Mine bidders to face penalties for delays; Centre proposes timelines

To expedite mining activities in the country and address shortcomings in the mine auction process, the Centre has proposed the introduction of intermediary timelines for acquiring mining leases and composite licences.

The government has outlined timelines for various activities involved in the process, accompanied by penalties for delays attributable to the bidder. According to the Ministry of Mines notification dated February 9, the penalty for surpassing specified timelines in any activity within a milestone would lead to deductions from the performance security deposited by the bidder.

The deduction percentage varies based on the milestone and the length of the delay, ranging from 2 per cent to 5 per cent. Performance security serves as a financial assurance of the successful bidder’s commitment to performance. The successful bidder is required to uphold the performance security throughout the lease period and revise it every five years based on the reassessed value of estimated resources. This amount can be forfeited if the licence holder doesn’t sign a production lease deed within a maximum period of five years after receiving a letter of intent (LoI) from the state government.

In December last year, the government fixed Rs 100 crore each for performance security and upfront payment amounts for production lease. While holding a composite licence, an individual will only need to pay Rs 50 crore as performance security. However, if the composite licence holder applies for a production lease, this amount will be revised to Rs 100 crore. For onshore mining also, the government’s proposal entails setting both performance security and upfront payment amounts at Rs 500 crore for a mining lease. Additionally, the performance security for a composite licence is fixed at Rs 250 crore, with the possibility of being revised to Rs 500 crore if the composite licence holder applies for a mining lease.

The proposed time frame for obtaining a mining lease from the issuance of LoI is set at 33 months (two years, nine months), while for a composite licence, it extends to 81 months (six years, nine months), according to the notification.

With the initiative to impose a penalty for delays, the government aims to enhance accountability and efficiency in the lease acquisition process, ultimately benefiting both stakeholders and the broader mining industry by minimising disruptions and ensuring smooth operations. The problem of delays in obtaining mining leases stems from undefined timelines for clearances and approvals.

The draft timelines for obtaining a mining lease in India are structured across four milestones, each delineating specific activities and associated completion time frames.

Obtaining a composite licence for mining is a lengthy process, where the successful bidder has to complete six milestones involving activities like obtaining permits, clearances, and submitting plans.

However, completing the final milestone (lease execution) within the overall time frame can lead to adjustments in previously applied penalty deductions. The notification emphasises that submitting incomplete applications or not providing sufficient time for authorities to process them can be considered a delay attributable to the bidder and may incur penalties.

The state government holds the authority to decide whether the delay is attributable to the bidder. To address this issue effectively, stakeholders are urged to review and provide comments and suggestions on the draft recommendations by February 24.

2% to 5% based on milestone and delay length

·         Penalty ranges from 2-5%

·         It will be deducted from the performance security deposited by the bidder

·         The proposed time frame for obtaining a mining lease from the issuance of the letter of intent is set at 33 months

·         For a composite licence, it extends to 81 months

·         The government has fixed Rs 100 crore as performance security for offshore production lease

·         For onshore mining, the performance security is Rs 500 crore for a mining lease