Mint Explainer: How the mining legislations open up assets for private sector

Jul 19, 2023

New Delhi: Parliament this week passed two crucial pieces of legislation that will unlock enormous mining prospects for the private sector. One of these legislations will allow the extraction of critical minerals, including lithium, a key component in the manufacture of batteries for electric vehicles. The second will authorize the extraction of minerals from the expansive coastal regions of the country. Mint delves into these two transformative bills that will increase the scale and scope of mineral exploration and production.

The OAMDR Act, 2002 came into force in 2010. However, no mining activity has been undertaken in the offshore areas till date. Hence, the Central government brought the amendment Bill to bring several reforms in the offshore mining sector. The proposed amendment in the Act will bring major reform by introducing auction as the method of allocation of operating rights in offshore areas.

The offshore areas will be granted to the public and private sector for a period of 50 years. The rights to mine atomic minerals will, however, go to companies in the public sector.

An Offshore Areas Mineral Trust has also been created to ensure availability of funds for exploration, mitigation of adverse impact of offshore mining, disaster relief, research, interest and benefit of the persons affected by exploration or production operations, etc. This will be funded by an additional levy on the production of minerals, not exceeding one third of the royalty. The exact rate of additional levy will be prescribed by the Central Government.

Also, the proceeds of the mining in offshore areas will go to the Central government.

The Mines and Minerals (Development and Regulation) Amendment Bill, 2023 for making amendments to the Mines and Minerals (Development and Regulation) Act, 1957.

This amendment gives the central government powers to auction mineral reserves, including the critical mineral reserves that are key to India’s self-reliance in making the energy transition to greener cars like electric vehicles, which are powered by batteries that have lithium in them. The auction of many such mines is stuck due to state governments not going ahead with it. With the new amendment, the state government to announce the auctions soon.

The second key benefit of the amendment is the opening of the exploration of mines to the private sector. The exploration of mines has been restricted to the government sector and that is one of the reasons behind India’s ranking low in terms of exploration of minerals.

This amendment will create an environment, where junior mining companies will thrive and explore India’s mineral potential. These mining companies will be funded through a revenue share mechanism once mining starts.

First, the central government is set to start auctioning about 90 mines of critical minerals, including lithium, which have not been auctioned by the states for the past four years. Out of 107 mining opportunities presented to the states over this period, only 19 have been auctioned, leaving 88 mines for the central government to promptly put up for auction.

Second, this will allow exploration by the private sector and help create a cohort of junior mining companies.

The offshore act will throw open a range of mining opportunities for the private sector. The opportunities include about 1,53,996 million tonnes of lime mud, 745 million tonnes of construction-grade sand and 79 million tons of heavy mineral placers, phosphorite in the eastern and western continental margins and polymetallic ferromanganese nodules and crusts in Andaman Sea and Lakshadweep Sea.