Indian Mining Regulatory Regime – A Critical Study

Indian Mining Regulatory Regime – A Critical Study

Written by Neetu Lather

Introduction

Globally, India is ranked as one of the leading producers of valuable minerals such as chromite, iron ore, coal and bauxite. Mining is accounted for 2% of the country’s gross value added (GVA) quarter of 2019 to 2020. This sector is a provider of the basic raw materials required by many manufacturing and infrastructure industries in the country. India produces 95 minerals, including 4 fuel-related; 10 metallics; 23 non-metallic; 3 atomic; 55 minor minerals (including building and other minerals). Many regulations are there in the mining sector in India and the legal framework has undergone important changes in the past five years, the result of which is a more transparent and efficient regime.

Regulatory framework

India’s mines and minerals sector operates under a federal structure where the powers and responsibilities for the regulation of the sector are divided between the central government and the respective State governments according to the Seventh Schedule of the Constitution of India (Union List, State List and the Concurrent List). The central government and the State governments are collectively responsible for the administration of the mining sector in India.  

The central government has the power under entry 54 of the Union List to regulate mines and mineral development to the extent that such a regulation is declared by the Parliament to be in the public interest. The State government has power under entry 23 of the State List to regulate mines and mineral development in accordance with the power of the central government.

The Mines & Minerals (Development and Regulation) Act 1957 (MMDR Act) is framed by the central government, which is the principal legislation governing the mineral sector (other than petroleum and natural gas) in India. The MMDR Act lays down the regulatory framework for the growth of all minerals and for the regulation of mines. Minerals are of two types’ minor minerals and major minerals. Building stones, ordinary clay, ordinary sand, gravel, and other minerals declared by the central government as minor minerals are included in minor minerals. Coal, manganese ore, iron ore, other minerals used for industrial purposes and minerals that cannot be categorised as minor minerals are considered to be major minerals.

By introducing the Mines and Minerals (Development and Regulation) Amendment Act 2015 notable changes were made to establish a transparent and non-discretionary regime for the grant of mineral concessions. The Act was further amended:

  • By 2016 Amendment allowed the transfer of mining leases which are granted other than through auction and used for captive consumption purposes.
  • By 2020 Amendment allowed the transfer of licences, approvals, and clearances (including environment and forest clearances) from the earlier licensee to the new licensee for two years period from the grant of new lease, to ensure uninterrupted mining operations.
  • By 2021 Amendment eliminated distinction between captive and merchant mines; No more restrictions on end utilization of Captive Mines(sec-7); Transfer of Statutory Approvals(sec-9); Sale of Ores & Minerals Extracted from Captive mines(sec-8); Allocation of Mines, Extension, and Lapse of Mining Lease(sec-7,9,5); Involvement of Central Government in conducting the auction of mineral concessions(sec-14,16); District Mineral Foundation(sec-10); Rights of certain existing concession holders(sec-13).[1]

Rules and Regulations

Mines and Minerals (Contribution to District Mineral Foundation) Rules 2015; Mineral Concession Rules 1960; Minerals Concession (Amendment) Rules, 2020;  Mineral Concession (Amendment) Rules, 2021; Mineral Laws (Amendment) Act 2020; Mineral Laws (Amendment) Ordinance 2020; National Mineral Policy, 1993[2]; National Mineral Policy 2019; Mineral Conservation and Development Rules 2017; Mineral Conservation and Development (Amendment) Rules 2018; Mineral (Auction) Rules 2015; Mineral (Auction) Amendment Rules 2017; Mineral (Auction) Amendment Rules, 2020; Mineral (Auction) Second Amendment Rules2021;  Offshore Areas Mineral (Development and Regulation) Act 2002 (OAMDR Act); Offshore Areas Mineral Concession Rules 2006 (OAMDR Rules);

Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948; Coal Bearing Areas (Acquisition and Development) Act, 1957; Coal Grading Board (Repeal) Act, 1959; Coal Mines (Conservation and Development) Act, 1974[3]; Coal India (Regulation of Transfers and Validation) Act, 2000; Coal Block Allocation Rules 2017; Coal Blocks Allocation (Amendment) Rules2020; Coal Mines (Special Provisions) Rules, 2014; Coal Mines (Special Provisions) Amendment Rules, 2015; Coal Mines (Special Provisions) Amendment Rules, 2020; Mines Act, 1952; Mines Rules, 1955.

Foreign Direct Investment Policy, as amended from time to time (FDI Policy); Pro-Active and Responsive facilitation by Interactive and Virtuous Environmental Single-window Hub (PARIVESH); The Occupational Safety, Health and Working Conditions Code 2020 (OSH Code).

The exploration and exploitation of petroleum and natural gas are primarily governed by the Oilfields (Regulation and Development) Act 1948; Petroleum and Natural Gas Rules 1959.

Regulatory authorities

State governments: In accordance with the provisions of the MMDR Act each State government has the power to grant mineral concessions and collect royalties, dead rent and fees within the State.

Ministry of Mines (MoM): It is a branch of the government of India, is the primary body for the administration of mining. It is accountable for the administration of the MMDR Act; survey and exploration of all minerals (other than coal, natural gases and petroleum); and mining and metallurgy of non-ferrous metals.

Indian Bureau of Mines (IBM): It is a subordinate office of the MoM and is to promote the systematic and scientific development of mineral resources while ensuring the protection of the environment in India.

Ministry of Coal (MoC): It controls the exploration of coal in India and is accountable for caring out the exploration activities in a sustainable manner. It also works for the development of the infrastructure which is necessary for prompt coal supplies to meet other sectors’ demands.

Ministry of Petroleum and Natural Gas (MoPN): It is established under the Petroleum and Natural Gas Regulatory Board Act 2006 to govern the exploration and exploitation of petroleum resources, including natural gas. It oversees the production, supply, distribution, marketing and pricing of petroleum products and natural gas. It also plans, insures development and control of, and assist, all industries related to the MoPN.

Ministry of Environment, Forest and Climate Change (MOEFCC): This agency regulates the planning and implementation of India’s environmental and forestry policies and programmes. To undertake a mining project in India, it’s mandatory for a project proponent to obtain environmental clearance from the MoEFCC.[4]

Proposal for changes in the legal and regulatory framework

The MoM published a notice with certain proposed reforms to the MMDR Act in August 2020. The comprehensive approach behind the proposed change is driven by the “Atmanirbhar Bharat” scheme with the objective of enhancing private investments, generating employment and bringing state-of-the-art technology into the mining sector. It aims to boost exploration activities and permits the private sector to take up exploration activities alongside the general exploration and survey work carried out by government agencies.

The proposed reforms include:

  • A seamless exploration, mining and production system to be introduced to bring more mineral blocks into auction.
  • To move towards an auction-only regime for allocation of mineral resources by resolving legacy issues.
  • To remove the difference of captive with non-captive mines, sales of surplus unused minerals and allowance transfer of mining leases, to increase efficiency in mining and production.
  • A transparent national mineral index to be developed for different minerals.
  • For computation of stamp duty on mining leases the norms should be rationalized
  • Clearly define “illegal mining”, to differentiate between mining in violation of numerous approvals & clearances inside a mining lease area, and illegal mining outside a mining lease area.[5]

Conclusion

With the amendments, the Government has made a step towards attaining mineral security in India. The new legal regime while nullifying the restrictive practices that prevailed in the erstwhile 1957 Act, has tackled various issues related to mining including auctions, transfer of statutory clearances, functioning of District Mineral Foundation (DMF) Trusts, etc. The amendment is made with the aim of creating employment, increasing the contribution of the mining sector to the GDP of the nation and captivate domestic as well as foreign investment. It will be however noteworthy to witness how the new legal regime will stand the test of time and judicial review.

But the present reforms in mining regulations are not sufficient without proper implementation of regulations. International law obliges India’s government to protect the human rights of its citizens from abuses by mining firms and other companies. India has laws on the books that are designed to do just that, but some are so poorly designed that they seem to be set up to fail. Others have become ineffective by improper implementation and enforcement or by corruption by elected officials or civil servants. The result is that key government watchdogs stand by as spectators while out-of-control mining operations threaten the health, livelihoods and environments of entire communities.

In some cases, public institutions have also been cheated out of vast revenues that could have been put towards supporting governments’ inadequate provision of health, education, and other basic services. From experience, it has come out that without effective government regulation, not all companies will behave responsibly in India and around the world. Some companies which make efforts to behave responsibly will also fail without proper government oversight. So with the introduction of new regulations and reforms in existing regulations proper implementation of the regulation is required.[6]

About the Author

Indian Mining Regulatory Regime - A Critical Study

Neetu Lather

Student at Vivekananda School of Law and Legal Studies, VIPS.

She has participated in various academic events including moot court Competitions and completed the Legal Drafting and Office Management Course at Vivekananda Institute of Professional Studies. Her areas of interest and research work are Constitutional Law, Competition Law, Criminal Law, Intellectual Property Rights and International law.


[1] Ronak Arora and Snigdha Singh, India: The New Mines And Minerals (Development And Regulation) Amendment Act, 2021 To Bring Noteworthy Changes, mondaq connecting knowledge & people,(12sep,2021),https://www.mondaq.com/india/mining/1059778/the-new-mines-and-minerals-development-and-regulation-amendment-act-2021-to-bring-noteworthy-changes

[2] MINING POLICY & LEGISLATION(OVERVIEW), Ministry of Mines Government of India,(12Sep,2021), https://www.mines.gov.in/UserView?mid=1319

[3] Acts Rules and Policies, Ministry of Coal,(11sep,2021), https://coal.gov.in/acts-rules-policies

[4] Mihir Deb, Mines and Minerals Sector in India and Its Indian mining Regulatory Regime, ResearchGate,(11 Sep 2021), https://www.researchgate.net/publication/318130983_Mines_and_Minerals_Sector_in_India_and_Its_Regulatory_Regime

[5] Shivpriya Nanda, Mining in India: overview, THOMSON REUTERS PRACTICAL LAW, (12Sep, 2021), https://uk.practicallaw.thomsonreuters.com/0-562 4168?transitionType=Default&contextData=(sc.Default)&firstPage=true

[6] Mining, Regulatory Failure, and Human Rights in India, human rights watch,(12Sep,2021), https://www.hrw.org/report/2012/06/14/out-control/mining-regulatory-failure-and-human-rights-india

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