Talk of Coal India Limited (CIL) shutting down sounds dramatic, but less so when you consider the fact that, while it has cash reserves of Rs 38,000 crore, it has been asked to pay `41,000 crore of fines already in Odisha and Jharkand for illegal mining and more states will soon follow suit.
Were prime minister Modi to try and get Parliament to change the law—with retrospective effect—to help CIL, chances are politicians like Rahul Gandhi could once again talk of suit-boot-ki-sarkaar since private-sector miners will also get saved; the latter have been fined rs 19,200 crore in Odisha alone since the Supreme Court (SC) judgment last August.
If Modi does nothing, to avoid controversy in the run-up to the elections, and CIL’s operations are badly affected as a result, millions of jobs will be hit, apart from the consequences of acute mineral shortages. Though the judgment of Justices Madan Lokur and Deepak Gupta dealt with iron ore and manganese, since it spoke of ‘any mineral’, state governments in Odisha and Jharkhand have started levying fines on CIL (goo.gl/wuY4sr).
Ironically, it was a re-interpretation of Section 21(5) of the Mine and Minerals (Development and Regulation), or MMDR, Act—one of the sections that deal with fines for illegal mining—by the central government’s mining ministry last year that caused the problem. The central government’s mining ministry traditionally interpreted Section 21(5) as applicable only to mining that was done on land without any mining lease—that is, it did not apply to violations of the law within the mining lease area. And if there were violation of the Environmental Protection Act (EPA) or the Forest Conservation Act (FCA), the ministry held, this had to be dealt with under those laws, not by using Section 21(5).
When Odisha first started issuing notices to mining companies, levying huge fines for over-mining—Rs 60,000 crore in FY12—the central government’s mines ministry gave this clarification in a letter to the chief secretary of the state in 2011 and 2012, and later it even gave an affidavit to this effect in the Orissa High Court. It also pointed out that the over-mining wasn’t quite as illegal as was being made out since royalties were paid on it and transport permits had also been issued by the state government to move the ore. This argument of the applicability of Section 21(5) to only mining outside the mining lease area, Lokur-Gupta note in their judgment, was also endorsed by the Central Empowered Committee.
Last year in January, however, the mines ministry had a rethink and filed an affidavit in SC saying Section 21(5) applied to all violations “be it forest clearances or environment clearances or any other such legal requirements” (we’ll come to the implications of ‘other such legal requirements’ later) and that this would also apply to mining “carried out within the lease area”.
What prompted such a massive U-turn is unclear, nor is it clear why Lokur-Gupta didnot strike this down as a retrospective change while it was clearly that. More so, since miners—and even the Government of India, by then—explained the ministry’s traditional stand to the SC, including GoI’s letters to the Odisha government and the affidavit in the Orissa high court. To be fair, GoI should also have submitted a new affidavit to SC or explained the ramifications of the change in the interpretation of Section 21(5).
But while the retrospective re-interpretation of Section 21(5) is a big issue, leave it aside for the moment—surely if a miner violates EPA/FCA, there should be huge fines? Of course there should be a huge fine, but here’s the catch, getting environment clearances (EC) clearances takes forever—Lokur-Gupta point to submissions that while an EC clearance was supposed to take a maximum of 180 days, it could take anywhere up to 390 days. Miners also told SC that the government allowed the possibility of getting an ‘ex post facto’ environment clearance and that “the default was retrospectively condonable”.
Lokur-Gupta made it clear such an attitude was not acceptable to them and that environmental clearances were sacrosanct—of the Rs 19,260 crore notices issued by the Odisha government after the SC judgment, Rs 17,400 crore pertained to not getting environmental clearances in time. But if huge delays in getting environmental clearances—and post facto condoning—were the order of the day, and across the country, is the SC suggesting mines be shut down in the meanwhile?
If the new interpretation of Section 21(5) was to be accepted, the more reasonable course for SC would have been to give miners time to comply with the new rules and to ensure the environment clearance process was speeded up to ensure this problem didn’t keep re-occurring.
Postscript: After the Union mines ministry’s reinterpretation of Section 21(5) to include violation of “other such legal requirements”, the Lokur-Gupta judgment increased the ambit of Section 21(5) to include violation of even “a statutory requirement”. Following this, Odisha started levying penalties on miners for other violations such as the consent-to-operate and mining-plan-threshold. When miners approached SC over this, Lokur-Gupta tried to limit the damage of their wide interpretation of the application of Section 21(5) and, last December, said that in such cases—of violations other than environment/forest—“the mining lease holders are at liberty to challenge the demand in an appropriate forum”. It is up to Modi, however, to figure out how to undo the larger damage to the mining industry through the retrospective reinterpretation of the law.