The Mineral Laws (Amendment) Ordinance, 2020

Introduction

We had in our last update “Prospective changes to be brought about by Mineral Laws (Amendment) Ordinance, 2020” discussed the changes that the Government of India (“Government”), may bring forth the Mineral Laws (Amendment) Ordinance, 2020 (“Ordinance”) which may amend the Mines and Minerals (Development and Regulation) Act 1957 (“MMDRA”) and Coal Mines (Special Provisions) Act, 2015 (“CMSPA”). The Ordinance was passed on 10th January 2020. In this update we review the changes brought about vide the Ordinance.

The salient features of the Ordinance are as follows:

1. Allowing composite prospecting licence-cum-mining lease for allocation of coal mines

Before the Ordinance, the coal blocks where either allocated for prospecting licence or for mining lease. The Ordinance has amended various provisions under both the Acts, i.e. MMDRA and CMSPA which will facilitate grant of prospecting licence-cum-mining lease. This will open up more coal blocks for auctions in India.

2. Continuation of production by mining lease holders

In order to maintain the sustained production of minerals (other than coal, lignite and atomic minerals), the Ordinance has added a proviso in the section 8A of the MMDRA which shall allow the State Governments to auction mining leases before the expiry of mining lease. Further, the Ordinance has added a provision 8B to the MMDRA which will give the successful bidder of the mining leases all the valid rights, approvals and clearances, licences (“Required Rights”) vested with the previous lessee and allow the bidder to carry out mining operations which were already being carried out by the previous lessee for a period of two (2) years. Within those two (2) years the allottee will have to obtain all the Required Rights.

3. Relaxation of eligibility criteria

As it has already been discussedⁱ, the primary aim of the Ordinance was to boost foreign direct investment (FDI) in the coal mining sector. Even though 100% FDI were allowed, there were restrictions as to which type of corporations or companies can participate in a coal mining auctions. These restrictions enabled monopolisation of the coal sector by indigenous companies and discouraged FDI. The Ordinance has brought about amendment in Section 11A of the MMRDA and Section 4 and 5 of the CMPSA. This amendment will allow any company interested in the coal sector to bid in coal mines auction. Therefore, any company which is financially sound or has mining experience in any other mineral or in any other country can now participate in auction for coal mines. This may increase the 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 the domestic companies.

4. Removal of end-use restrictions

Also in our previous update we had discussed that Section 11A of the MMDRA and Section 4 of CMSPA imposed end-use restrictions on the usage of coal mines and the changes the Ordinances may bringⁱⁱ. Now, the Ordinance has amended Section 11A of the MMDRA as well as Section 4 of CMPSA which has removed the end-use restrictions provided earlier, and now has allowed coal mining operation for own consumption, sale or for any other purposes, as may be specified by the Government. Further, the Ordinance has also amended Section 20 of the CMPSA which will allow the successful allottees of the coal mines to utilise the mined coal in any of its plants or plants of its subsidiary or holding company. These amendments may enable wider participation in coal mine auctions and increase FDI.

5. No prior approval required

The Ordinance has amended Section 5 and 17A of the MMDRA and has done away with the requirement of obtaining prior approval from the Central Government for grant of reconnaissance permit, prospecting license or mining lease. This will increase the ease of doing business in coal sector in India.

6. Allowing holders of non-exclusive reconnaissance permit (“NER”) of deep seated minerals to obtain composite licence (prospecting licence-cum-mining lease) or mining lease

Earlier the NER holder did not have the opportunity to apply for mining licence. This made impossible for the private as well as foreign entities to participate in exploration the deep seated mineral beds in India and there was no reward for bearing such huge costs. In order to promote deep seated mineral exploration, the Ordinance has amended Section 10C of the MMDRA which will now allow NER holders to apply for composite as well as mining licence. Through this the Government aims to enhance the exploration of minerals with advance technologies brought in by the private entities.

Conclusion

The Ordinance is a welcomed step towards liberalisation of the mining sector in India. Along with these important changes the Ordinance has also added provisions under Section 8 of the CMSPA to allow re-allocation and compensation for termination of allocated mines, allowed appointment of designated custodian of mines under production by amending section 18 of MMDRA and empowered the Central Government to frame rules in respect of newly introduced sections. These amendments will enhance the ease of doing business, streamline the process of coal auctioning, attract large investments in the coal mining sector as well as encourage FDIs.

(i) Prospective changes to be brought about by Mineral Laws (Amendment) Ordinance, 2020, https://www.agarwaljetley.com/prospective-changes-brought-about-ineral-laws-ordinance.html

(ii) ibid, para 2

This update 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) – 9999 5653 93