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Thursday, April 22, 2021

New deal for coal/mineral auctions: what does MMDR Amendment Bill, 2021 entail?

Coal and Mines Minister Prahlad Joshi has introduced the Mines and Minerals (Development and Regulation) Amendment Bill, 2021 in Lok Sabha. What are the key changes?

Written by Karunjit Singh , Edited by Explained Desk | New Delhi |
March 18, 2021 10:07:00 am
Union Minister Pralhad Joshi speaks in Lok Sabha during the second part of the Budget Session of Parliament, in New Delhi, Monday, March 8, 2021. (LSTV/PTI Photo)

Coal and Mines Minister Prahlad Joshi has introduced the Mines and Minerals (Development and Regulation) Amendment Bill, 2021 in Lok Sabha to streamline the renewal of the auction process for minerals and coal mining rights.

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What are the key changes?

The amendment proposes to allow captive miners of both coal and other minerals to sell up to 50 per cent of their production after meeting the requirements of the end-use plant and on paying additional royalty to the state government. Operators are currently only allowed to use coal and minerals extracted from captive mines for their own industrial use. Experts note that this increased flexibility would allow miners to maximise output from captive mines as they would be able to sell output in excess of their own requirements.

The amendment also proposes to fix additional royalty payments to states for the extension of mining leases for central public sector enterprises. Disagreements over the additional royalty to be paid by state-owned NMDC to the Karnataka government for the extension of mining rights at the Donimalai mine had led to NMDC suspending operations at the mine for over two years. NMDC recently resumed operations after an interim agreement on the additional royalty to be paid to the Karnataka government.

Experts noted that state governments may object to the fixing of an additional royalty to be paid by CPSEs for such extensions as this may lead to lower revenues compared to a transparent auction process.

Another key change the Bill proposes is to empower the central government to conduct auctions or re-auction processes for the grant of a mining lease if a state government fails to complete the auction process in a specified period, decided after consultations between the Centre and state. Experts noted that industry players may welcome the move as it would likely lead to greater transparency in the auction process as there is a perception that state governments may in some cases prefer some bidders, and try to delay or cancel mining rights if their preferred bidders do not win mining rights.

Could the amendment face legal challenges?

Experts said the amendment, if passed, was likely to face legal challenges particularly from state governments where the BJP and its allies are not in power.

“If an act is passed in which any state government’s discretionary power is taken away or their rights or benefits are infringed, it is likely to be challenged in the Supreme Court, especially in the case of state governments where there is an Opposition party in power,” said Deepak Thakur, partner at law firm L&L partners.

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