Removal of certain section of Mining Act may lead to irreparable loss of investors’ confidence: FIMI

Miners’ body FIMI on Sunday said that the removal of certain section of Mining Act, which will pave way for auctioning of more than 500 blocks, is bound to lead to irreparable loss of investors’ confidence in country’s mineral sector, apart from multiple litigations in courts.

“Had this Section 10A(2)(b) not been repealed, there would have been additional job creation through these saved 500 concessions,” the Federation of Indian Mineral Industries (FIMI) Secretary General, R K Sharma, said.

On conservative basis taking an average of 100 employees per mine in the initial stage for 500 mines, there will be an employment generation of 50,000 jobs directly. Since the ratio of direct to indirect employment in mining sector is 1:10, the total employment generation will be 5.5 lakh jobs — 50,000 direct and five lakh indirect.

Under Section 10A (2)(b), reconnaissance permit (RP) or prospecting licence (PL) were issued to the mineral blocks but mining leases (MLs) were not granted.

“The annulling of Section 10A(2)(b) will send a wrong signal to both domestic and international investors about consistency in India’s mineral policy particularly during the current crisis period when the country is vying desperately for enhancing investment in mineral sector,” he said.

FIMI said it is claimed that one of the major reforms is repealing of Section 10A(2)(b) thereby claiming to make more than 500 mineral blocks available for auction.

While amending the Mines and Minerals (Development and Regulation) Act, 1957 in 2015, the government acknowledged the valuable contribution made by Reconnaissance Permit (RP)/ Prospecting License (PL) holders by introducing Section 10A(2)(b).

This section provided safeguard to the concessionaires for their rights of mining the deposit thereby guaranteeing the vested rights to such concessionaires.

“Action on the part of the government to remove Section 10A(2)(b) from the Act and offering such blocks for auction is against natural justice and will have far reaching adverse implications on the growth of the domestic mineral sector besides tarnishing the image of the country in the international arena,” FIMI said.

There are three kinds of mineral concessions — reconnaissance permit, prospecting licence and mining lease. Reconnaissance permit is granted for preliminary prospecting of a mineral through regional, aerial, geophysical or geochemical surveys and geological mapping.

Prospecting licence is granted for undertaking operations for the purpose of exploring, locating or proving mineral deposit. A prospecting license holder has preferential right to obtain mining lease in the area concerned. A mining lease is granted for undertaking operations for winning any mineral.

The cancellation of saved cases under Section 10A(2)(b) implies that government of India has faltered on its Act and is bound to lead to irreparable loss of investors’ confidence in Indian mineral sector, apart from multiple litigations in courts resulting in such an exercise of the government being rendered completely futile.

The annulling of section 10A(2)(b) will also deprive the adoption of state-of-the-art technology required in exploration and mining sector besides impeding much needed FDI.

The recent experience of auctioning of coal blocks for commercial mining is a testimony where none of the international mining company evinced interest to participate despite best efforts of the government to attract FDI in coal sector.

Since January, 2015 when the auction regime for mineral blocks was introduced, so far 103 blocks have been auctioned out of 154 offered for sale.

Out of these 61 are greenfield blocks and balance 42 are brownfield auctioned mines which were already operative.

It is a matter of great despair that even after a lapse of more than five years not even a single Greenfield ML block has come to a stage of mine development/production.

Similarly, in case of PL-cum-ML only in one case prospecting licence has been granted out of these 9 auctioned.

“Based on the bitter experience gained so far with respect to development of the auctioned blocks, it is implied that out of the proposed 500 mineral blocks as would be available consequent upon repealing of Section 10A(2)(b), not more than 50 blocks would be in position to be offered for auction for grant of PL/ML with the stipulated G3/G2 level of exploration,” FIMI said.

Moreover, such 50 blocks can only come in fruition in terms of production only after five to seven years. Balance 450 blocks may take another two to three years for their offering for auction and seven to ten years to come into operations.

Recently, the Cabinet approved a proposal for changes to the mining and mineral law, a move that may increase local production and bring more blocks into auctions, according to sources.

These changes will be implemented through an amendment to the Mines and Mineral (Development and Regulation) Act, 1957 for which a bill will be placed in Parliament in the upcoming session, a highly placed source said.