The Centre recently passed the Mineral Laws (Amendment) Act 2020 (“Amendment Act”) which allows companies that do not possess any prior coal mining experience to engage in mining projects, as well as those that are not ‘engaged in specified end use'. The Amendment Act further provides that a successful bidder (i.e. the new lessees) of the mining leases expiring under the provisions of sub-section (5) and (6) of Section 8A of Mines and Minerals (Development & Regulation) Amendment Act, 2015, shall be deemed to have acquired all valid rights, approvals, clearances, licenses and like vested with the previous lessee for a period of two years. The Amendment Act also provides that it will be lawful for the new lessee to continue mining operations on the land, in which mining operations were carried out by the previous lessee, for a period of two years from the date of commencement of new lease on the same terms and conditions which were stipulated in the approval provided to the previous lessee.

The Ministry of Environment, Forests and Climate Change (“MoEF&CC”) inorder to align the provisions of the guidelines passed under the Forest (Conservation) Act, 1980 (“FC Act, 1980”) to the provisions of the Amendment Act, amended the guidelines on 31 March, 2020. The changes have been brought about in para 7.3(vi) which specifically deals with the validity of forest clearances for mining of minor minerals. As per the earlier amendment, existing period of validity of forest clearance was co-terminus with the period of mining lease and was deemed extended under the Rules made under section 15 of the Mines and Minerals (Development & Regulation) Act, 1957 subject to the certain conditions.

Further it was required that the new lessee, after obtaining Letter of Intent (“LoI”), has to obtain a clearance under the FC Act 1980 for the rest of the mining lease period beyond initial two years during which it is deemed to have acquired rights to undertake mining operation. The failure to obtain such clearance might attract punitive action including restriction from carrying out any further mining activities.

This buffer period provided to the new lessee has been a welcome step as obtaining various regulatory approvals is seen as a major bottleneck by companies in energy resources mining and exploration. In the recent past contractors have surrendered or relinquished the areas awarded to undertake mining activities, due to the delay in obtaining such clearances or at times approvals even being denied.

The recent amendment to the guidelines also provide that while obtaining approval under the provisions of FC Act 1980 the new lessee has to pay the Net Present Value (“NPV”) for the total forest area located within the mining lease, along with any other amount due as per the guidelines issued by Government of India from time to time. However, on the date of issuance of LoI, the state government shall realize a lump sum amount at the rate of INR 0.75 million per hectare (for the total forest area within the mining lease) from the new LoI holder which would be deposited into the account meant for Compensatory Afforestation Fund Management and Planning Authority (“CAMPA”). Such amount will be adjusted against the actual compensatory levies payable on the forest land, at the time of approval of the forest clearance.

Due to the ongoing pandemic a further clarification was issued on 9 August, 2020 by MoEF&CC with respect to the annualization of NPV which may not be feasible as it involves techno-economic analysis of various parameters used for NPV calculation. However it was concluded that lump sum payment of NPV can be made by the user agency up to 31st March, 2021 or within two months from the time COVID pandemic ends, whichever is earlier. It was clarified that this exemption shall be made with the condition that the user agency at the time of making of NPV payments shall pay interest at the rate of 12% per annum on delayed payment of NPV i.e. from the date of issuance of LoI  by the State Government.

In light of the above developments, on 11 October 2020 the MoEF&CC in its circular to Secretary, Ministry of Mines, Government of India and Principal Secretary (Forests) in all states and union territories highlighted that even after a lapse of six months' time no proposal for grant of approval under FC Act 1980 has been submitted by any of the concerned states, thereby defeating the very spirit and purpose of the guidelines dated 31 March, 2020, read with the guidelines dated 9 August, 2020 issued by the MoEF&CC in this regard. The Assistant Inspector General of Forests, MoEF&CC has therefore requested the Ministry of Mines, Government of India and State Governments/Union territory Administrations to direct the concerned lessees to obtain prior approval of the Central Government under the FC Act, 1980 within the stipulated time failing which mining operation will be stopped till such time when the prior approval under the FC Act, 1980 is obtained by the concerned states and union territories.  

The MoEF&CC has been working out ways by which the delays are brought down and also deliberating upon ideas to have a pre-embedded contract where all approvals are in place before awarding the mining leases. Since the idea has now been put to paper with the Amendment Act coupled with the guidelines issued by the MoEF&CC from time to time, it would be interesting to see if such initiatives by the Government to streamline clearances and approvals prevent the delays.  

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