Coal licenses in India are issued to some mining companies today for a specific end use such as steel production and power generation. The Mineral Laws (Amendment) Ordinance, which was promulgated in January, removes this end-use restriction for coal mines. The Ordinance further clarifies that companies do not require any coal mining experience in India to participate in auctions.
The bill amends the Mines and minerals (development and regulation) act, 1957 (MMDR act) and the Coal mines (special provisions) act, 2015 (CMSP act). An ordinance with similar provisions was promulgated on january 10, 2020.
- The MMDR act regulates the overall mining sector in india. The cmsp act provides for the auction and allocation of mines whose allocation was cancelled by the supreme court in 2014. Schedule i of the act provides a list of all such mines; schedule ii and iii are sub-classes of the mines listed in the schedule i. Schedule ii mines are those where production had already started then, and schedule iii mines are ones that had been earmarked for a specified end-use.
- Removal of restriction on end-use of coal: Currently, companies acquiring schedule ii and schedule iii coal mines through auctions can use the coal produced only for specified end-uses such as power generation and steel production. The bill removes this restriction on the use of coal mined by such companies. Companies will be allowed to carry on coal mining operation for own consumption, sale or for any other purposes, as may be specified by the central government.
- Eligibility for auction of coal and lignite blocks: the bill clarifies that the companies need not possess any prior coal mining experience in india in order to participate in the auction of coal and lignite blocks. Further, the competitive bidding process for auction of coal and lignite blocks will not apply to mines considered for allotment to: (i) a government company or its joint venture for own consumption, sale or any other specified purpose; and (ii) a company that has been awarded a power project on the basis of a competitive bid for tariff.
- Composite license for prospecting and mining: currently, separate licenses are provided for prospecting and mining of coal and lignite, called prospecting license, and mining lease, respectively. Prospecting includes exploring, locating, or finding mineral deposit. The bill adds a new type of license, called prospecting license-cum-mining lease. This will be a composite license providing for both prospecting and mining activities.
- Non-exclusive reconnaissance permit holders to get other licenses: currently, the holders of non-exclusive reconnaissance permit for exploration of certain specified minerals are not entitled to obtain a prospecting license or mining lease. Reconnaissance means preliminary prospecting of a mineral through certain surveys. The bill provides that the holders of such permits may apply for a prospecting license-cum-mining lease or mining lease. This will apply to certain licensees as prescribed in the bill.
- Transfer of statutory clearances to new bidders: currently, upon expiry, mining leases for specified minerals (minerals other than coal, lignite, and atomic minerals) can be transferred to new persons through auction. This new lessee is required to obtain statutory clearances before starting mining operations. The bill provides that the various approvals, licenses, and clearances given to the previous lessee will be extended to the successful bidder for a period of two years. During this period, the new lessee will be allowed to continue mining operations. However, the new lessee must obtain all the required clearances within this two-year period.
- Reallocation after termination of the allocations: the cmsp act provides for the termination of allotment orders of coal mines in certain cases. The bill adds that such mines may be reallocated through auction or allotment as may be determined by the central government. The central government will appoint a designated custodian to manage these mines until they are reallocated.
- Prior approval from the central government: under the mmdr act, state governments require prior approval of the central government for granting reconnaissance permit, prospecting license, or mining lease for coal and lignite. The bill provides that prior approval of the central government will not be required in granting these licenses for coal and lignite, in certain cases. These include cases where: (i) the allocation has been done by the central government, and (ii) the mining block has been reserved to conserve a mineral.
- Advance action for auction: under the mmdr act, mining leases for specified minerals (minerals other than coal, lignite, and atomic minerals) are auctioned on the expiry of the lease period. The bill provides that state governments can take advance action for auction of a mining lease before its expiry.
Categories of minerals:
As per the available legislations in the country, all minerals have been classified into two categories namely.
- Major minerals: major minerals are minerals like agate, asbestos, barytes, bauxite, cadmium, calcite, china clay, coal. Copper lead, manganese, mica, nickel, rock phosphate, soapstone, tungsten, wollastonite, zinc, etc., as specified in second schedule appended with the mmdr act 1957.
- Minor minerals: the minor mineral are building stone, gravel, ordinary clay, ordinary sand and any other mineral which the central government may by notification in the official gazette declare as minor mineral.
Permission for mining:
- The state governments grant permission for mining, known as mineral concessions, for all the minerals located within the boundary of the state, under the provisions of the mines and minerals (development and regulation) act, 1957 and mineral concession rules, 1960.
- However, for minerals specified in the first schedule to the mines and minerals (development and regulation) act, 1957, central government approval is necessary before granting the mineral concession.
- Minerals specified under the first schedule include hydrocarbons, atomic minerals and metallic minerals such as iron ore, bauxite copper ore, lead precious stones, zinc and gold.
- It might also put an end to coal india ltd’s monopoly in the sector.
- This will speed up the process of implementation of projects, ease of doing business, simplification of procedure and benefit all the parties in areas where minerals are located.
- The bill provides for licensing of coal mining leases (pl-and-ml) which will increase the availability of coal and lignite blocks and provide for an allocation of different grades of coal blocks in wide geographical distribution.
- Environmental and forest clearances will be automatically transferred to the new owners of the mineral blocks along with other clearances for two years. This will allow the new owners to continue with the hassle-free mining operations. They can apply for new licenses for two years during the period.
- Now, the auction of the lease of mines can be started before the end of the lease term. This will enable the state government to take advance action for auction of mineral blocks so that the new leaseholder can be decided before the current lease period ends. This will help in the smooth production of minerals in the country.
- His opens up the sector to players outside steel and power as well as removes end-use restrictions.
- It will create an efficient energy market and bring in more competition as well as reduce coal imports. India imported 235 million tonnes (mt) of coal last year, of which 135 mt valued at rs 171,000 crore could have been met from domestic reserves.
- It would also help india gain access to high-end technology for underground mining used by miners across the globe.
Coal sector in India:
- Despite having the world’s fourth largest coal reserves, india imported 235 million tonnes (mt) of coal last year, of which 135mt valued at rs.171,000 crore could have been met from domestic reserves.
- India’s state-run coal giant has been unable to meet growing demand despite abundant resources.
- The south asian nation depends on coal india for more than 80 per cent of its domestic production and the miner has consistently fallen short of production targets in the last few years.
- The government has been progressively liberalizing the coal sector over the last several months to attract new investments, and getting rid of this archaic end-use restriction was a key step.