How Mines and Mineral Bill 2023 clears roadblocks for private investment

With the node, the country is set to see an influx of private capital and technology for improved exploration and production of critical and deep-seated minerals

In a bid to attract private sector investment in the exploration of critical and deep-seated minerals in the country, the Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2023, on August 2.

The Bill amends the Mines and Minerals (Development and Regulation) Act, 1957, allowing for private participation in the exploration and mining of 29 minerals that include gold, silver, copper, cobalt, nickel, lead, potash, rock phosphate, beryllium, and lithium, among others.

With this nod, the country is set to see an influx of private capital and technology for improved exploration and production of critical and deep-seated minerals that have applications across sectors — ranging from information technology, communication, medicine, and defence to electric mobility.

How does the Bill aim to encourage private players' participation?

According to the United Nations Framework for Classification of Resources, the exploration of minerals is divided into four stages — G4 (reconnaissance), G3 (prospecting), G2 (general exploration), and G1 (detailed exploration).

So far, the G4-level surveys, which include aerial surveys, geophysical and geochemical surveys, and geological mapping, were only done by state agencies like the Geological Survey of India and Atomic Minerals Directorate for Exploration and Research.

At present, private companies could get either "mining leases" or "composite licences."

Under a "mining lease", the licence holders get the rights to do just mining, but "composite licence" holders have the right to do both prospecting and mining. The reconnaissance operations are prohibited under the Act.

The Bill allows private parties to take an "exploration licence" by competitive bids issued by the state government and conduct reconnaissance and prospecting operations. The "exploration licence" holder is also allowed to do pitting, trenching, drilling, and sub-surface excavation, which were still prohibited under the Act.

The terms and conditions

The "exploration licence" will be given for a period of five years (extendable by two years). In these auctions, eligible explorers would bid on their desired percentage share of the auction premium, which will be paid eventually by a "mining lease" holder after the sale of the explored mine by the state government.

If the holder of an "exploration licence" wishes to engage in mining activities within the area where exploration has been conducted, they are required to participate in another competitive auction round to obtain the “mining lease”.

One individual can take up to five thousand square kilometres of area for exploration, provided the area granted under a single "exploration licence" does not exceed one thousand square kilometres. Moreover, the licensee will be allowed to retain up to 25 per cent of the originally authorised area after the first three years after submitting a report to the state government stating reasons for retention of the area.

To expedite the process of mining of the explored minerals, the Bill mandates the issuance of “mining leases” by the state government or the central government within one year from the date of the receipt of the geological report from the "exploration licence" holder.

Why private exploration and mining is needed in critical and deep-seated minerals?

So far, private explorations were prohibited in the country, but private players were allowed to do mining in non-atomic minerals, where exploration had already been done by the government.

The Bill also opens doors for exploration and mining of six atomic minerals — beryllium, lithium, niobium, titanium, tantalum, and zirconium — needed for building a clean energy economy. Unlike other minerals, the exploration and mining of atomic minerals were reserved for government entities under the Act.

The exploration requires techniques that are highly specialised, time-intensive, and monetarily risky operations. While Indian public sector undertakings were in a relatively better position to explore surficial and bulk minerals like coal and iron ore, they had not fared well when it came to deep-seated and critical minerals owing to high expenditure and long duration of risky projects while being under pressure to increase the supply of bulk minerals.

It is estimated that India has explored just 10 per cent of its Obvious Geological Potential (OGP), less than 2 per cent of which is mined, and the country spends less than 1 per cent of the global mineral exploration budget.

Despite possessing 6 per cent of the world's 120,000 million tonnes of rare earth reserves, India's contribution to global output remains at only 1 per cent. This disparity can be attributed to factors such as limited private participation, stringent regulations, and a lack of advanced technology.

The private exploration allows entry of national and international private mining firms, called junior explorers, to engage in risk-taking by putting their expertise and limited financials into explorations to find potential mines, which will help tap its unexplored mineral resources.