Mine Lease Expiry in Offing, FIMI Suggests Skipping Auction Route

Kolkata: A heavy agenda for action in the coming months awaits the Union Ministry of Mines and concerned state mining departments as a large number of non-captive mining leases will expire in March 2020.

The expiry will warrant holding of auctions as per the amended provisions of the Mines and Minerals (Development and Regulation) Act 1957 (MMDR). The amendment, carried out in March 2015 to repeal an Ordinance, took effect from January 12, 2015.

Secondly, penalty for production in excess of environmentally cleared quantities has become a ticklish issue in the mining sector as several states, particularly Jharkhand, Odisha and Chhattisgarh, have imposed hefty penalty on several companies under Section 21 (5) of the MMDR Act, which derived additional strength from the judgement delivered by the two-judge bench comprising Justices Madan B Lokur and Deepak Gupta on August 2, 2017, in writ petition (civil) no. 114 in Common Cause vs Union of India and others.

And thirdly, there are strong indications that some leaseholders of captive mines are keen on undertaking commercial or merchant mining as well and it is quite possible that area limits may have to be relaxed quite substantially to ensure viable scale of mining. The existing provision may have to be made more liberal.

The auction will involve 329 non-captive leases, of which 48 are working mines. An estimated 2.64 lakh jobs are involved. The decision, at this juncture, of the Ministry of Mines to allow Steel Authority of India Ltd to sell 25% of its high grade captive iron ore production is quite significant. As is the decision to dispose 70 million tonnes of relatively low grade iron ore including fines which are now lying dumped across SAIL’s captive mines.

Also read: Donimalai: Karnataka Readies Fight Strategy as NMDC Earns Relief in First Round

It definitely indicates that the Centre and the states foresee a fairly long drawn-out process for holding of auction, completion of all formalities and commencement of normal production by the new leaseholders. In such cases, litigation also can’t be ruled out. Disruption may result in loss of about 30% of iron ore production. There will also be loss of chrome ore and manganese ore.

The Federation of Indian Mineral Industries (FIMI) has suggested to the Centre that the period of lease, which are due to expire in March 2020, be extended till 2030 on the lines of the provision for captive mines and “thereafter by 20 years at a time till reserves last”. In effect, the suggestion is to skip auctions.

It may be mentioned that Odisha had veered round to the view that a smooth transition may be possible if the state government is given leases on a temporary basis for two years. It had argued that during this period, it should be possible to go through the entire process and thereafter. the state government would transfer the leases to the successful bidders.

The mines ministry found that an amendment of the relevant Act / Acts may be necessary to make an enabling provision. On the lines of the earlier provision for temporary working permits, the environment ministry was examining if temporary clearances for one year can be given.

Also read: Odisha Govt to Auction Iron Ore Mining Leases, Trade Unions Demand Job Security

What is clear is that this complex issue is claiming serious attention of the mines and environment ministries, and it may be quite some time before a decision is reached, particularly on FIMI’s suggestion to skip auctions.

As for penalties for production beyond the limit of environmental clearance and mining plan, it is seen that subsidiaries of Coal India Ltd have together have received a hefty claim of Rs 53,331.12 crore and they have preferred appeals before the revisional authority against the penalty. The Supreme Court judgement of August 2, 2017, Section 30 of the MMDR Act and Rule 55 (v) of Mineral Concession Rules 1960, have been cited by the state authorities while raising penalty claims. In the demand notice on South-Eastern Coalfields Ltd mines, however, Section 21 (5) of the MMDR Act has been cited.

The relevant circular of the Ministry of Environment, Forests and Climate Change (MoEFC) makes it clear at the outset that with respect to projects for major minerals with more than five hectares of lease area, the term ‘expansion’ will include increase in production or lease area or both. Expansion in production beyond approved capacity, however small, will constitute violation and attract penal provisions of the Environment (Protection) Act. As coal ministry approves mining plan for the entire life of a mine, the approved calendar plan for annual production for the life of the mine has to be submitted.

The judgement held that compensation to be recovered should be 100% of the notional value of the iron ore and manganese ore produced ... without / in excess of environmental clearances. The Union mines ministry in its affidavit argued that lower recovery (30%) would be contrary to the statutory scheme and 100% recovery should be made under Section 21 (5) of the MMDR Act.

Mines secretary Anil Gopishankar Mukim told NewsClick, “We cannot lose sight of the fact that the highest court in the land had upheld recovery of 100% compensation from parties producing in excess of approval.”

Also read: Will Foreign Companies Now ‘Loot’ India’s Coal?

Quite a few of the aggrieved parties, which include public sector undertakings, have made token payments to the state governments and moved the respective high courts. Therefore, recovery of the penalty is likely to remain a far cry. Only Odisha has reportedly succeeded in its penalty recovery drive to a great extent. Therefore, this issue has to be sorted out by the Centre at the earliest.

Finally, about captive mines’ leaseholders eyeing expansion into commercial or merchant mining. Already, Tata Steel has indicated its intention to this end to make use of its expertise in exploration and production of coal and ores. The rigidity of the original distinction is no longer there because of relaxations made from time to time in recent years. And, provisions also exist for relaxation of area limits on case-by-case basis. The Centre has to decide whether there is room for finetuning the provision and making it more liberal, ensuring at the same time that liberalisation is not exploited by unscrupulous parties.