With the path-breaking reforms in the mining laws ushered by the Narendra Modi-led Government in the country, experts in the sector believe that the present laws in the sector are perfectly okay in terms of transparency as well revenue growth to some extent, but at the same time they express deep concerns about the abrupt halt in operations in some parts in the country.
“As far as new reforms in the mining sector are concerned, we welcome the move of the Government as it will bring in transparency and enrich revenue growth to boost economy, but the main concern is that halt in operation in some parts of the country. The given law must ensure continuity of mining operations in the interest of jobs and the Government revenue until the mineral in the lease gets finished,” said Goa-based mining expert Aniruddha Joshi.
The recent Amendment in the Mines and Mineral Development and Regulation (MMDR) Act has transformed the mining industry in some way or the other. “law was changed to bring in transparency of allocation of leases. One cannot be against transparency. But the law needs, besides jobs, to ensure that mining industry is taxed with improved variable royalty percentage structure such that industry is competitive in all price variations. like GST, royalty should be only tax on mining industry,” added Joshi.
In Goa, the mining issue has been on the boil in the state following a Supreme Court order in February this year, banning extraction and transportation of iron ore from 88 mining leases from March-end this year. However, sources said, “Goa Chief Minister Manohar Parrikar is likely to meet Prime Minister Narendra Modi in New Delhi soon to resolve the mining crisis in the state.”
As far the mining laws are concerned, the most important fact is that India became the first major country to subscribe to “auctions” as the only way of granting mining rights. “In a drastic and hitherto unforeseen move, the MMDR amendment put a sunset date on existing mining leases. On March 31, 2020, all non-captive mining leases are now doomed to expire. These leases are supposed to be auctioned well in advance for them to recommence on April 1, 2020. However, now the time has run out. On March 1, 2020, about 65 million tonnes of iron ore production in the state of Odisha, India’s largest iron ore producer shall cease,” said another expert on condition of anonymity, adding that millions of tonnes of steel capacity will be starved for iron ore – plunging the domestic steel industry back into a viability crisis from which it has barely begun to emerge.
A total of 288 merchant mining leases across the country are expiring exactly 1 year and 10 months from today and not one of them has been auctioned yet and neither are the state and central governments prepared for it. “The Geological Survey of India (GSI) and Mineral Exploration Corporation limited (MECl) — the two major Government-owned bodies responsible for preparing the geological report which forms the basis of the auction, are woefully underprepared and understaffed to handle this massive undertaking,” he added.
New rules, notified recently, prescribe that existing leaseholders would carry out general exploration (G2) over the entire mineralised area under the lease before April 2019 and submit a geological study report to the state government and the Indian Bureau of Mines (IBM) within a month of the completion of the exploration work. “This however would still leave merely 11 months for the State governments to conduct the auctions, grant the lease to the successful bidder before the existing leases expire,” the expert said.
He further added, “Not only that, once the auction is completed, the successful lessee shall be required to acquire the land under the mining leases, obtain environmental and forest clearances from Ministry of Environment and Forest, procure the consent to establish from state pollution control board, procure the machinery and establish the plant, procure the consent to operate from State Pollution Control Board and then commence.”
It would be fair to estimate that the 88 Goan iron ore mines, which were cancelled in February 2018 by the SC, would not commence operations till March 2022 auctions assuming they ever do commence operations.
The bidders will be forced to grapple with acquiring land from the erstwhile lessees as well as land owners who wouldn’t happily cede the land without granting their pound of flesh. Unlike in other states, the miners in Goa have built substantial logistics and shipping infrastructure which would have be built over time afresh.
“Most importantly, Goa’s iron ore resources are low grade and the mining industry is struggling to sell the same profitably at current tax levels. For any new bidders, the costs of acquiring the land afresh, investing in logistics and infrastructure might render Goa non attractive,” experts said.
“Even bigger deterrent will be the fact that alternative options in the form of auctions in Odisha and other states might be more attractive than low grade Goan iron ore mines. With iron ore pricing scenario expected to worsen, not only will the auctions fail to deliver additional revenues, the auctions could also fail completely,” they added.