Prospective changes to be brought about by Mineral Laws (Amendment) Ordinance, 2020

Introduction

The Cabinet on January 8, 2020 has approved the promulgation of Mineral Laws (Amendment) Ordinance 2020 (“Proposed Ordinance”) which will amend the Mines and Minerals (Development and Regulation) Act 1957 (“MMA”) and Coal Mines (Special Provisions) Act, 2015 (“CMA”) in order to ease the eligibility criteria as well as the process of auction of coal mines in India. Through this measure, Government of India (“Government”) also aims to increase the volume of Foreign Direct Investment (FDI) in coal sector.

Earlier, as per the Section 11A of the MMA only companies and corporations (including foreign companies and corporations) engaged in production of iron and steel, generation of power and washing of coal obtained from a mine with the prior approval of the Government were eligible to be allocated coal/lignite blocks for composite prospecting license cum mining lease. Further, the CMA provided for the edibility criteria for participating in a coal mine auction. The Proposed Ordinance aims to do away with the end use restrictions provided in the above provisions of Section 11A of the MMA and will allow private entities to bid for usages other than production of iron and steel, generation of power and washing of coal.

The Proposed Ordinance also allows sale of coal in open market but bars export of the same. This may increase volume of FDI in the mining sector primarily because it will open up the coal mining sector for exploration and exploitation by the foreign companies without any restrictions and secondly, by ending the monopolisation of coal resources by domestic companies.

Further, the Proposed Ordinance may also amend the current provisions and will not contain any minimum net worth and technical qualification criteria for bidding. Also, the prior approval of the Government won’t be necessary to bid in an auction. As per the available information, proposed minimum criteria are that the companies or corporations must be capable to make the upfront payment, in instalments and are able to deposit performance guarantee or earnest money. This is to ensure that the bidders do not default on payment as well as prevent squatting on mines. This will open up the coal mining sector for anyone who is willing and is capable to invest.

This Article is by Urvisha Kesharwani, who is interning with the firm under the guidance of Mr. Rohitaashv Sinha, Advocate & Associate Partner at Agarwal Jetley & Co., Advocates & Solicitors. Contact: Email: rohitaashv.sinha@agarwaljetley.com or Mob: (+91) - 9999565393