Indian Mining Law: A Critical Review (Part-I)

Introduction

This article shall critically analyse the legal framework for mining in India. First, it shall provide a brief overview of the industry and its legal framework. Secondly, it shall establish that the set of amendments made in the law in the recent period (between 2015 and 2021), in prioritizing the promotion of ease of doing business, fails to adequately address problems regarding sustainability in the industry. Thirdly, using the concepts of mineral tenure security and the ‘social license to operate’, it shall offer a theoretical argument for why the accomplishment of the two aforesaid policy objectives need not be viewed as requiring a trade-off, given the nature of the Indian mining industry. Fourthly, it shall propose a change that may be made in the law for enhancing its ability to ensure sustainability in the sector. Finally, it shall present its conclusions.

Industry Overview

Identified as one of the core sectors of the Indian economy, the mining and quarrying sector contributed 1.63% of the Indian Gross Value Added (GVA) in the financial year 2020-21.[1] Ranking fifth worldwide in terms of total volume of mineral production[2] and seventh in terms of value of production,[3] India is also the world’s second largest coal and crude steel producer.[4] It produces 95 minerals,[5] many of which provide raw materials to downstream industries including power generation, infrastructure, and a range of manufacturing activities such as automobiles, cement and chemicals.[6] In 2020-21, the number of reporting mines in the country was 1332,[7] and the industry is characterized mainly by a large number of small operational mines.[8]

Legislative Framework

The Indian Constitution vests in the Central Government the power to regulate mines and mineral development, to the extent that the Parliament considers the same to be ‘expedient in the public interest’.[9] In exercise of these powers, the Mines and Minerals (Development and Regulation) Act, 1957 was enacted.[10] This Act, along with the rules framed under it, constitutes the backbone of the legislative framework on mines in India. It confers on the State Governments the power to make rules for granting mineral concessions in regard to minor minerals,[11] and similar powers to the Central Government in respect of other minerals.[12]

Four provisions of the MMDR Act may be noted as significant. First, it provides for 4 types of mineral concessions- reconnaissance permits, prospecting licenses, mining leases, and composite licenses, which are ‘two-stage concessions’ directly allowing mining operations to be conducted after prospecting operations are complete.[13] Secondly, it allows the Central and State Governments to prematurely terminate a prospecting license or mining lease on grounds that this would be ‘expedient in the interest of’, inter alia, ‘preservation of natural environment’, ‘avoiding danger to public health’, and ‘prevention of pollution’.[14]

Thirdly, the Act provides for certain restrictions on the grant of mineral concessions, including eligibility criteria for the prospective concession holder,[15] as well as the maximum area[16] and duration[17] for which the concession may be granted.[18] Fourthly, it bestows the Central Government with the duty to take all necessary steps to ensure conservation and development of minerals in the country, as also to prevent related environmental damage, by making rules[19] and issuing directions[20] for the same.

Recent Amendments and Policy Objectives

It has been argued that post the liberalization of the Indian economy in the 1990s, the country’s legal framework on mining has witnessed a shift paralleled across the developing world-[21] that is, a re-orientation aimed at attracting greater private investment in the sector.[22]

In particular, the amendments made to the Indian mining law from 2015 to 2021 (demonstrated in the subsequent paragraphs), reflect a clear prioritization of precisely this objective,[23] despite the existence of multiple, and complex, concerns afflicting the mining sector-[24] which include, though are not limited to, sustainability, rights of local communities, working conditions and the proliferation of illegal mining.[25]

These amendments were brought in by the Central Government, noting the decline in production in the industry in the immediately preceding period.[26] In 2015, an amendment to the MMDR Act mandated auctions for allocation of mineral concessions, for improving transparency in the process.[27] In 2016, an amendment was made to allow for transfer of captive mining leases obtained other than through auction, for the purpose of easing ‘legitimate business transactions’ involving these leases.[28] In 2020, the Act was amended to allow for ‘seamless transfer’ of all ‘valid rights, approvals [and] clearances’ in respect of a mining lease, for a 2-year period from a prior lessee to a new lessee.[29]

Finally, among the changes made in 2021, this article highlights three as significant- first, it provided that no mine would be reserved for a particular end use;[30] secondly, that captive mines may sell up to 50% of their annual mineral produce in the market, after meeting their own requirements;[31] thirdly, that the statutory clearances transferred to new lessees under the aforementioned 2020 amendment would be valid not for 2 years, but for the entire lease period of the new lessee.[32]

The purposes behind this set of amendments, as stated by the Government across policy documents,[33] has been to facilitate the ease of doing business,[34] along with the related aims of increasing employment and investment in the sector, maintaining continuity in mining operations following change of lessee, and increasing the pace of exploration and auction of mineral resources.[35] A review of industry reports released prior to 2015[36] reveals an addressing of the concerns in these amendments, and appreciation of these amendments by stakeholders from concerned business groups has been noted.[37]

Yet, this privileging of industrial interests, as this article argues, causes these amendments to fall short in addressing other concerns existing in the mining sector. One prominent area where they fall short in at least two ways is that of sustainability concerns- first, they fail to make any mention of sustainability concerns raised in judicial decisions[38] and government reports[39] alike before their enactment. Going further, their emphasis on seamless transfer of clearances and expansion of investment and production has been argued to be directly antithetical to the concerns of sustainability.[40] For instance, it has been contended that automatic transfer of clearances to new lessees after expiry of a lease, while fostering continuity in mining operations, can be harmful for the environment if this is done without examining the environmental impacts after one cycle of mining.[41]

A Conceptual Framework for Reconciling Divergent Interests in Mining Law

This divergence of interests- governmental interest in attracting private investment on the one hand and environmental concerns on the other- is not unusual to India.[42] Invoking two concepts prominent in scholarship on mining laws, this article shall offer a solution to this dilemma, later using the conceptual basis so evolved to argue for certain sustainability-enabling provisions to be inserted into the Indian law.

Mineral Tenure Security as a Policy Objective

It has been empirically shown that one of the most important investor considerations in the mining industry is that of security of mineral tenure- owing to the many risks deriving from, for instance, the uncertainties of discovery involved in reconnaissance and prospecting operations, and volatility in the mineral market even after mining is complete.[43] As a result, providing such security has been a primary concern in the ‘wave of reform’ in mining laws in several developing countries, which, like India, seek to encourage private investment in the sector.[44]

Traditionally, the notion of security of tenure has been equated with a ‘right to mine’- that is, as a ‘reasonable legal entitlement’ to the right to extract minerals after a ‘successful completion of the exploration phase.[45] More recently, however, the understanding of the concept has tended to broaden in view of newer uncertainties in the industry (for instance, those created by environmental legislation).[46] Termed as the ‘modern concept of security of tenure’, it is concerned with the stability of rights not only in the transition between discovery and mining, but the ‘entire duration of the productive life of a mine’.[47]

That the guarantee of mineral tenure security is a priority for the Indian Government is clear in its National Mineral Policy 2019, which supports the idea of a right of first refusal to holders of reconnaissance permits at the time of auction of prospecting license, and to holders of prospecting licenses at the time of auction of mining leases, for promoting ‘seamless transition from reconnaissance permit to prospecting license to mining leases’.[48] Further, the MMDR Act as it stands offers a right of first refusal to a captive mining lease holder at the time of auction of the mining lease on its expiry.[49] It also, as noted earlier, provides for ‘seamless transfer’ of up to 23 clearances from exiting lessee to new lessee.[50] Both of these provisions enhance the degree to which the law offers stability and continuity in the activities of the investor in the sector.[51] Additionally, the Act clearly provides a limited set of grounds on which a mineral concession may be terminated, which are tied to ‘public interest’ and efficiency’.[52]

  1. Government of India Ministry of Mines, Annual Report 2021-22 (2022) 5.

  2. International Organizing Committee for the World Mining Congresses, World Mining Data 2020-21 (Vienna 2021) 46.

  3. Ibid 49.

  4. Ministry of Mines, Annual Report (n 1) 26.

  5. Ibid 23.

  6. McKinsey and Company, Putting India on the Growth Path: Unlocking the Mining Potential (December 2014) 11.

  7. Ministry of Mines, Annual Report (n 1) 25. This figure excludes mines for atomic, fuel and minor minerals.

  8. Ibid 15.

  9. The Constitution of India 1950 Seventh Schedule List 1 Entry 54.

  10. The Mines and Minerals (Development and Regulation) Act 1957 (hereinafter, ‘MMDR Act’).

  11. MMDR Act (n 10) Section 15.

  12. MMDR Act (n 10) Section 13.

  13. MMDR Act (n 10) Section 3.

  14. MMDR Act (n 10) Section 4A.

  15. MMDR Act (n 10) Section 5.

  16. MMDR Act (n 10) Section 6.

  17. MMDR Act (n 10) Sections 7 and 8.

  18. MMDR Act (n 10) Section 6.

  19. MMDR Act (n 10) Section 18.

  20. MMDR Act (n 10) Section 20A.

  21. Ana Bastida, ‘Mining Law in the Context of Development: An Overview’ in Speed P (ed), International Competition for Resources: The Role of law, the State, and of Markets (Dundee University Press 2008) 112.

  22. Pradeep Mehta, The Indian Mining Sector: Effects on the Environment and FDI Inflows (OECD Conference on Foreign Direct Investment and the Environment 2002) 6.

  23. Editorial, ‘The Common Good has a Price’ (2021) 56 Economic and Political Weekly 14.

  24. Nathalie Monteiro, Ana Bezerra, Jose Neto and Elaine Silva, ‘Mining Law: In Search of Sustainable Mining’ (2021) 13 Sustainability 867 2 3.

  25. Indian Chamber of Commerce and CUTS International, Sustainable Mining in India- Overview of Legal and Regulatory Framework, Technologies and Best Process Practices (2019) 7 8.

  26. Government of India Ministry of Mines, Amendments in the Mines and Minerals (Development and Regulation) Act 1957 (2015- 2021): A Big Boost to Mineral Production and Employment Generation (2021) 1.

  27. The Mines and Minerals (Development and Regulation) Amendment Act 2015 Section 10B.

  28. The Mines and Minerals (Development and Regulation) Amendment Act 2016 Section 3.

  29. The Mines and Minerals (Development and Regulation) Amendment Act 2016 Section 5.

  30. The Mineral (Auction) Second Amendment Rules 2015 Section 3.

  31. The Mines and Minerals (Development and Regulation) Amendment Act 2021 Sections 7 and 8.

  32. The Mines and Minerals (Development and Regulation) Amendment Act 2021 Section 9.

  33. Examples include the Statement of Objects and Reasons in The Mines and Minerals (Development and Regulation) Amendment Bill 2021, Ministry of Mines, Amendments in the MMDR Act (n 26) 3 and Ministry of Mines, Annual Report 2021-22 (n 1) 6.

  34. Ministry of Mines, Amendments in the MMDR Act (n 26) 3 and 11.

  35. The Mines and Minerals (Development and Regulation) Amendment Bill 2021 Statement of Objects and Reasons.

  36. For instance, McKinsey and Company, Putting India on the Growth Path (n 6) 13, which notes ‘long lease time for mining lease procedures’ as one of the impediments in the growth of the Indian mining sector.

  37. Ministry of Mines, Amendments in the MMDR Act (n 26) 21.

  38. For instance, Deepak Kumar and Others v State of Haryana & Others (2012) 4 SCC 629 and MC Mehta v Union of India AIR 2004 SC 4016.

  39. For instance, Government of India Planning Commission, Sustainable Development: Emerging Issues in India’s Minin Sector (May 2012) 8 9.

  40. Editorial, ‘The Common Good has a Price’ (n 23).

  41. Ibid.

  42. Bastida (n 21) 116.

  43. Elizabeth Bastida, ‘A Review of the Concept of Security of Mineral Tenure: Issues and Challenges’ (2001) 19 Journal of Energy and Natural Resources Law Security 1 32 36.

  44. Ibid 31.

  45. Ibid 35.

  46. Ibid 42.

  47. Ibid 37.

  48. Government of India Ministry of Mines, National Mineral Policy 2019 (2019) 3.

  49. MMDR Act (n 10) Section 8A.

  50. MMDR Act (n 10) Section 8B.

  51. MMDR Act (n 10) Section 8B.

  52. MMDR Act (n 10) Section 4A.

(This article is written by This post has been authored by Niharika Mukherjee, a third-year law student at NLSIU, Bangalore.) 

CITE AS: Niharika MukherjeeIndian Mining Law: A Critical Review’ (The Contemporary Law Forum, 19 August 2022) <https://tclf.in/2022/08/19/indian-mining-law-a-critical-review-part-i/> date of access. 

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