The union cabinet has approved mining reforms (The amendments, now to be laid before Parliament in the Budget session), first proposed in mid-2020 paving the way for the auction of nearly 500 old mineral bearing areas.
With the Cabinets’ nod the Mines Ministry will be placing these reforms that will bring in more blocks to the market by also taking back areas lying unutilised by PSUs, will provide greater level playing field between players, a uniformity in stamp duties applied by states and introduce a mineral index as the basis for royalty and other mining related taxes. Many of the reforms are likely to benefit companies that have bagged mines through 2020 auctions.
Here are the highlights:
- Amendment of section 10A (2)(b) & 10A (2)(c) of the MMDR Act: The proposal to free up a large number of areas applied for prior to 2015 was fiercely opposed by mining companies that had threatened to go to court. While refusing them their claims, recognised under MMDR 2015, the Government proposes to compensate these companies for their exploration expenses from NMET funds.Some quarters within the Government also disapproved of this move. The MoM’s decision to go ahead with it only reaffirms that there shall be no deviation from the auction route for allocation of mining rights, irrespective of the challenges.
- Reallocation of non-producing blocks of Government companies
- Substitute ‘mining operations’ with ‘production and dispatch’ should bring more material into the market since miners must now fulfill a minimum production (now dispatch) commitment.
- Government-owned companies will have to pay a charge (or a premium) to have their leases extended. Karnataka government’s demand for such a premium from NMDC – which the Centre had conceded to – was not provided for under the existing laws.
- Captive mines will be allowed to sell up to 50% of the minerals excavated during the current year. This will be subject to a premium which will be decided by the central govt
- Production will be incentivised: based on the experience in the coal sector a 50% rebate in the quoted revenue share (premium) will be offered for the quantity produced and dispatched earlier than scheduled date of production.
- PSUs will step in to facilitate production from mines auctioned in March 2020 that haven’t started production. As SteelMint reported recently, Odisha Mining Corporation has already been entrusted to operate two iron mines – Jilling Lagolata and Guali – auctioned last year.
- Amendment to DMF guidelines to allow the local Member of Parliament to become a member of DMF Governing Council.
- No charges on transfer of mineral concessions for non-auctioned captive mines.
- Exploration regime will be simplified to facilitate a seamless transition from exploration to production.
- The MEMC Rules (Minerals (Evidence of Mineral Contents) Rules, 2015 to include globally accepted classification standards like CRIRSCO, JORC etc and the latest UNFC classification.
- In India, the effective tax rate on mining at about 64% is the highest in the world. The Centre proposes to rationalize and bring uniformity to stamp duties of various states.
- A National Mineral Index (NMI) will replace the current system of arriving at an Average Sale Price (ASP) based on which various statutory payments are charged for future auctions.
- A committee will look into the problem of royalty on royalty (or double taxation) arising from royalty being included in ASP and then being computed on an ad valorem basis.
- National Mineral Exploration Trust (NMET) to become an autonomous body.
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