Cabinet approves blueprint for mining sector reforms

Our Bureau Updated on January 14, 2021
It is proposed to introduce an index-based mechanism by developing a National Mineral Index for various statutory payments and others for future auctions. | Photo Credit: © Jason Lee / Reuters

MMDR Act to be amended to improve procedures

The Union Cabinet has approved a blueprint for facilitating reforms in the mining sector. This includes amending the Mines and Mineral (Development and Regulation) Act 1957, clarifying doubt on double taxation, rationalising stamp duty and developing the National Mineral Index beside others.

The entire blueprint to be presented in the Parliament during forthcoming Budget Session, starting January 27.

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According to government officials, a panel will be formed to examine the issue of double taxation. “In the current statutory framework, royalty is included in Average Selling Price (ASP) of minerals and then it is computed on ad valorem basis leading to double taxation,” an official explained. Further, he said that there is a proposal to amend the Indian Stamp Act, 1899 to bring uniformity in stamp duty calculation in various States. “Effective tax rate (ETR) on mining in India is approximately 64 per cent which is highest in the world,” he said. Various other countries levy taxes in ranges between 34-38 per cent.

National Mineral Index

One proposal is related to developing the National Mineral Index (NMI). Presently, Average Sale Price (ASP) is the basis for calculating various statutory payments, which is subject to distortions due to the absence of sale price data for some minerals, differences in prices across states, etc. “It is proposed to introduce an index-based mechanism by developing a National Mineral Index (NMI) for various statutory payments and others for future auctions,” the official explained.

Legacy issues

Another official said that to resolve legacy issues in the Mining sector, it has been proposed to amend section 10A (2)(b) and 10A (2)(c) of the MMDR Act. “These amendments will make a large number of mines available for auctions. It will help us strengthen auction only regime and boost transparency in the system,” he explained. Further, it is proposed to compensate those whose mineral concessions would be cancelled under this amendment, through NMET funds. Also, non-producing blocks of the Government companies will be reallocated. “This will bring a large number of mines into production while making PSUs efficient and competitive,” he said.

Amendment will help substituting ‘mining operations’ with ‘production and dispatch’, which in-turn operationalise many mines. There will be charges on the extension of mining leases for Government companies. These charges are proposed to create a level playing field and bring uniformity in the sector.

Captive and merchant mines

The second official quoted above said a proposal is to remove the distinction between captive and merchant mines. This will facilitate captive mines to sell up to 50 per cent of the minerals excavated during the current year. Based on the coal sector experience, it is proposed to provide 50 per cent rebate in the quoted revenue share, for the quantity of mineral produced and dispatched earlier than the scheduled date of production. PSUs can facilitate production from those working mines auctioned in March 2020, which could not start production even after the transfer of valid rights, clearances, etc.

It has been proposed to amend District Mineral Fund (DMF) to facilitate spending the corpus on people living in directly affected areas. Local Member of Parliament (MP) will be a member of DMF Governing Council. It is also proposed that there will not be any charges on transfer of mineral concessions for non-auctioned captive mines.

The Government will also make efforts to simplify the exploration regime. Despite the vast mineral potential, exploration activities are abysmally low in the country. Out of the total Obvious Geological Potential (OGP) area of 0.571 million sq. km, only 10 per cent of the area has been explored so far, and mining is carried out in 1.5 per cent of the OGP area. “While countries like Canada and Australia spend almost 14 per cent of global exploration expenditure, India's exploration expenditure is approximately 0.2 per cent and that too mainly on surficial deposits and not on minerals which we import,” the second official quoted above said.

Published on January 14, 2021
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