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Is Modi Government Planning on Selling State Govt. Owned Mineral Resources to Corporates?

Ayaskant Das |
A draft notification by the Ministry of Mines says mineral blocks not auctioned by state governments can be auctioned by the Centre.
minera resource.

New Delhi: In an attempt apparently aimed at helping corporate houses appropriate a greater pie of natural resources of the country, the Modi government has proposed a law whereby the Centre can auction mineral blocks that belong exclusively to states. On February 9, the Union Ministry of Mines had issued a draft notification proposing a series of mining reforms, including the transfer of rights to auction mineral blocks to the Central Government.

The Mines and Minerals (Development & Regulation) Act, 1957 will be amended to “provide the power to central government to conduct auction (of mineral blocks) in cases where the State governments face challenges in conduct of auction or fail to conduct auction”. Among other reforms, the government has proposed to allow commercial trading of up to 50% of coal extracted from blocks allocated exclusively for captive mining. The Centre has also sought to do away completely with the mandatory requirement to conduct fresh assessments and obtain new clearances whenever successful new bidders take over mineral blocks from old leaseholders.

Even though the draft notification makes it amply clear that all proceeds from auctions of mineral blocks by the Centre will fully accrue to respective state governments, it is being claimed that the proposed legislation undermines the federal structure of the country: state governments not only own minerals (except coal and uranium) but are also fully empowered to decide when and how to utilise those resources.

Experts have questioned the intention of the Central Government in bearing the costs and rigours of the auction process if all proceeds will ultimately accrue to state governments. “State governments are trustees of mineral resources. They can use the power at their disposal to auction mineral blocks in accordance with their own needs,” said senior Supreme Court lawyer Sanjay Parikh.

The ministry has justified its proposal to take over the power of auctioning all blocks on the grounds that state governments have displayed tardiness in selling minerals. The notification stated that Central Government exploration agencies have – since the year 2015 – handed over geological reports for 143 mineral blocks which are ready for auction to various state governments.

However, only seven blocks from this list have been auctioned so far. The draft notification also stated that leases of 334 mineral blocks, out of which 46 were working mines, expired in March 2020. However, despite repeated prodding by the Centre, only 28 of those blocks had been auctioned by the states so far, it said. The idea to auction a greater number of blocks on a regular basis has been justified on the basis of the assumption that this will ensure continuous supply of minerals in the country. It has further been reasoned that a delay in conduct of auctions has a substantial impact on the availability and prices of minerals.

“Where will the concept of inter-generational equity go if all mineral resources are auctioned together? Mineral resources have to be extracted in a very reasonable manner in accordance with our requirements. Otherwise it will lead to zero balance of resources for future generations. In the past there have been instances of fake letterhead companies buying over coal blocks even if those firms had no involvement in manufacturing activities of any nature. Immediate and wholesale auction of mineral blocks will result in precious natural resources going under the control of only those corporate houses who not only have very deep pockets at the moment but also have the power to compete for bids. There will be manifold adverse impacts on the local environment too if, by any imagination, all mineral blocks are subjected to extraction at the same time,” Parikh told Newsclick.

It has been speculated that any attempt by the Centre to take over powers of state governments, as far as ownership and management of mineral resources are concerned, will be vehemently opposed. In the wake of an attempt by the Central Government to undermine federalism, which forms a basic structure of the Constitution of India, it is likely that state governments would challenge the amendment in court, thereby resulting in a complete derailment of the mineral block auction process. On the other hand, an alternative exists for the Centre in the form of extending assistance to states for conducting e-auctions, which is a faster and cost-effective process if at all there exists the need to sell more mineral resources.

In the proposed amendment to the Act, a provision has also been made to allow leaseholders of captive mines to sell up to 50% of minerals extracted in any particular year, after meeting end-use requirements, provided that an additional royalty, as prescribed by the Central Government, is paid. In continuation of this provision, captive coal block leaseholders will now be able to use 50% of extracted minerals for commercial trading. This proposal has been justified by the Centre on the assumption that it will reduce the import bill of coal and help bridge India’s trade deficit.

“There are numerous thermal power plants in India that have been designed to operate only with imported coal. Many plants are strategically located along the country’s coastline for easy availability of imported coal through the sea route. These plants can never switch to domestic coal. Further, there is no reason why the government should charge additional royalty for coal (or any other mineral) that is commercially traded after meeting end-use requirements. It will lead to an artificial increase in the cost of minerals and the burden of additional royalty will ultimately be transferred to the consumer. This goes against the spirit of Atmanirbhar Bharat. If at all, the government should withdraw all captive conditions from upon existing leaseholders,” said R.K. Sachdeva, former advisor (Coal) to the Government of India.

In March last year, soon after a total lockdown was imposed across the country on account of COVID-19, the Central Government had issued a notification giving a two-year holiday for new mining leaseholders wherein they could continue extracting minerals on the basis of old clearances provided they obtained new clearances by the year 2022.

The new draft notification proposes to completely do away with the requirement of obtaining new clearances: the old set of clearances can be used by new leaseholders till all resources are exhausted in the mineral block. It stated that new leaseholders are “facing difficulties” in obtaining fresh clearances which not only happens to be a “lengthy process” but is also “time consuming”.

“The proposal that no fresh clearances are required for new leaseholders is pro-industry and pro-development. Any break in mining operations for the sake of new clearances would have led to a discontinuity in business. Mine operators would have had to begin the entire exercise afresh after getting new clearances. It would have become difficult for mine operators to find ore again,” added Sachdeva.

Sections of the industry have welcomed the move to continue extraction on the basis of old clearances even though those pertaining to environment and forests are not within the domain of the mines ministry.

“An environmental clearance, once granted, is valid irrespective of change of ownership of a mine. But consent for establishment and operations have limited validity and need to be renewed periodically. These cannot be bypassed. Further, any mining plan approved by the Indian Bureau of Mines does not come with a lifelong validity. It has to be reviewed every five years. Each project proponent has to submit mining plans for the next 20 years, including a closure plan. The Indian Bureau of Mines reserves the right to revoke a prior approval in the event of deviations from the original plan,” said Rebbapragada Ravi of mines, minerals & PEOPLE, an alliance of individuals, institutions and communities affected by mining.

Questions have also been raised about the issue of the safety of workers engaged in mining activities while allowing continuous extraction on the basis of old clearances. Shouldn’t safety standards be reviewed periodically as leaseholders dig deeper into the earth to extract minerals? The Directorate of Mines Safety reserves the right to cancel operations in the event of safety norms not being followed properly or being violated intentionally.

Further, there exist a certain set of mining clearances that are granted by state governments including handing over of the lease itself, through agreement, by the respective Directorate of Mines & Geology.

“If there is any change in ownership, the new leaseholder has to sign a fresh agreement with new terms and conditions. This includes the amount of royalty and also the issue of mining permits at regular intervals. Any extension of mining lease or change in ownership has also to be done through issue of government order by the concerned department which cannot by bypassed,” added Ravi.

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