An Analysis of Mining Legislations and reforms in India

Abstract

The mining sector of India forms a core part of the Indian economy, mines and minerals play
an essential role in the economic growth of any country. It is essential to regulate and
legislate upon the same in order to avoid illegal mining, prevent misuse of the minerals and
protect the environment.

India is self sufficient when it comes to certain minerals while it is dependent upon other
nations for others. India mineral rich region akin to Australia and eastern Africa, however it
lacks the resources to untap the natural treasures present under the earth within its
boundaries. The Mines and Minerals (Development and Regulation) Amendment Bill, 2023
has been introduced to overcome these challenges. This paper analysis the positive and
negative aspects of such reforms.

Keywords - Reconnaissance Permits, Prospecting Licenses, Mining Leases, mineral

concession

Introduction

The mining industry forms a quintessential part of the Indian economy as it provides basic
raw materials that are essential for numerous important industries. India is a major producer
of bauxite, iron, and zinc ore, standing among the top five producing countries. Furthermore,
it is also the world’s second-largest coal producer as of 2021. The country is rich in minerals
and is often compared to developed nations such as Australia when it comes to its geological
potential.

However, only 10% of the Obvious Geological Potential (OGP), has been explored and out of
that less than 2% is actually mined. The country’s investment in global mineral exploration
remains modest, accounting less than 1%.1 Minerals play a very important role when it comes
to growth of any economy. It is misfortunate that a developing country like India with regions
rich in minerals unable to capitalise on such treasure.

1
Ministry of mines, annual report 2023
The central and the state together regulate the mining sector in the country. Several
legislations have been enacted over the years to protect the natural resources from being
exploited or misused as well as to promote the exploration of new minerals and regulate the
procedure for the same.

The Mines and minerals (Development and regulations) Act, 1957 (MMDR act) provides the
basic framework for mining regulations in the country. The act has been amended time to
time so that the mining legislations are refined and are in accordance with the ever-changing
society and environment. Hence, the latest Mines and Minerals (Development and
Regulation) Amendment Bill, 2023 has been introduced in order to leverage from the private
sector expertise to unlock the country’s untapped mineral potential.

Legal Framework

India being a federal union of states, presents that the State Governments are the owner of
minerals located within the such state boundaries. However, article 297 of the Indian
constitution provides that resources in the continental shelf and exclusive economic zones
would also be under the authority of the Union.

Even though mineral wealth vests with the State Govt, the subject of regulation of Mines and
Minerals development is included in the 7th schedule of constitution of India. Therefore, as
per the entry number 54 of the List 1 (union list) the parliament by law to be expedient in the
public interest can regulate the mines and mineral development. While entry 23 of list II
(state list) under the 7th schedule provides for Regulation of mines and mineral development
subject to the provisions of List I with respect to regulation and development under the
control of the centre.

Hence in regards to entry 54 of List I, Parliament has passed legislation titled ‘The Mines &
Minerals (Development and Regulation) Act, 1957’ as Central Act and section 15 of this act
delegated the rule making powers in respect of minor minerals to the states. The MMDR Act,
coupled with the rules framed under it, are the cornerstone of the legal framework when it
comes to mines in India. The legislations that govern mining sector are:

 Mines Act, 1952 and Mines Rules 1955

 Mines and minerals (Development and regulations) Act, 1957
 Mineral Concession Rules, 1960
 Mineral Conversation and development rules, 1988
 Offshore Areas Mineral (Development and Regulation) Act, 2002
 Offshore areas mineral concession rules, 2006
 Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules,
2016

Mines Act, 1952 and Mines Rules 1955

The mines act 1952 is a welfare legislation which provides for regulation of labour and their
safety in mines. As per its preamble it is an act to amend and consolidate all the laws that
related to labour and their safety in mines. Further, it legislates the provisions with regards to
for healthcare and security of mineworkers and providing them safe working conditions.

While section 58 of the mines act 1952 led to the introduction of the mines rules 1955 which
also provided for provisions related to basic healthcare, sanitation and welfare of mine-
workers.

Mines and minerals (Development and regulations) Act, 1957 and The Mineral
Concession Rules, 1960

The Mines and minerals (Development and regulations) Act, 1957 (MMDR act) is a central
legislation that constitutes the basic framework of mining regulations in India. The act applies
to all mineral except minor minerals and atomic minerals. The act throws light on the process
and conditions for acquiring a mining or prospecting licence in India.

Since the act was enacted adhering to the Industrial Policy Resolution 1957, it predominantly
aimed on imparting a mineral concession regime with respect to the metal producing public
sector undertakings. Mineral concessions refer to the license for mining. The act provides for
3 types of mineral concessions:

1. Reconnaissance Permits
2. Prospecting Licenses
3. Mining Leases

The Mineral Concession Rules, 1960 were introduced with the aim to govern and regulate the
grant of reconnaissance permit and prospecting permits. These rules also govern the mining
lease. Section 13 of the Mines and Minerals (Development and Regulation) Act provides for
the said rules.
Salient features –

 Reconnaissance Permit- the reconnaissance permit is granted for conducting mining

operations for the initial prospecting of a mineral through regional, aerial, geophysical
or geochemical surveys and geological mapping, as defined under the act. Such
permit for any mineral is granted for a period of 3 years and for maximum area of
5000 sq. kms. The operations carried out under this permit do not include main
activities of extraction. Herein, after the period of 2 years the areas should be
decreased and extraction area should be found. A holder of RP possesses a preferential
right to acquire PL(s) in the area concerned.

 Prospecting Licenses - the grant of prospecting license is the next step after the RP,
as this permit is granted to carry out activities for the purpose of exploring, locating,
and establishing mineral deposits presence beyond doubt and spotting of the minerals.
A PL for any mineral is granted for a maximum period of 3 years and maximum area
of 25 sq. kms, the maximum area limit can be relaxed by the central govt if necessary.
A PL holder possesses a preferential right when it comes to acquiring ML in the
concerned area.

 Mining Lease- mining lease is the legal contract for undertaking operations for
extracting any mineral or other valuable deposits as per the conditions as to time,
price, rental, or royalties agreed to. In other words, mineral lease is granted for
winning the mineral present under earth. It is granted for maximum of a 20 years
period and a 30 years period, for a maximum area of 10 sq. kms, however if required
central govt can relax this limit.

 Termination of prospecting licences or mining leases - Section 4A of MMRD act

states that Central or state government can terminate prospecting licences or mining
leases after providing reasonable opportunity to the holder of such license. A license
can be terminated in following cases:
 By the virtue of regulation of mines and mineral development
 In interest of preservation of natural environment,
 To check on floods and to prevent pollution,
 To ward off danger to public health or communications
 To safeguard safety of buildings, monuments or other structures
 To conserve mineral resources
 For ensuring safety in the mines or other such purposes
 In case non-performance of production operations and dispatch for a 2 years
period from the date of execution of the lease

 license/lease grant in case the ownership lies with a person other than the
government- The rights of private landowners to own subsoil and mineral wealth has
been recognised by Supreme Court.2 Chapter V of the Mineral Concession Rules,
1960, lays down the procedure of the grant of RP prospecting lease and ML when the
ownership lies with the person and not the government. These rules put in place some
qualifications regarding approval and grant of the prospecting license or mining lease
such as that the entity must have filed the ITRs and got the self-assessment of income
tax completed.

 Royalty - Section 9 of MMRD act state that a holder of mining lease shall pay royalty
in regards to any mineral removed or consumed from the leased area at the specified
rate provided in second schedule. License holder shall not be liable to pay royalty in
case of any coal consumed by a workman engaged in a colliery given that the
consumption is not more than one-third of a tonne per month.

 Revision – As per section 30 of the MMRD act either on its own or in case an
aggrieved party files an application made within the prescribed time, the central
government has the authority to revise any order or decision made by a state
government with respect to any mineral other than a minor mineral.

 Penalties

Section 21(1)  In case of carrying out  imprisonment for a term which may
reconnaissance or prospecting extend to 2 years and with fine
or mining operations without which may extend to 25000 rupees
permit or licence or lease, per hectare of the area

2
Threesiamma Jacob and others v Geologist, Dptt of Mining and Geology and others 2013 (9) SCALE 1
respectively
 Or in case of transportation
and Storage in violation of
Act or the Rules
Section 21(2)  Contravention of any Rules  imprisonment for a term which may
and extend to 1 years or with fine which
 Continuation of such may extend to 5000 rupees, or with
contravention both, and
 in the case of a continuing
contravention, with additional fine
which may extend to 500/- rupees
for every day during which such
contravention continues after
conviction for the first such
contravention

Mineral Conversation and development rules, 1988

The Mineral Conservation and Development Rules, 1988 provide provisions regarding
reconnaissance and prospecting operations with the objective of protecting and preserving
minerals in India. According to these rules, a license for the purpose of mining is authorised
in the most scientific manner, and the mining lease holder is instilled with the liability to take
all reasonable precautions required to protect the environment and prevent pollution while
conducting prospecting, mining, beneficiation, or metallurgical operations in the region.

Offshore Areas Mineral (Development and Regulation) Act, 2002 and Offshore Areas
Mineral Concession Rules, 2006

For the purpose of for regulation of mines and development of mineral resources in the
offshore areas which includes territorial waters, continental shelf, the exclusive economic
zone or any other maritime zone under the union of India, the Offshore Areas Mineral
(Development and Regulation) Act, 2002 was enacted by the central government.
This act is applicable to all minerals found in the offshore area and also includes those
minerals provided in Section 2 of the Atomic Energy Act, 1962 but rules out mineral oils
which includes natural gas and petroleum and minerals related hydrocarbon resources.

Section 35 of the act provides for introduction of the Offshore Areas Mineral Concession
Rules, 2006 by the Ministry of Mines. These rules lay down the procedure for granting
reconnaissance permit, exploration license or production lease as per the act

The Mineral (Auction) Rules, 2015 & Minerals (Other than Atomic and Hydro Carbons
Energy Minerals) Concession Rules, 2016

The section 13 of the Mines and minerals (Development and regulations) Act, 1957 provides
for the enactment of these rules by the central government. They aim at regulating the grant
of permits, licenses and leases in respect of minerals and for related purposes. According to
section 3 of these rules, they apply to all the minerals excluding those prescribed as minor
minerals and those listed in Parts A and B of the First Schedule of the said Act.

Mines and Minerals (Development and Regulation) Amendment Bill, 2023

The Mines and Minerals (Development and Regulation) Amendment Bill, 2023 was
introduced in the Lok Sabha on July 26, 2023. The bill sought to amend the Mines and
Minerals (Development and Regulation) (MMDR) Act of 1957, with the main aim of
encouraging private sector participation in the exploration of essential and deep-seated
minerals within the boundaries of the country.

The bill seeks to enact crucial provisions with the objective of increasing private sector
engagement which differs from the existing MMDR Act of 1957. following key provisions
throw light on such contrast:

 Inclusion of sub-surface activities in reconnaissance: After the 2015 amendments

of the, reconnaissance been defined as preliminary prospecting, encompassing aerial
surveys, geophysical, and geochemical surveys, and geological mapping. The new bill
widens that definition and seeks to include pitting, trenching, drilling, and sub-surface
excavation as a part of reconnaissance which was prohibited in the past.
 Introduction of exploration license (EL): Apart from the previous permits such as
reconnaissance, prospecting, mining leases, and composite licenses included in the
MMRD act, the new bill also aims at introducing the concept of an exploration
license, allowing reconnaissance or prospecting, or both, for specified minerals.
 Declassification of atomic minerals: Previously, six atomic minerals - —beryl,
beryllium, lithium, niobium, titanium, tantalum, and zirconium were restricted to
government entities are now declassified as atomic mineral by the new bill. These
minerals can now be explored and prospected by private individuals as well.
 Auction mechanism for exploration licenses: As per the new bill, the exploration
licenses so introduced will be granted by the state government through the process of
competitive bidding. The framework for such auction will be defined by the central
government.
 Exploration license validity and area: The exploration license is granted for five
years, which shall be extended by two years if necessary. The maximum area for
carrying out the exploration activities extends up to 1000 sq. kms. However, at the
end of the 3rd year up to 25 percent of the originally authorized area can be retained
by the licensee, subject to submission of reasons.
 Geological reports and incentives: with regards to the mentioned exploration
license, a geological report must be submitted by the licensee within three months of
exploration completion or license expiration. In case proven resources are found,
auction for a mining lease must be conducted by the state government within six
months of the report. The licensee is entitled to a share in the auction value of the
mining lease for the prospected mineral, the share will be defined by the central
government.
 Central government-led auctions for critical and strategic minerals: The auctions
for the composite licenses and mining leases of certain specified minerals which are
considered critical and strategic, such as lithium, cobalt, nickel, phosphate, potash,
and tin. Shall be conducted by the central government though concessions will
continue to be granted by state government

Mining sector’s existing exploration constraints

As per the geological mapping of India, an area of 571,000 sq. km, from a total of 3.1 Mn sq.
km. has been demarcated as an Obvious Geological Potential (OGP) area, as the geological
potential for the occurrence of mineral deposits is more.
As per the Atomic Minerals Directorate for Exploration and Research and the Centre for
Social and Economic Progress (CESP), India’s geological potential is close to mineral-rich
regions like Western Australia.3

Unfortunately, due to legal, administrative, technological and environmental constraints the

process of exploration which is a necessity for discovering viable minerals is obstructed. As a
consequence, the country has mere explored 10% of its Obvious Geological Potential (OGP)
out of which only 2% forms the total extraction. India accounts for less than 1% of the global
mineral exploration budget.

One factor contributing towards such unachieved potential is that the process of exploration
necessitates use of techniques like aerial surveys, geological mapping, and geochemical
analyses. However, such techniques are highly specialized, time-intensive, and capital
intensive and with bleak probability as much as less than a 1% of the explored projects
turning out as commercially viable mines. Therefore, the majority of such exploration
projects have been undertaken and executed by government bodies like Geological Survey of
India and Mineral Exploration Corporation Limited (MECL). The lack of private
participation has led to paucity of vital mineral discoveries.

The MMDR act, 1957 has been amended from time to time to increase the involvement of the
private companies through procedures like First Come First Served (FCFS) and Prospecting
Licenses (PLs), Mining Leases (ML) or Reconnaissance Permits (RPs). In order to ensure
transparency and prevent misuse a shift towards auction-based allocation was aimed. The
Evidence of Mineral Content (EMT) rule were introduced with the objective of ensuring
fairness but resulted in limiting the private sector participation by only allowing auction of
projects with prior government exploration. This acted as a hindrance for private firms to
enter early-stage exploration.

Even after all the initiatives, which also included funding from National Mineral Exploration
Trust (NMET) to the private firms registered as exploration agencies, the private participation
remained scarce.

Positive aspects of the New Bill

3
INDIA BRIEFING, India's Mines and Minerals Bill 2023: Push for Greater Private Sector Role (india-
briefing.com), (Last visited sept 6, 2023)
The Mines and Minerals (Development and Regulation) Amendment Bill, 2023 overcomes
the above-mentioned challenges by lining up India’s exploration processes with those of
developed countries and following the successful models like of Australia’s

 The new type of license encourages exploration by private sector

 It would aid India in accomplishing net carbon neutral by 2070 which was agreed to
at COP26 Glasgow summit
 The private sector involvement would decrease the import bill of India by discovery
of new minerals
 The new bill would attract FDI and junior private explorers as it creates a more
conducive legal environment, which would ultimately lead to economic growth4

Negative aspect of the new Bill

The new amendment bill raises a few concerns, while the entire world is moving towards the
alternatives of the fossil fuels India on the other end is trying to capitalise it, also jeopardising
its commitment to reduce the emissions intensity of GDP made at the Paris agreement. 5 Apart
from that the bill raises following concerns –

 revenue generation done by Private companies is dependent upon a share of the

premium paid by mining entities. The process of government clearance is slow, the
revenue generation only starts after successfully discovered mine is auctioned and
operationalised and this could take years.
 The auction premium will be known only after a successful mine auction. This poses
a lack of clarity in the revenue prospects and it might discourage private sector
participation
 It is difficult and complex to auction an unexplored resource. the process becomes a
lot feasible after the value of resources dealing with is known such as discovered
mineral deposits.

4
Shivpriya Nanda, J Sagar Associates, Mining in India: overview, THOMSON REUTERS PRACTICAL LAW,
(Sept 7, 2023, 8:11pm), Mining in India: overview | Practical Law (thomsonreuters.com)
5
Overview: India: minerals and mining laws and regulation, STA LAW FIRM, (Sept 7, 2023, 9:16 pm),
https://www.stalawfirm.com/en/blogs/view/india-minerals-and-mining-laws-and-regulations.html
 The explorer gets only a share of the premium at an unspecified stage as only the
government can auction whatever the explorer has discovered. This discourages the
private players as they cannot directly sell their discoveries to the appropriate entity. 6

Conclusion

only a few things in the world that do not have two faced implications, the new amendment
bill is like a double-edged sword as it has its fair share of advantages and disadvantages.

The new regulations aim to set up new mines, however the process could take up years
leaving any investor ambiguous whether the investment is worth the risk or not.

While steps were taken towards overcoming the existing challenges faced by the mining
sector, those amendments were confronted with difficulties. Such problems must be revisited
and discussed in details so that the main objective of the Bill is achieved.

6
. Supreme Court Opinion dated September 27, 2012 on a Reference by the President of India (Special
Reference No.1 of 2012 under Article 143(1) of the Constitution of India).