Mining licences to be awarded only through competitive bidding

TNN Jun 21, 2011, 04.07am IST NEW DELHI: The draft Mines and Minerals (Development and Regulation) Act has been changed to make competitive bidding the sole criterion for awarding of mining and prospecting licences. The draft is ready to go to the cabinet and if cleared is likely to be tabled in the monsoon session of Parliament. If the Act is passed, except in some specific cases, the first in line system of awarding mineral licences, that the mines ministry feels often results in undervaluing of resources, will be all but over. The change has been incorporated as per the recommendations of the Ashok Chawla Committee on Allocation of Natural Resources that was submitted to the Cabinet Secretariat earlier this month. While the competitive bidding criterion applies to both prospecting licences (PL) and mining licences (ML), an exception has been made for large area prospecting licences (LAPL) which the committee said should be incentivised as it is a "special instrument for locating deep seated and concealed deposits of minerals". "We have put in a clause in the draft MMDR Act that wherever data is available with the state government regarding the exact nature and quantum of mineral deposits, ML and PL should only be awarded through competitive bidding. This is because we feel that the royalty system in case of first in line awarding of licences often does not adequately reflect the value that state government should ideally be getting," explained a senior official. In its recommendations, the committee had talked about the need to have open, transparent and competitive bidding and also said that the new Act should "allow states to move towards a clear and appropriate bidding process". However, given that the royalty position will completely alter, it is likely that the GoM on the issue may meet once more before the Parliament session to take into account what this would mean for the proposal to have miners routing 26% of their profit to a fund for the development of the area they are functioning in a clause that had raised the hackles of the industry. "It is not possible to say what view the GoM would take but there is at least one meeting scheduled before Parliament meets where it is likely that the changed royalty scene after competitive bidding is taken into account for a relook at the 26% profit sharing clause. All we can say is that the draft MMDR Act is ready to go to the cabinet," the official said. Planning Commission deputy chairman Montek Singh Ahluwalia had written to the ministry opposing the profit sharing clause. Therafter, a provision was inserted saying that individual industries could approach the government for an exemption explaining the financial reasons for doing so and a decision would be taken on a case-to-case basis. Incidentally, the Ashok Chawla Committee too had noted that the development of mineral bearing areas which generate revenue "leaves much to be desired...(and) a significant portion of the revenue be used to ensure all round development of the mineral bearing areas, for example, through a non-lapsable fund in the mining districts and transparent and flexible district level mechanisms including Zilla Panchayats and District Planning Committees."

India mining bill: good for who? July 8, 2011 4:28 pm by Mary Watkins

Recent high profile cases have highlighted the dilemma India faces in developing its mineral riches how do you exploit the countrys natural resources without damaging local communities and the environment in the process? On Thursday as Delhi was reeling from another explosive development in the 2G telecom licences scandal, a group of minsters was quietly approving a new draft of the mines and minerals bill. On the face of it the draft bill offers some welcome improvements to the outdated existing regulation. It would be mandatory for coal miners, for example, to share 26 per cent of their profits with people affected by a project. Companies mining other resources, meanwhile, would be required to pay a 100 per cent royalty on their production to the local population. Prakash Jaiswal, Indias coal minister, said that the new bill would speed the approval of land clearances something that both foreign and domestic investors have long complained about in India. The levies would add about Rs110bn a year to the exchequer. And better still Mr Jaiswal insisted that the new bill would not affect the revenues of coal companies in the long-term. But investors were less convinced. News that the draft bill had won ministerial approval hit Indian mining stocks hard on Friday. Shares in coal and iron ore groups including Coal India, which last year raised $3.4bn listing a 10 per cent stake, Sesa Goa and NMDC saw heavy intra-day falls in Mumbai. Analysts and industry bodies said, if passed in its current form, the new law could act as a disincentive to miners, deter foreign investors and dent profits. The Federation of Indian Mineral Industries warned the new rules would raise costs for iron ore miners by 10 per cent and hit exports. Gero Farruggio, head of coal supply research in Asia at Wood Mackenzie, said the worry for Indias coal miners was that an additional tax could make the commercialisation of marginal supplies less viable. It could also limit Indias ability to

supply demand and force it to import more, which would in turn put upward pressure on coal prices globally. India is not alone in trying to find a way to balance demand for commodities with the needs of its people. The difference is that in Asias third largest economy, the problem of securing a steady and reasonably priced supply of minerals such as iron ore and coal is already having wider effects on the economy. Domestic production of coal, for example, has slowed in the last few years at a time when the fuel is desperately needed to supply Indias growing power and manufacturing industries. But as miners continue to argue over the merits of the draft bill, one thing is for sure, experience shows there will be a few more twists and turns before India gets it new mining laws.