UNDERMINED

Ordinance to reform the mining sector will do more harm than good

SPresident Pranab OON AFTER Mukherjee signed the ordinance to amend the archaic Mines and Minerals (Development and Regulation) Act of 1957,Union minister for steel and mines, Narendra Singh Tomar, announced it is a revolutionary step towards reviving the country’s mining sector.

His ministry highlighted that the Mines and Minerals (Development and Regulation) Amendment Ordinance, 2015 will address problems that have been plaguing the sector for long.These include granting mineral leases in discretionary, nontransparent and delayed ways, problems in renewal of mining leases, illegal mining activities, reluctance to undertake exploration and investment in the sector, and grievance of the civil society that the mining-affected people are not cared for.

But these problems are not new and ways to address most of them have long been debated by the country’s intelligentsia.This includes the report of the High Level Committee on National Mineral Policy in 2006 by the Planning Commission.In 2011,the then government led by the United Progressive Alliance (upa) introduced a bill to reform mmdr Act,1957 which later lapsed.

So, what was the urgency behind introducing an ordinance? Is it to reform the sector, as highlighted by the mines ministry, or to give an impetus to the mining sector, by expediting and expanding mining leases?The ministry has several times acknowledged that delays in granting mining leases has been a major factor for “significant reduction in the output of the mining sector”.Sources say the Prime Minister’s Office has already announced a deadline of March 10 to begin the first phase of auctioning of non-coal mines.

Auction is the buzzword

The ordinance introduces a provision to grant all mineral concessions through auctioning. However, auctioning is hardly a one-sizefits-all solution.

It is the best way to allocate mineral concessions where mineral deposits can be accurately established and a proper valuation can be done. This will help the leaseholder capture the windfall profits as well as bring in transparency in the allocation process. However,in cases where mineral deposits are not properly established,auctioning can lead to problems like undervaluation of minerals, leading to lower revenue generation for the government, or overvaluation, resulting in the inability of the concession holder to meet commitments. This will lead to uncertainties in case of prospecting-cummining leases.

If auctioning has to be done for prospecting-cum-mining leases, it can only be done for bulk minerals, such as iron ore,