Steel ministry for key changes in mining Bill

Against auctions for concessions, wants PSU reservation to stay and Centre?s veto on mining rights to remain

The Supreme Court might have made a case for auctioning of natural resources, but voices within the government do not seem in conformity with the apex court directive.

The Union steel ministry has raised serious objections over the auctioning route proposed as the key reform measure in the new mining legislation. The Bill is being examined by a standing committee of Parliament.

The steel ministry has opposed auctioning of mineral concessions, doing away with public sector undertaking (PSU) reservation and eliminating prior approval of the central government for according mining rights. The ministry’s objections carry weight as it monitors output in a sector that consumes a major chunk of the country’s mineral output.

“The ministry, in its submission to the standing committee, has raised objections over the clause proposing competitive bidding for mineral concessions in the mining Bill. The ministry is worried that even mines allocated to central PSUs would be auctioned once their current leases expire,” an official familiar with the development told Business Standard.

The Mines and Minerals Development and Regulation (MMDR) Bill, 2011, states that state governments, the owners of the minerals, would conduct bidding for grant of Prospecting Licence (PL) and Mining Lease (ML) for areas where the value of mineralisation is known. However, for the initial two stages of granting a Reconnaisance Licence and Large Area Prospecting Licence, a first-come, first-served method is proposed.

A 10-member Group of Ministers (GoM) headed by finance minister Pranab Mukherjee had approved the Bill in July last year. The cabinet had approved the draft in September, after which it was tabled in Parliament and later sent to the committee.

The ministry is also miffed at the Bill’s proposal to end the reservations currently available for PSUs in allocation of mines. The proposal is aimed at creating equal opportunities for the private sector to compete with state-owned companies in grant of concessions and to push private investment in mining. Owning a captive mine allows PSUs to get the ore at transfer price, much less than the market price. India produces 1,123 million tonnes of minerals worth Rs 2 lakh crore annually and PSUs account for about three-fourth of this production.

The other provision of the Bill that has not gone down well with the ministry is the proposal to lift the Centre’s power to approve the award of concessions for critical minerals, including iron ore. Currently, state governments award concessions for all minerals, except for some major minerals like iron ore, limestone and chrome and minerals of strategic importance like uranium, where the Centre’s prior approval is mandatory. The government has removed the provision from the new legislation, saying it is inconsistent with the idea of auctioning. The steel ministry argues the proposal would trigger serious trouble for the mining sector, as mineral-rich states would then be free to grant concessions on their own.