Understanding the MMDR Act

Hemant K Batra | Updated on: Sep 25, 2020
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The central legislation in force for the mining sector has evolved well over the past decades. Does it need to change further?

There is a universal consensus regarding the indispensability of minerals, as they constitute essential raw materials for many basic industries. Undoubtedly, they are highly significant natural resource for development; more so being finite and non-renewable. The mining sector in India owes its growth and development to the widespread availability of minerals lying deposited in abundant rich reserves. India is gifted with enormous resources of many metallic and non-metallic minerals.

The mining sector is an essential segment of the Indian economy. India comprises of more than 1,500 operating mines and produces almost 100 minerals. Globally, India is the secoond largest producer of coal and crude steel. The entire mining sector including development of minerals in India is regulated by the Mines and Minerals (Development and Regulation) Act, 1957 (the MMDR Act), which was enacted more than six decades ago. The MMDR Act being the central legislation in force for the mining sector was enacted adhering to the then Industrial Policy Resolution 1957, and hence was intended predominantly on affording a mineral concession regime in the background of the metal producing public sector undertakings.

Evolution of the law

The economic liberalisation era of 1991 and onwards gave birth to a separate National Mineral Policy 1993, laying down the path for private sector in exploration and mining. The MMDR Act was amended on numerous occasions to deliver a fair concession regime to invite private sector investment, including FDI, into exploration and mining. The series of amendments in the MMDR Act over several decades have given it a new connotation, scale and purpose.

For instance, the MMDR Amendment Act, 2015, substituted the first-come-first-served/discretionary process for grant of mineral resources by a transparent and competitive auction process, enabling the States to find a greater share of the value of mineral resources. The amendment also ensured certainty of tenure and easy transferability of mineral concession.

The recent most amendment in the MMDR Act is carried out by the Mineral Laws (Amendment) Act, 2020 (the MLA Act). This amendment is carried out to take forward the agenda of ease of doing business and opening the mining sector for commercial mining and allowing domestic as well as global investors to invest. Today, 100 per cent FDI is permissible through automatic route in the steel and mining sectors, and for coal and lignite. The MLA Act has introduced the new era of liberalisation of the mining sector by amending the MMDR Act.

The central government is today statutorily empowered to prescribe conditions for ensuring continued production by the holder of mining leases, who have acquired all valid rights, approvals, clearances, licences and the like vested with the previous lessee, for a period of two years. Before the amendment, the MMDR Act offered a two years’ time span to the new lessee for commencing the mining operation. However, the newly introduced section 8B of the MMDR Act provides for deemed acquisition of all valid rights, approvals, clearances, licences, and the like by the new lessee.

Seamless production

The new legislation intends to ensure uninterrupted production of minerals. The central government is today empowered to prescribe the conditions for the new lessees to begin production without prejudice to the stipulated period of two years for starting the production. In the current scenario, the successful bidders of mining leases are considered deemed acquirers of all valid rights, approvals, clearances, licences and the like vested with the previous lessee for a period of two years.

Earlier, the new lessee was required to obtain statutory clearances before starting mining operations. This obligated obtaining more than 20 approvals to start the mining operations (including about 10 approvals relating to different central government ministries and an equal no. of approvals from the state government) including environment clearances and forest clearances. Typically, the new lessees needed 24 to 30 months to get these approvals, which led to an inordinate delay in commencing mining operations. Hence, the successful bidders can now start mining operation forthwith by leaning on the approvals of the erstwhile lessee.

Furthermore, in certain cases, prior approval of the central government will no more be required for grant of reconnaissance permit, prospecting licence, or mining lease in respect of the specified minerals. These include cases where the allocation has been done by the central government, and the mining block has been reserved to conserve a mineral. Before the amendment, in such case, state governments required prior approval of the central government for granting reconnaissance permit, prospecting license, or mining lease in respect of the specified minerals.

According to the law prevalent for many years in the mining sector, the lease had to be put up for auction, on the expiry of the lease period, as per the specified procedure. As the provision was silent viz. initiating of the advance action by the state government on reporting the expiring leases for auction, the issue needed clarity. Under the newly introduced legal regime, nothing shall prevent the state governments from taking an advance action for auction of the mining lease before the expiry of the lease period. This would guarantee continuity of the production of the minerals without any intermittent breaks.

Stick to the point

To boost the exploration of deep-seated minerals and attract private investment, the new legislation allows non-exclusive reconnaissance permit holders of deep-seated minerals or any minerals of the national interest to apply for a composite licence (prospecting licence-cum-mining lease) or mining Lease. Earlier, all the holders of non-exclusive reconnaissance permit (of any notified mineral or non-notified mineral or a group of specified minerals, other than specified minerals specified) were forbidden from making any claims for the grant of any prospecting licence-cum-mining lease or a mining lease.

The buck of progression will not stop here. The central government is contemplating bringing about further changes in the MMDR Act as dealing with the rights and privileges of the existing concession holders and applicants. It is believed that the new amendments are required to pave way for unlocking a large number of potential mineral holding areas which are lying blocked for a variety of reasons, including pending legacy cases, absence of sunset clause in the MMDR Act etc.

However, the existing concessionaires likely to be affected by the prospective alterations are requesting the centre to protect their rights by not making any further changes in the MMDR Act which safeguard seamless changeover for existing mineral concession holders to the mining stage.

The evolution of the governing framework of the mining sector and development of minerals is a continual process aiming for an efficient, transparent, and commercially viable regulating mechanism for the mining industry.

The writer is a Delhi-based commercial and corporate lawyer

Published on September 25, 2020

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