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Mines Bill passed, auction likely in June

Last updated on: March 20, 2015 21:54 IST

Paving the way for auction of iron ore and other mines, Parliament on Friday cleared the Mines and Minerals Bill after days of high drama, as some Opposition parties broke ranks from Congress and Left in Rajya Sabha to support this key reform measure of the government.

States are likely to launch the auction process in June for allocation of mines, having iron ore and other minerals, following the passage of this Bill, which has incorporated amendments suggested by a parliamentary panel, would now replace an Ordinance promulgated in December last.

Finance Minister Arun Jaitley said that the new law would enable "computerised allocation" of the mines, while checking corruption and any discriminatory allocation systems, while Steel and Mines Minister Narendra Singh Tomar said it would bring in a "revolutionary change" in the beleaguered sector.

The estimated revenue proceeds could not be immediately ascertained for the auction, for which states have so far identified over 100 mines, containing as many as 10 minerals like iron ore, bauxite and others, for the first phase. In all, 199 mines have been identified so far.

The Mines and Minerals (Development and Regulation) Amendment Bill, 2015, was passed by the Rajya Sabha earlier in the day with 117 members voting in favour and 69 against it.

Later it was approved by the Lok Sabha within 20 minutes. Industry bodies, including CII, FICCI and Assocham said the new law will bring transparency in auctioning of mines, boost investor sentiment and kick-start industrial growth.

The Bill envisages spending a fixed percentage of revenue generated from mining on the development of the local area.

As per its provisions, there will be no renewal of any mining concession, unlike the original act of 1957. Also, the licence will be for 50 years, as against 30 now, after which there will be no renewal but compulsory auction.

The bill was cleared by the Lok Sabha earlier also but was referred to a Select Committee in Rajya Sabha by a united Opposition. After a day of high drama yesterday, the Bill was cleared by the upper house today as the government agreed to the amendments recommended by Select Committee on March 18.

These amendments provide for existing lease holders to pay 100 per cent of royalty towards district mineral foundation (DMF) while those who will get mines after the new legislation will have to pay up to one-third of the royalty.

"The Mines and Minerals (Development and Regulation) Amendment Bill, 2015, will bring in a revolutionary change in the sector. It will attract more investment, enhance expertise and income of those employed with the sector," Steel and Mines Minister Narendra Singh Tomar told PTI.

While hailing the passage of the Bill, industry body FIMI said higher payment for development for the project affected persons mandated in the Bill would inflate cost of production which would be felt by end-users and the general public alike.

The bill replaces Mines and Minerals (Development and Regulation) Amendment Ordinance, 2015 promulgated on January 12, 2015 and amends the Mines and Minerals (Development and Regulation) Act, 1957.

Tomar said it would help in bringing out the untapped potential of the sector with two per cent of the royalty fixed to be used on exploration activities, he said adding that the auctioning process could likely be started by June.

"Exploration (of minerals) will get a boost. Process will be simplified and investment will come in," he said.

This is the second major reform bill of the Narendra Modi government that has got cleared by Parliament in the Budget session, after the Insurance Laws (Amendment) Bill, seeking to hike FDI in insurance sector, that was passed recently.

Government had earlier promulgated ordinances on insurance coal and mines and minerals. In the upper house all parties, barring Congress and the Left, supported the Mines and Minerals Bill.

The House earlier saw a lot of discussion on a motion moved by P Rajeeve of CPI(M), which sought that the measure be re-sent to the Select Committee as it had not taken the views of all stakeholders including state governments.

This amendment was voted out after a division, with parties like TMC, NCP, SP, BSP, BJD, AIADMK, DMK and JMM, besides allies Shiv Sena and SAD supporting the government.

Some members also pointed out that the bill could fail the legal test and get struck down by courts as it sought to impinge on the rights of states, which were not consulted by the Select Committee looking into the bill.

The Select Committee to which the bill was referred to by the Rajya Sabha brought in one amendment in it and passed it.

"We are already in the process of framing the rules and guidelines for auctioning. We hope to ready them within May. Unlike coal, mines will be auctioned by the states. I think the process can be started by June," Tomar said.

The new law creates a new category of mining license i.e. the prospecting license-cum-mining lease, which is a two stage-concession for the purpose of undertaking prospecting operations (exploring or proving mineral deposits), followed by mining operations.

While the current law provided for a mining lease of a maximum 30 years and a minimum of 20 years, which could be renewed for another 20 years, the Bill provides for a 50 year mining lease. On expiry, instead of being renewed, leases will be put up for auction, as specified in the Act.

The Bill provides that the Centre may reserve particular mines for a specific end use and allow only ligible end users to participate in the auction.

Tomar said the Bill provides for creation of a District Mineral Foundation (DMF) for the welfare of the persons in districts affected by mining related operations. Licensees and lease holders shall pay the DMF an amount not more than one-third of the royalty.

A National Mineral Exploration Trust (NMET) shall also be established by the central government for regional and detailed mine exploration. Licensees and lease holders shall pay the NMET two percent of royalty.

India was once the world's third-largest exporter of iron ore but is importing heavily now after court ordered action against illegal mining. 

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