In January, 2015, the amended Mines and Minerals (Development and Regulation) Act, 2015 ushered in significant changes in the process of allocating mineral blocks to change the game.
By Satnam Singh
While mining block allocation has proceeded robustly in the past four years, actual mineral production is lagging majorly, triggering developmental concerns. In January, 2015, the amended Mines and Minerals (Development and Regulation) Act, 2015 ushered in significant changes in the process of allocating mineral blocks to change the game.
State governments, responsible for block preparation activities, allocation process and other related tasks, have already allocated 53 mineral blocks. Karnataka has auctioned 14 blocks, followed by Jharkhand, Madhya Pradesh and Rajasthan with 6 blocks each, and Chhattisgarh, Andhra Pradesh and Odisha with 5 blocks each. These are chiefly of limestone (24), iron ore (19), gold (4), manganese (2), graphite (2), diamond (1) and bauxite (1). It’s pertinent to note that though India produces 23 major minerals, only seven types are auctioned.
Windfall for states
That 53 blocks have been auctioned in four years is good news, especially with premiums as high as 275% (Madhya Pradesh) for iron ore and 138% (Chhattisgarh) for limestone. The revenue expected from these blocks is Rs 183,161 crore, including auction premium of Rs 143,169 crore, royalty, Rs 35,725 crore, DMF, Rs 3,572 crore, and NMET, Rs 714 crore —compared to only royalty collection under the previous regime. Clearly, this is a windfall for states.
However, mining leases or prospecting licences have been signed for only two blocks (both in Karnataka) so far. Earlier rules did not specify timelines for signing of mining lease; now, this is mandatory within three years of issuance of letter of intent, with a provision of two extra years for delay beyond the control of the preferred bidder. The three-year timeframe is expected to suffice for securing the required clearances from state governments, before mining leases are signed.
Six blocks were auctioned in FY16 and 15 in FY17. Thus, mining leases ought to be signed for around six blocks in the next 3-4 months and for around 15 blocks by next year. But this looks improbable except in a few states. Progress has been slow due to land, environment and forest clearance issues. In Karnataka, two mining leases have been signed in 14 months, with a few more expected within the stipulated 18 months. Meanwhile, 48 working leases for around 329 blocks are set to expire by March 31, 2020, and the auction of 101 mines needs to be completed before that deadline to ensure production does not suffer.
Impact of delays
Delay in the start of already auctioned blocks can hamper the response for blocks about to be auctioned. Lower production of minerals is also detrimental to end-users and the country. Raw material availability at affordable prices is emerging as an issue owing to the likely shortage of iron ore and other major minerals post 2020. Around 97 mining leases across India will lapse by 2020.
Both the Centre and states need to address the sectoral issues, for which five steps are recommended:
1. States may establish a special cell headed by the chief secretary with representation from different government agencies looking into statutory clearances to expedite them. Block owners too can be consulted on a regular basis to understand the issues faced by them.
2. The existing Mining Tenement System (MTS) can be utilised to track the entire lifecycle of a mineral block, starting from the issuance of letter of intent to grant of mining lease while uploading applications for all clearances and approvals required in the MTS, so that both the applicants and the government can monitor the situation easily.
3. An integrated single-window clearance needs to be initiated with integration and co-ordination of all related subjects such as land, water, mineral, environment, forest, etc. A single agency to take care of all such clearances will obviate inter-departmental references and reduce delays.
4. There is a need to streamline the process of environment and forest clearance by removing redundancies in the existing process without compromising on environmental and forest concerns. This is needed for preliminary and regional exploration projects—for instance, an NOC from the forest department where no forest land is available may be taken by the state government at the block preparation stage.
5. Land details gathered by a state’s mining and geology department using differential global positioning system during the auction process need to be vetted by the revenue department to avoid any mismatch at later stages or at the time of land acquisition.
-The writer is Director, CRISIL Infrastructure Advisory