The Mines and Minerals (Development and Regulation) Act, 1957 ("1957 Act") was the principal legislation that was enacted with a view to regulate the minerals and mining sector in India. The 1957 Act has undergone meticulous amendments in the years 2015, 2016, and 2020 to bring sweeping reforms in the mineral sector with the changing times. To effusively utilize the potential of the mineral sector, increase employment opportunities and investment in the mining sector including coal, resolve long pending issues that have slowed the growth of the mining sector, the Ministry of Coal, Government of India introduced the Mines and Minerals (Development and Regulation) Amendment Bill, 2021 which sought to amend the 1957 Act. On 28th March 2021, The Mines and Minerals (Development and Regulation) Amendment Act, 2021 ("Amendment Act, 2021") received assent from the President of India and was published in the Official Gazette by the Government of India.
This article highlights and discusses certain key amendments, which have been made keeping in mind the issues and challenges faced by the erstwhile 1957 Act and with the aim of making it adept for future requisites.
A. No more restrictions on end utilization of Captive Mines
The most significant change brought forth by the new Amendment Act, 2021 is the elimination of the distinction between captive and merchant mines. Under the old regime of the 1957 Act, companies acquiring any mine (other than coal, lignite, and atomic minerals) through auctions were allowed to utilize the product only for "prescribed end-uses like power generation and steel production" and not for any other purpose. Such mines were known as captive mines.
The Amendment Act, 2021 now removes this circumscription on the utilization of mines by such companies. The mines now will not be limited to just a specific purpose/industry/sector and the companies will be permitted to carry on coal mining operations for their own consumption, sale, or for any other purposes, as may be prescribed by the central regime.1
B. Transfer of Statutory Approvals
Section 8B of the 1957 Act which dealt with 'transfer of statutory clearances', provided that upon the expiry of the mining lease of the lessee, mines were to be leased to new persons through auction. On the transfer of such a lease, statutory clearances acquired by the anterior lessee were to be transferred to the incipient lessee for a period of two years. The incipient lessee was required to obtain fresh clearances within these two years.2
The Amendment Act, 2021 replaces this provision and quite valiantly provides that all the statutory clearances and licenses shall be valid till exhaustion of mineable reserves and post expiry or termination of the lease, the government will conduct an auction process and all the statutory rights will stand transferred to the next successful bidder.3
C. Sale of Ores & Minerals Extracted from Captive mines
Previously, there was no provision under the 1957 Act, regarding the sale of minerals extracted from captive mines. However, a noteworthy amendment has been brought in Section 8 of the erstwhile 1957 Act by adding a new subsection to Section 8, which provides that the captive mines (other than atomic minerals) may sell up to 50% of their yearly mineral production within the open market after meeting their own needs, but the lessee will be required to pay extra charges to the government for mineral sold within the open market.4
Furthermore, some provisos to Section 8 of the erstwhile 1957 Act have been added which can be adumbrated below:
- The Central Government may by notification in the Official Gazette and for the explanations to be recorded in writing, increase the said rate (i.e. 50%) of coal or lignite which may be sold by a government company or corporation.
- The sale of coal shall not be permitted from the coal mines distributed to a company or organization that has been granted a power venture on the premise of a competitive bid for tariff (which includes Ultra Mega Power Projects)
D. Allocation of Mines, Extension, and Lapse of Mining Lease
The recent Amendment Act, 2021 empowers the State Government to decide the period of mining leases including existing mining leases for Government companies or corporations. It also introduces the payment of an additional amount in cases where the State Government extends the time period for a mining lease of Government companies or corporations.5
- Allocation of mines with expired leases to a Government
The newly substituted Section 8B, provides that in cases where the auction process for granting mining lease is not completed or the new lease has been terminated within 1 year of the auction then the State Government can grant a lease for such mine to a Government company. The period of the lease can however be for a period of 10 years or until the selection of a new lessee, whichever is earlier.6
- Lapse and Extension of mining lease
The erstwhile 1957 Act provided that where the mining operation is not commenced by the lessee within 2 years of the grant of a lease or the mining operation has been discontinued for two years, the mining lease shall be deemed to be expired from such period.7 The new legal regime substituted the earlier provisions of Section 4A and with a noteworthy provision stating that the mining lease will not lapse at the end of the said period if a concession is granted by the State Government upon an application by the lessee. It also provides for the extension of the mining lease by declaring that the State Government can extend the threshold period of lapse of the lease only once and up to one year. 8
E. Involvement of Central Government in conducting the auction of mineral concessions.
Under the erstwhile 1957 Act, States were empowered to manage and conduct the auction of mineral concessions except the coal, lignite, and atomic mineral. The new Amendment Act, 2021 brings a sweeping reform by adding a new proviso to sub-section 4 of Section 10B and sub-section 5 of Section 11 to the 1957 Act, which provides that if the State Government fails to conduct the auction of mineral concessions in respect of notified minerals or otherwise, within the stipulated time period fixed by the Central Government in consultation with the State Government, then the Central Government shall step in and conduct the auctions.9
F. District Mineral Foundation
District Mineral Foundation("DMF") was first bought into the picture in 2015, by way of the Mine and Minerals Development Regulation (Amendment) Act, 2015 ("2015 Amendment Act"). DMF is a non-profit body established to work for the interest and benefit of persons and areas affected by mining or mining-related operations. Vide, the said amendment, the State Governments were vested with the responsibility of setting up DMFs in every mining district of the respective States and to prescribe the composition and functioning of DMFs including utilization of the funds.10 The new Amendment Act, 2021 now empowers the Central Government to direct the utilization of the DMF's.11
G. Rights of certain existing concession holders
The 2015 Amendment Act provided that the mines will be leased through an auction process.12 Vide, the said amendment certain rights were bestowed to existing concession holders and the applicants. The holder of reconnaissance permit or prospecting license had the right: (a) to obtain prospecting license or mining lease, and (b) for grant of mining license in cases where the Central Government had given their approval or letter of intent issued by the State Government before the commencement of the 2015 Amendment Act.
The new Amendment Act, 2021 quite valiantly provides that on the date of commencement of this Act, the right to obtain a prospecting license or a mining lease will lapse. To protect the interest of such person(s) whose rights have been lapsed, the Amendment Act, 2021 provides that such person(s) will be reimbursed for any expenditure incurred towards reconnaissance or prospecting operation in such a manner as may be prescribed by the Central Government.13
The amendments made by the Government are a step towards attaining the mineral security of the country. 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 idea behind the amendment is to create employment, to increase the contribution of the mining sector in the GDP of the nation and to 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.
1. Refer Section 7 of Amendment Act 2021.
2. Refer Section 8B of 1957 Act.
3. Refer Section 9 of Amendment Act 2021.
4. Refer Section 7 of Amendment Act 2021.
5. Refer Section 7 of Amendment Act 2021.
6. Refer Section 9 of Amendment Act 2021.
7. Refer Section 4A (4) of 1957 Act.
8. Refer Section 5 of Amendment Act 2021.
9. Refer Section 14 and Section 16 of Amendment Act 2021.
10. Refer Section 9B of 1957 Act.
11. Refer Section 10 of Amendment Act 2021.
12. Refer Section 10A of 1957 Act.
13. Refer Section 13 of Amendment Act 2021
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