Rajya Sabha passes Bill facilitating offshore mining and mineral auctions

The proposed legislation aims to unleash the untapped potential of India's offshore resources and enhance transparency in the allocation of minerals

In a significant step toward exploiting India's offshore resources, the Council of States passed the Offshore Areas Mineral (Development and Regulation) Amendment Bill (OAMDR), 2023, on Wednesday.

The Bill represents a transformative change for the offshore mining sector, which has remained largely inactive since the enactment of the OAMDR Act in 2002. It aims to increase transparency in the allocation of minerals found in the country's offshore basins, permitting the granting of production leases exclusively through auctions and reserving some allocations for government entities and public sector units (PSUs).

The passage of the Bill marks a historic milestone, unlocking India's vast mineral-rich offshore areas. This move promises strategic benefits, strengthening the nation's territorial waters, which have been frequently threatened by neighboring countries. The extraction of minerals from these areas is expected to bolster India's strategic position further.

The Bill stipulates a fixed 50-year production lease for offshore minerals. Under this new legislation, the government plans to introduce auctions as the primary means to award production leases for offshore minerals.

The amendment enables the granting of production leases to the private sector solely through competitive bidding auctions. Under the composite licensing system, explorers will also have the right to develop and mine minerals under a single license.

The Bill introduces a four-year timeline for the start of production and dispatch following the execution of a composite license or production lease. It also establishes a two-year timeline (extendable by one year) for the resumption of production and dispatch after a discontinuation.

The amendment limits the total offshore area that one individual can acquire. Now, no person can hold more than an area spanning 45 minutes of latitude by 45 minutes of longitude, encompassing any mineral or group of associated minerals under one or more operating rights.

The amendment provides for the creation of a non-lapsable Offshore Areas Mineral Trust to ensure the availability of funds for exploration, the mitigation of the adverse impact of offshore mining, disaster relief, research, and the interests of those affected by exploration or production operations. This fund will be maintained under the Public Account of India and will be financed by an additional levy on mineral production, capped at one-third of the royalty. The Central Government will determine the exact rate of the additional levy.

To promote ease of doing business, the Bill includes provisions for the straightforward transfer of composite licenses or production leases.

According to the Bill's Statement of Objects and Reasons, royalties, auction premiums, and other revenues from the production of minerals in offshore areas will go to the Government of India.