, 07:53am hrs
Goolam E VahanvatiGoolam E Vahanvati, Attorney general of India
The government can go ahead and allocate mining leases on a first come, first served (FCFS) basis, attorney general GE Vahanvati has told the government. The AGs advice, sought by the mines ministry where around 400 requests for mining leases are pending, comes at a time when the larger issue of allocating natural resources through auctions is being heard in the Supreme Court as part of the presidential reference made by the government.

In tendering the advice, the AG has gone by the context of the Supreme Court ruling on February 2, which cancelled 122 licences granted by former telecom minister A Raja through a skewed FCFS policy. Calling for their cancellation, the SC had said that all natural resources should be allocated through auctions alone. Though the government did not challenge the cancellation of the licences, it has made a presidential reference to the SC seeking to know if the auction criteria would apply to all natural resources in all circumstances or only telecom spectrum.

However, the AG has told the mines ministry that the SC ruling was in the context of telecom licences/spectrum and did not pertain to the mines sector. The observations of the SC in the judgment dated February 2, 2012, with regard to transfer of natural resources were genuinely made in order to justify the cancellation of the telecom licences, Vahanvati has said. The SC was not called upon to consider other statutory provisions, particularly, the provisions under the MMDR Act, 1957, and the rules made thereunder, the AG has added.

Vahanvati has concluded that the existing practice (of granting mining leases) can be continued. In the event of any challenge to the existing practice, the matter may be considered at that stage, he added.

In coming to this conclusion, the AG also stated that the grant of mineral concessions by way of mining leases on an FCFS basis is rare and on the basis of statutory provisions and none of these provisions are before the SC.

As reported by FE in its May 1 edition, the mines ministry had referred the matter to the AG on April 19 fearing possible strictures from the SC after its February 2 judgment.

The context of the reference was that the government cant put the sector on hold, as it will take a while before Parliament clears the MMDR Bill, which will set the stage for auctions.

The AGs advice favouring FCFS may insulate the mines ministry from any potential adverse comments by the comptroller and auditor general of India (CAG) in future. This is important considering that a leaked draft report on coal by the CAG has stated that the exchequer lost around R10.7 lakh crore by not auctioning captive coal blocks in the past.

The mines ministry is in a bind because since the adoption of the new mineral policy in 2008, the MMDR Bill took more than three years to reach Parliament. Even after the Bill was introduced in December, it is stuck with the Standing Committee, tackling wide differences between ministries over some provisions.

As earlier reported by FE, the countrys mining sector witnessed a negative growth of 2.96% in January 2012 as against the corresponding month last year. Booming illegal mining has led to overexploitation, forcing the SCs central empowered committee to recommend a ban on mining in three districts of Karnataka. In terms of pendency of applications, Karnataka tops the list with over 19,300 applications for concessions, followed by Gujarat (4,900), Madhya Pradesh (close to 4,600), Orissa (3,600) and Chhattisgarh (2,700).

Interestingly, the government-appointed Ashok Chawla committee, which submitted its report last year, has favoured auction of natural resources. However, it has said that only prospective mining licences should be allocated through auctions. In his opinion, Vahanvati has also said that the position of persons who have been given reconnaissance permits and prospecting licences will stand on a different footing because such persons invest time and effort in exploration.