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Major mining reforms and coal auction on the anvil

Major mining reforms and coal auction on the anvil

Major mining reforms and coal auction on the anvil
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By Anshu Sharma  May 9, 2020 10:35:46 AM IST (Updated)

When Prime Minister Narendra Modi reviewed the mining and coal sector last week, he urged the ministries to focus more on import substitution and value addition for exports.

When Prime Minister Narendra Modi reviewed the mining and coal sector last week, he urged the ministries to focus more on import substitution and value addition for exports.

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Sources privy to the developments told CNBC-TV18 that the ministry of mines is mulling to bring in big-ticket changes to the Mines and Minerals Development Regulation (MMDR) Act to free up over 700 mines for auction. The coal ministry, on the other hand, is looking to begin the much-delayed auction of coal mines for commercial mining, likely in July.
According to various sources in the government, we understand that ministry of mines is planning to delete the 10A 2(b) and 10A 2(c) clause under MMDR Act to free up as many as 700 mines for auction.
Under 10A 2(b), pre-auction regime mines do not have any sunset clause on getting on to the next stage of concession from prospecting license. In the 10A 2(c) clause of the MMDR Act, it allowed pre-auction regime mines to get a mining lease within 2 years from the commencement of the act.
The deletion of the clauses from MMDR will free up over 700 mines, impacting steel majors and others who are at various stages of getting clearances or fighting cases in the court.
The ministry is also of the view to remove the distinction between captive and non-captive mines by amending the MMDR Act. The idea is to not allow states to reserve and auction mines going forward for captive use.
In 2015, MMDR Act was amended to introduce auction of minerals. The companies with captive mines were given an extension for their mining lease up to 2030 with a clause of the right of first refusal if it were to be auction post-mining lease expiry.
Sources suggest the clause on the right of first refusal in the event of an auction of the mining leases expiry will have to be deleted to break the distinction of captive and non-captive mines.
The government also intends to rationalise and review non-captive mines under public sector undertakings (PSUs) which have not been utilised for over 3 years. Over 100 mines are expected to be part of this category which may be put up for auction post review.
The ministry also intends to clarify the clause on illegal mining under MMDR Act, as it has in the past led to a huge penalty on both government and private sector companies. Mining within the lease area in violation of environment and forest clearance and lease conditions will not be comparable to illegal mining.
Sources have also indicated that the ministry of coal is looking at conducting an auction of 81 coal mines in the month of July. Earlier the plan was to begin the process in the month of April but got delayed due to COVID-19 led lockdown.
Apart from these big reforms, the ministry is also looking at ways to avoid double taxation, calibrated payment for stamp duty, and deferment of upfront payment for a certain period to make auctions of minerals attractive.
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