India’s Ministry of Mines has sought public opinion on a series of reforms that could significantly improve supplies and offer new mines for auction.
It proposes to allow auctioned mines to work with existing environmental clearances and also auction areas on behalf of state governments. These are significant reforms on the back of a series of changes Narendra Modi Cabinet cleared recently. It includes a 22.5 per cent premium (1.5 times royalty) that PSUs such as NMDC must henceforth pay for mining rights granted to them directly.
With an amendment to mining laws in 2015, India decided to auction all mines henceforth. The real turning point however in this “paradigm shift” however came — just before the Covid19 was declared a global pandemic — with the auction of more than 20 working iron ore mines in Odisha.
Despite the Centre’s best efforts, the transition was far from smooth. Iron ore prices have refused to come down after the failure of new lessee’s failure to begin production resulted in a shortage of ore. Such is the situation that the Centre’s own Ministry of Roads and Highways felt compelled to point out to the cascading and dampening effect on GDP.
The additional amendments for which comments and suggestion are being sought before the 24 February are:
1. Noting that environmental clearances continue to be time consuming the Centre proposes to validate environmental clearances granted to the new lessee for two years until the exhaustion of mineable reserves. On expiry or termination of the lease, these clearances will be transferred and vested to the successful bidder of the mining lease. It will also provide for a “mine” to be recognised as a mine till it is no longer feasible to produce minerals from the mine and which may have different owners from time to time.
2. Captive mines are now allowed to sell half their production in the open market. They must pay an additional amount of royalty, depending on the mineral. Taking into account the average sale price and average cost of production, the Mines Ministry proposes this be 2.5 times royalty (currently royalty is @15%) in the case of iron ore lumps and 1.5 times royalty for fines.
The Ministry has already decided it wants to do away with captive conditions for future mines. Mines already auctioned for captive use, will have to pay no additional premium while selling up to 25 per cent of their production in the open market, but will have to pay an additional premium of 50 per cent of royalty to sell any ore beyond that.
3. Similarly captive coal mines will be allowed to sell half their production to help “reduce coal imports and ensure additional revenue to the states.”
4. The Centre which has turned to PSUs to help fix the current iron ore crisis has had to simultaneously assuage state demand for compensatory premiums from PSUs, as was seen in NMDC’s Donimalai case. SteelMint has learnt while this applies to any such lease extended or reserves after the 2015 amendment– as is the case for NMDC’s leases in Chhattisgarh – the additional premium will be levied on future dispatches subsequent to the current reforms being turned into law.
Proposed premiums for PSUs:
And finally the Centre proposes to auction are toas where state governments are either finding it hard to auction or not doing it for some reason. The Ministry’s note explains: “Any delay in conduct of auction has substantial impact on the availability as well as prices of minerals.
…Government exploration agencies have handed over geological reports for 143 mineral to various state governments, only 7 of these have been auctioned. Only 28 blocks have been auctioned till date. Against the 334 blocks whose leases expired on 31 st March 2020 only 46 are working today.
These additional reforms along with the ones cleared by the Cabinet are expected to be placed before the parliament in the current session.
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