MoUs cannot supersede MMDR Act: Mines Ministry

The Orissa government which has entered into Memoranda of Understanding (MoU) with as many as 50 players in the steel sector may have to comply with some stringent conditions of the Union mines ministry.

The Union ministry of mines which has prepared draft guidelines for state governments to enter into MoUs with interested parties for enhancing transparency and scientific development of minerals has categorically stated that all existing MoUs should be reviewed every six months in terms of the specified milestones.

The MoUs which have outlived their utility or where there is substantive non-performance of the other party should be scrapped so that there is regular process of weed-out.

On new MoUs, the guidelines say that fresh MoUs should be signed keeping in mind the earlier MoUs of the same nature where the state government is yet to deliver on its part, and also the available natural resources in the state.

Since it is inevitable that with changes in techno-economic environment, fresh MoUs may be necessary from time to time, the MoUs should have sunset clauses with alternative solutions or renegotiation provisions in case the state is unable to deliver within a stipulated period (say five years).

The state governments will also need to enter into supplementary MoUs with existing MoU companies to comply with the guidelines notified by the state governments and while doing so may ensure that the process of entering into supplementary MoUs filters out routine MoUs that may have been entered into earlier.

While these guidelines elaborate the process and procedures, they do not specify the policy and content of the MoUs since they have to be state specific.

According to the guidelines of the Union mines ministry, the MoU cannot be used by a company or person as a legally binding contract to obtain any preference over other competing interests, especially in case of a situation of multiple applicants for obtaining allocation of natural resources.

Moreover, the MoU must fall squarely within the ambit of the declared public policy, and under no circumstances, supersede the Mines & Minerals (Development & Regulation) Act.

The items committed in the MoUs signed by the state government must be in conformity with the declared public State Mineral Policy and must be entered into in a transparent manner, and suitably notified in the state government website.

All individual items of commitment in a MoU must clearly specify the quantum and nature, and the extent of applicability in the specific context. Specific items of commitment could include milestones of achievement and triggers for steps by the other party, captive use and ore linkage terms and conditions, investment size and phasing, value addition of ore, setting up of end-use plant for the minerals, employment for technical staff and local area development to be undertaken.