India: What are states responses to proposed amendment in mining policy?

On August 24, the mines ministry released a notice summarising “proposed reforms” to the Mines and Mineral (Development and Regulation) Act, the main law governing mining in India and sought for feedback from public and key stake holders.

Here is what key iron ore states of Odisha, Jharkhand and Karnataka have to say about the Government’s proposed mining reforms.

1) On the move to reduce the geological threshold for compositeprospecting-cum-mining licenses (PL-cum-ML) to faster allocate partially explored areas. The United Nations Framework Classification for Resources (UNFC) climbs in accuracy and detail from G4 to G1. Mining rights are currently being offered for deposits explored up to G2 level and PL-cum-ML for G3 level

• Jharkhand approves of this.
• Karnataka wants thresholds for MLs to be reduced from G2 to G3.
• Odisha has reservations: It takes at least a G3 level exploration to arrive at an estimate of economically exploitable mineral content which decides the reserve price for auctions and in turn the premiums offered.

2) On allowing private players to carry out exploration with funding from the National Mineral Exploration Trust

• Jharkhand agrees.
• Karnataka wants suitable threshold to be applied to these companies.
• Yes, as long as it does not lead to mining rights, says Odisha. Also wants funding to be linked to states contributions to NMET.

3) On deleting Sections 10A (2) (b), 10A (2) (c) of MMDR 2015 to free nearly 700 blocked areas for auction

• Jharkhand says CM Hemant Soren had already asked for this.
• Karnataka says this will finally end policy stalemate.
• Odisha wants deletions to be applied with retrospective effect.

4) On auctioning all future mines without any end use restrictions

• Yes, says Jharkhand. It creates artificial barriers in the auction process.
• Karnataka agrees.
• Yes, but should not curtail tenure of existing captive leases, says Odisha.

5) On removing first right of refusal available to captive miners

• Jharkhand agrees.
• Karnataka agrees.
• Odisha agrees.

6) On allowing captive miners to sell up to 50% of their output(up from current 25 %) in the open market

• Jharkhand says not required.
• No, says Odisha. The move gives unfair and unlawful advantage to successful bidders for the 5 captive blocks it auctioned this year.
• Karnataka approves.

7) On introducing a National Mineral Index that will determine different levies payable to state and centre

• Jharkhand says it depends on the methodology adopted but the index must not consider transfer prices between captive mine and plant and long-term supply contractsleading to lower royalty collections. Copper, gold, aluminium prices must continue to be linked to benchmark metal price
• Karnataka wants state and economists to be part of the committee developing this index.
• No says Odisha. The National Coal Index which its based on takes non-arm’s length sale into consideration which will lead to lower average sale price affected negatively royalty, auction premium and DMF collections. Odisha wants representation in committee.

8) On amending Section 21 (4) and Section 21 (5) with prospective effect to clarify that “illegal mining” is mining outside a leasehold area

• Any change will be an attempt at circumventing Supreme Court’s unambiguous and clear verdict of 02 August 2017 in the ‘Odisha illegal mining’ matterWP(C) 114/2014.
• Karnataka agrees
• Odisha says ok but amendment should be in conformity with SC order.

9) On rationalising stamp duty and imposing it on area instead of mineral

• Jharkhand says this would be a violation of federal structure since stamp duty not governed by MMDR Act 1957 but the state’s laws. Also stamp duty is applicable on the value of a transaction and cannot be applied to land minus minerals under it.
• Karnataka also disagrees, says lessee does not hold surface right and is only conferred excavation rights.
• Odisha echoes similar views. In its defence, says it charges stamp duty on the highest projected annual production in the mining plan and the highest grade to cover for the element of uncertainty in assessment of quality and quantity of the mineral deposit.

10) On amending DMF rules to create more tangible assets

• Jharkhand says should be left to governing council of DMF Trust. Projects should be in the interest of mining affected people and not substitution or augmentation of work to be carried out by the local administration.
• Karnataka says ok but also allow for a certain percentage (15%) of total action plan to be spent at the Government level.
• Odisha says not required.

11) On returning blocks un-operated for three years to the government for their re-auction.

• Jharkhand agrees.
• Karnataka agrees.
• Odisha says okay.

12) On taking back unused virgin areas allotted to PSUs

• Jharkhand agrees.
• Karnataka agrees.
• No, says Odisha. A large number of MSME and downstream industries are critically dependent on state PSUs and re-allocating these areas will require fresh statutory clearances delaying their operationalisation.

13) On autonomy for NMET

• Jharkhand wants NMET to remain a trust or a non-profit body
• Karnataka is okay with it.
• Odisha is okay.

14) On granting funding to entities notified under the subsection (1) of section 4 shall be eligible for funding.

• Jharkhand agrees.
• Odisha is okay.
• Karnataka is okay.

15) Additional comments:

• Jharkhand wants state governments, particularly eastern statesmajorly dependent on mining, to be consulted again before any drastic change in policy that may have a huge impact on existing industrial scenario and socio-economic development.