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Mines and Minerals (Development and Regulation) Amendment Bill, 2023

GS3/GS1 Paper

 Syllabus: Issues related to Development, Mineral and Energy Resources

 

Source: TH

 Context: Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2023, (MMDR Amendment) in a bid to attract private sector investment in the exploration of critical and deep-seated minerals in the country.

 

What are critical and deep-seated minerals?

  • Critical Minerals: Critical minerals are natural resources that are essential for various industries, including technology, manufacturing, and clean energy. E.g., Lithium, nickel, cobalt etc.
  • Deep-Seated Minerals: Deep-seated minerals refer to minerals that are found deep within the Earth’s crust and are typically more challenging and costly to explore and mine compared to minerals closer to the surface. E.g., Gold, Copper, Diamonds etc.

 

India’s import dependency for critical and deep-seated minerals:

India is highly dependent on imports for critical and deep-seated minerals like

  • 100% dependency: lithium, cobalt, nickel, niobium, beryllium, tantalum,
  • Very high dependency: copper, zinc, lead, gold, silver, platinum group elements (PGEs), and diamonds.

 

India’s current status:

  • India is the world’s 4th largest producer of iron ore and the 2nd largest producer of coal as of 2021.
  • India is the second-largest producer of Aluminium globally
  • India’s mineral demand is projected to rise by 3% in 2023, fuelled by expanded electrification efforts and overall economic growth

 

The issue with the import dependency:

This import dependency poses challenges due to vulnerabilities in global supply chains and the potential for supply disruptions and increased prices. Moreover, the cost of importing these minerals is rising for India.

 

Private sector participation is crucial for the exploration of critical and deep-seated minerals in India due to:

  • Geological Potential: India has substantial geological potential for hosting valuable mineral resources, similar to mining-rich regions globally.
  • Limited Exploration: India has explored only a small fraction of its geological potential, with less than 2% of known resources being mined.
  • Government Dominance: Exploration efforts have been largely led by government agencies like the Geological Survey of India and Mineral Exploration Corporation Limited, with limited private sector involvement.
  • Complex Exploration Techniques: Mineral exploration demands specialized techniques like aerial surveys, geological mapping, and geochemical analyses.
    • These operations are resource-intensive, time-consuming, and carry financial risks.

 

Background

  • The MMDR Act, 1957 has undergone several amendments to address various issues in the mineral sector.
  • Amendments in 2015 introduced auction-based mineral allocation, established DMF for community welfare, and NMET for exploration promotion.
  • Amendments in 2016, 2020, and 2021 focused on emerging challenges and reforms, including removing the captive vs. merchant mine distinction.

 

Need for further Amendment:

The mineral sector requires more reforms, particularly in exploring and mining Critical Minerals crucial for economic growth and national security. Limited availability and extraction concentration of these minerals poses supply chain vulnerabilities and disruptions. Critical minerals have gained importance due to India’s energy transition commitment and goal of achieving Net-Zero emissions by 2070.

 

Key provisions of Mines and Minerals (Development and Regulation) Amendment Bill, 2023

Key ProvisionsMMDR Act 1957MMDR Amendment Bill
Private Sector to Mine Atomic MineralsLimited to State agencies for exploration.Allows the private sector to mine 6 atomic minerals- lithium, beryllium, niobium, titanium, tantalum and zirconium.
The central government can auction mining leases and composite licences for critical minerals.
Auction for Exploration LicenceNo provision for an exploration licence auction.The state government grants licences through competitive bidding, while the Central government prescribes auction details.
Maximum Area in which Activities areProspecting licence: Up to 25 sq. km.Bill allows activities under a single exploration licence in an area of up to 1,000 square kilometres.
Incentive for Exploration LicenceThe state conducts auctions for mining leases if resources are proven after exploration. Licensee receives a share in the auction value of the mining lease for prospected minerals.

 

Mines and Minerals Bill 2023 endeavours to stimulate private sector involvement through:

  • Expanding Mining Opportunities: The Bill excludes six atomic minerals that were previously reserved exclusively for government entities
  • Enabling Exploration Activities: The Bill overturns the Act’s prohibition on certain exploration activities like pitting, trenching, drilling, and sub-surface excavation.
  • Introduction of Exploration License (EL): The Bill introduces a new exploration license (EL) aimed at promoting reconnaissance-level and prospective-stage exploration by private players.
  • Defining Exploration Area: The Bill specifies the maximum exploration area, allowing activities within 1,000 square kilometres under a single exploration license.
  • Central Government Auctions: The Bill empowers the central government to conduct auctions for composite licenses and mining leases specifically for critical and strategic minerals.

 

Case study:

In countries like Australia, private junior explorers take risks to discover potential mines and subsequently sell them to larger mining companies, fostering greater participation and multiplying exploration efforts.

 

Some potential issues and concerns raised by industry experts:

  • Delayed Revenue Generation: Private companies’ revenue from exploration depends on premium shares after mine auctions, subject to government clearance timelines and potential delays due to deposit complexity and geography. This could impact exploration project viability.
  • Uncertainty in Revenue: Explorers might not know their revenue until mine auction success, dissuading potential private participation due to unclear investment returns during exploration.
  • Auctioning Challenges: Auctioning exploration licenses is complex as the value of undiscovered resources is uncertain. This may reduce private sector interest due to unpredictability in the auction process.
  • Government Control over Discoveries: The policy limits private explorers to sharing premiums post-discovery, instead of selling discoveries directly. This contrasts with global practices where private explorers can sell findings to mining companies.
  • Investment Assurance: Companies may hesitate to invest significantly in exploration due to uncertainty about utilizing discoveries, affecting capital investment incentives.

 

Also, the Ministry of Mines, in June this year, came out with a list of 30 minerals critical to the country’s economic development and national security.

 

Insta Links:

 

Mains Links:

Despite India being one of the countries of Gondwanaland, its mining industry contributes much less to its Gross Domestic Product (GDP) in percentage. Discuss. (UPSC 2021)

“In spite of adverse environmental impact, coal mining is still inevitable for development”. Discuss. (UPSC 2017)