Mines and Mineral (Development & Regulation) Amendment Act,2015 : 10A2(b) cases and Mineral block Auction

                                                                                                                                           Rajesh Deoliya

[rajeshdeoliya@gmail.com]

[photo courtesy Sh KL Verma, exploration geologist and  consultant of international repute]

Minerals are one of the key elements in the economy of any country. The vast area of Indian territory is blessed with variety of rock types which are potential host for many minerals to deserve pragmatic approach for scouting of minerals to add to the national mineral inventory and their possible extraction to generate employment opportunities, contribute in the national economy towards self-reliance and to bridge the gap in regional economic imbalances. The prospecting ( also called as exploration) work is basic tool for such exercise. The National Mineral Policy, 2008 clearly expressed that the private sector would be the main source of investment in reconnaissance and exploration and government agencies will expend public funds primarily in areas where private sector investments are not forthcoming. Further, the same policy continued in the National Mineral Policy,2019  giving encouragement to private sector in prospecting and exploration.

1. The Prospecting License and MMDR Act  prior to year 2015:

The system of mineral concessions in India is such that the presence of mineral(s) has to be proved in an area before mining operations can commence through the mining lease. Sometimes before grant of prospecting license Reconnaissance Permit [RP] is also granted to prove the presence of mineral(s) in an area to secure a prospecting license but this practice is limited to minerals which occur in small quantity and controlled by complex geological set up like gold, diamond etc.; being limited in nature the RPs are not discussed here.

Prior to the amendment in the Mines and Minerals (Development and Regulation) Act,1957 in year 2015, the prospecting licenses were granted on the basis of preferential rights through section 11 which states …..    

"  [11. (1) Where a reconnaissance permit or prospecting license has been granted in respect of any land, the permit holder or the licensee shall have a preferential right for obtaining a prospecting licence or mining lease, as the case may be, in respect of that land over any other person:

 Provided that the State Government is satisfied that the permit holder or the licensee, as the case may be, -

(a)       has undertaken reconnaissance operations or prospecting operations, as the case may be, to   establish mineral resources in such land;

(b)       has not committed any breach of the terms and conditions of the reconnaissance permit or the prospecting licence; 

(c)       has not become ineligible under the provision of this Act; and

(d)       has not failed to apply for grant of prospecting licence or mining lease, as the case may be ,within three months after the expiry of reconnaissance permit or prospecting licence, as the case may be, or within such further period as may be extended by the said Government.

(2)       Subject to the provisions of sub-section (1),where the State Government has not notified in the Official Gazette the area for grant of reconnaissance permit or prospecting licence or mining lease, as the case may be, and two or more persons have applied for a reconnaissance permit, prospecting licence or a mining lease in respect of any land in such area, the applicant whose application was received earlier, shall have a preferential right to be considered for grant of reconnaissance permit, prospecting license or mining lease, as the case may be, over the applicant whose application was received later.

 where any such applications are received on the same day, the State Government, after taking into consideration the matters specified in sub-section (3), may grant the reconnaissance permit, prospecting license or mining lease, as the case may be, to such one of the applicants as it may deem fit.

(3)       The matters referred to in sub-section (2) are the following:-

(a)       any special knowledge of, or experience in, reconnaissance operations, prospecting operations or mining operations, as the case may be, possessed by the applicant; 

(b)       the financial resources of the applicant; 

(c)       the nature and quality of the technical staff employed or to be employed by the applicant;

(d)       the investment which the applicant proposes to make in the mines and in the industry based on the minerals;   

(e)       such other matters as may be prescribed.

The above system of grant of PLs was full of conflicts due to applicants being more than one (sometimes more than 100) and belonging to small to large financial strength. The decision making at the end of government side was always tough and was resulting in litigations.

2. The Prospecting License and MMDR Act post year 2015:

The Mines and Minerals (Development and Regulation) Amendment, 2015 brought new concept of bidding replacing the First Cum First Serve / preferential right system of grant of prospecting licenses and mining leases. The new system introduced prospecting license cum mining lease and mining lease granted through bidding. With commencement of this amendment all applications received prior to this act were declared ineligible subject to certain conditions popularly called as section 10 A (2) (b) and 10 A( 2)(c ). The section 10 is produced below to understand these two matters:

 10. After section 10 of the principal Act, the following sections shall be inserted, namely:–  

10A. (1) All applications received prior to the date of commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015, shall become ineligible.

(2)            Without prejudice to sub-section (1), the following shall remain eligible on and from the date of commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015: 

               (a) applications received under section 11A of this Act;

(b) where before the commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015 a reconnaissance permit or prospecting license has been granted in respect of any land for any mineral, the permit holder or the licensee shall have a right for obtaining a prospecting licensee followed by a mining lease, or a mining lease, as the case may be, in respect of that mineral in that land, if the State Government is satisfied that the permit holder or the licensee, as the case may be,—

(i)  has undertaken reconnaissance operations or prospecting operations, as the case may be, to  establish the existence of mineral contents in such land in accordance with such parameters as may be prescribed by the Central Government;

(ii) has not committed any breach of the terms and conditions of the reconnaissance permit or  the prospecting license;

(iii) has not become ineligible under the provisions of this Act; and

(iv) has not failed to apply for grant of prospecting license or mining lease, as the case may be, within a period of three months after the expiry of reconnaissance permit or prospecting license, as the case may be, or within such further period not exceeding six months as may be extended by the State Government;

(c) where the Central Government has communicated previous approval as required under sub-section (1) of section 5 for grant of a mining lease, or if a letter of intent (by whatever name called) has been issued by the State Government to grant a mining lease, before the commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015, the mining lease shall be granted subject to fulfillment of the conditions of the previous approval or of the letter of intent within a period of two years from the date of commencement of the said Act 

3. The 10A2(b) position in Law:

It is important to note that section 10A2(c) became ineffective after 11th January 2017 because the mining lease applications pending at the time of the Act, coming in to force i.e 12th January 2015 completed the window of two years for the grant. The mining lease applications which were not converted into mining leases have automatically lapsed.  However, since there was no timeline for the conversion of the prospecting license application into mining lease under section 10A2(b), the prospecting license applications are still pending for grant.

4. The 10A2(b) issues:

Prior to the amendment of the year 2015 in MMDR (Amendment) Act the prospecting licenses were granted for three years meaning that within this period all prospecting of mineral-related exercises should have been completed with compliance to the then prevailing prospecting standards and if found viable, the geological report along with mining lease applications should have been submitted before the state government for grant of mining lease. However, there was a provision of two years extension totaling to five years. But the 10A2(b) section of MMDR (Amendment) Act,2015 remained silent over the prospecting license period as it fixed two years for 10A2(c ) cases. Now, speculations are rife that the central government is deleting this section. If it is so than all the pending applications will lapse.

Though correct number of the prospecting licenses due for cancellation due to the anticipated change in law, is not available. The early news were counting them as 600 which is now in various news reports is mentioned about 500 in number. However, with the knowledge of industry it can be comfortably stated that some of these prospecting licensees are as old as 10 years and still pending for a final decision for grant or rejection.

5. Types of 10A(2)(b) cases:

These Prospecting Licenses [PL] related cases are of various types, some of them are mentioned below:

1. Letter of Intent [LOI] for grant of PL, issued by state governments prior to 12th January, 2015 but not executed.

2. PL executed by state governments prior to 12th January, 2015 but prospecting work not done in accordance with the Mineral Conservation and Development Rule,1988, guidelines issued by Ministry of Mines on dated 24th June, 2009 and 30th October, 2014. 

3. PL executed by state governments prior to 12th January,2015, PL holder carried out prospecting operations as per Mineral Conservation and Development Rules, 1988 and  guidelines issued by Ministry of Mines on dated 24th June, 2009 and 30th October, 2014.Submitted application for grant of mining lease. The applications are pending for grant.

4. PL executed by state government prior to 12th January,2015  and work done as per the prevailing norms of prospecting post MMDR (Amendment) Act and also as per the Minerals (Evidence of Mineral Contents) Rule, 2015 submitted application for grant of mining lease before state government. The applications are pending for grant.

5. The Concerns:

As evident from the legal position of the prospecting license cases in the law, the concern of industry is that if these applications which are mainly related to Iron Ore, Bauxite, Limestone and Manganese Ore, then there will be huge loss to them as in many cases the PL holder has already complied the conditions of grant and even purchased large chunk of land and made investment for end use plants. The point of industry is that the state governments are not processing their applications for grant of mining lease. While the state  governments are not sure about the process of grant of mining lease in such cases as they are not able to find the validity of PL post MMDR amendment act, which generally was maximum 5 years. More over there is a general inclination for grant of mining leases through auction which also another hurdle anticipated in the grant of these mining leases and proposed deletion of section 10A2(b).

6. The status of Prospecting Licenses and Mining Leases post MMDR (Amendment)Act, 2015:

Since the position in the eyes of law is clear and it's the far-reaching effect in the form of expected cancellation of pending PLs are envisaged. An exercise is done to understand the scenario of prospecting license and mining lease in the pre and post MMDR (Amendment) Act,2015. The data source for this taken from the yearbooks published by the Indian Bureau of Mines, as it is the authenticated source.

 Period

The Prospecting License

Mining Lease

Year

No

of PL

Area Covered (Hectare)

Year

No

of ML

Area Covered (Hectare)

Pre MMDR (Amendment) Act,2015

2009-10

81

21386

2009-10

10483

507403

2010-11

131

35682

2010-11

11003

547814

2011-12

115

19746

2011-12

11456

530285

2012-13

104

13366

2012-13

11104

498249

2013-14

146

24589

2013-14

10982

454706

2014-15

168

28255

2014-15

11001

453891

2015-16

5

2869

2015-16

4138

354908

Pre MMDR (Amendment) Act, 2015

2016-17

NIL

NIL

2016-17

4382

366010

2017-18

NIL

NIL

2017-18

NIL

NIL

It is evident from the above table that the MMDR (Amendment) Act,2015 has failed to attract the investment in the mining sector in any form of mineral concessions. The consistency in grant of prospecting license and mining lease suddenly evaporated and figured to as low as nil for the year 2017-2018. The available knowledge suggest that some mining leases have been auctioned successfully and came for operations recently ( not reflected in the above table due to lack of authenticity) but they were mainly those which were working mines and cancelled due to reasons like violations and irregularities. The data further suggest that the present concept of auction of mineral resources required reconsideration, however for time being, the cases falling within the bracket of 10A2(b) for grant of prospecting licenses can be given two years' time for completing prospecting and grant related formalities so that some investment in the sector will come to rejuvenate the mining sector which is nosedived.

                                                                              ***

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Comments

Well thought & written. 👏👏👏
Niraj Chowdhary said…
Well explained Sir.
All concerns are rightly stated.
Keeping practical aspects in consideration, believing on Government data 100% is not possible. Most of the Government data are very old, which lessen their authenticity.
Even after such huge payment to Government, land acquisition still remains a very risky subject with land sellers turning back after selling their land. Incidents like Tata Singur, WB, POSCO, Jagatsinghpur, Odisha, ArcelorMittal land acquisition, Vedanta clearance etc are possible with other companies also.
When a company is acquiring large areas, there is bound to be all types of land like Government, Grassland, Wasteland, General, ST, SC, etc & you have different land acquisition rules for each land type.
Forest clearance is still a big challenge for every company.
Company has to wait long for Government to auction minerals of their requirement in their economic zone inspite of having economic minerals of their interest in their surroundings areas.
In addition to major minerals, industries require minor minerals in small percentage. But, since the original project itself is of large volume, the quantity of these minor minerals also becomes large. Getting of minor mineral lease is again a big challenge. India have 28 States + 1 (1 common for all UT) = 29 Minor Mineral Rule. In place of "One Nation, One Rule", we have gone reverse "One Nation, 29 Minor Mineral Rules". Some of the States have stopped granting any minor mineral lease since 2015 as their Minor Mineral Rule is yet to be published.
Most of the time, companies believes in managing the issues via Liaoning instead of eliminating or reducing the issues.
Both, Government & Companies have to solve these in professional manner.

Rajesh Prasad said…
Dear Sir,
You are absolutely correct 👍
Regards,
Rajesh Prasad

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