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Economy

Cabinet paves way for mining sector reforms to boost employment and curb imports

Updated : January 13, 2021 08:34 PM IST

In a bid to boost employment generation and augment mineral production in India, today the cabinet approved the mines ministry’s proposal to bring reforms via changes in policy and amendment to the mines and minerals development regulation (MMDR) Act and Rules.

The mines ministry aims to auction over 500 mineral mines and is targeting to double mineral production in India in the next 4-5 years period. The idea behind policy reforms is also to save forex outgo which is incurred by way of increased imports of Aluminum and steel products and the aim is ultimately to become an exporter.

The Ministry proposed the removal of section 10A (2b) and 10A (2c) under the MMDR act which hindered the prospect of a mineral auction of over 500 mines. The MMDR Act clause 10A (2c) allowed pre-auction mines to get EC & FC clearances by 2017 and clause 10A (2b) does not have a sunset clause on pre-auction mines for starting operations.

The proposal includes the removal of the distinction between captive and non-captive mines, an incentive for early mineral production for miners by way of 50 percent rebate on revenue share for the quantity produced earlier than the schedule. Provision of penalty is also proposed for not maintaining prescribed production for 3 consecutive quarters, which may lead to termination of mining lease.

The Mines Ministry is also streamlining provision for additional royalty on an extension of mining leases under section 8A of the MMDR act and rules. The amendment to the section will allow states to charge additional royalty in lieu of mining lease extension. This comes at the back of NMDC's Donamalai mine’s lease expiry in Karnataka that led to the long disruption of iron ore mining. This move will ensure there is no such disruption in mineral production future and also bring a level playing field for auctioned and government dispensation allotment of mines to PSUs.

The Mines Ministry will also clarify the controversial 21(5) section under the MMDR act. The amendment will clarify that mining within the mining lease area cannot be illegal under Section 21 (5) of the MMDR Act. In the past, like in the case of Coal India, violation of environment/forest clearance has led to the state government of Odisha to seek fine in the tune of Rs 20,000 crore.

The proposal also allows the transfer of mines with no additional royalty for mining companies. Earlier, the private companies’ transfer of auctioned mineral mines attracted 80% additional royalty provision.

The industry has expressed its concerns on high taxation on mining, a proposal to rationalise stamp duty is likely to be considered by the finance ministry.

The ministry also plans to reallocate mineral mines of Public Sector Undertakings (PSUs) if it fails to bring the mines online in 5 years.

The government also plans to develop the National Mineral Index for the purpose of statutory and auction payments as the Average Sale Price is considered distorted due to various reasons.

The changes to the rules and act of MMDR will be laid in the parliament for amendment before it is made public by the government and it is expected in the upcoming budget session.

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