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LATEST NEWS UPDATES | Centre plans overhaul of mining sector by Sudheer Pal Singh

Centre plans overhaul of mining sector by Sudheer Pal Singh

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published Published on Aug 19, 2010   modified Modified on Aug 19, 2010


When former Karnataka Lokayukta N Santosh Hegde recently said that vested interests were controlling the mining industry, he was not exaggerating, considering that India registered over 182,000 cases of illegal mining across 17 states in the last five years alone.

The Union government data show that Andhra Pradesh — the single largest contributor to the country’s mineral production of roughly Rs 1,28,000 crore — alone registered a 110 per cent increase in illegal mining cases in the last four years. The number of cases in Andhra rose to 11,590 in 2009 compared to 5,385 in 2006.

The proposed amendment to the Mines and Minerals Development and Regulation (MMDR) Act plans to tackle the issue of illegal mining, besides bringing other changes in the current functioning of the mining industry.

The Bill proposes allowing states to set up special courts for prosecution of mining-related offences and giving more teeth to the Indian Bureau of Mines (IBM), which serves as a sectoral regulator, by allowing it to take direct action in cases of illegal mining, a senior official told Business Standard.

Illegal mining is one reason why the growth in the country’s mineral production in value terms dipped to 10 per cent in the last financial year from 17 per cent in 2005-06. If the proposed amendment is cleared by the Group of Ministers (GoM) and gets past the legislative rituals, the mining sector could see a sea change. The GoM has already met twice last month and the Ministry of Mines is likely to introduce the new mining Bill in the current session of Parliament.

The draft Bill, a sequel to the 2006 Hoda Committee report, introduces new concepts like making the local population shareholders in mining projects, apart from setting up a regulator to file cases against violators and check illegal mining. “The delays in renewal of concession agreements lead to companies continuing mining without licences. So, the GoM has decided to set up a regulatory authority to tighten the mechanism of granting mineral concessions,” former mining secretary Santha Sheela Nair had said after the GoM meeting last month.

Some experts, however, doubt the efficacy of the idea. “It is not understood how illegal mining can be checked by setting up a regulator. A regulator sitting at the Centre cannot stop this,” said a senior government official. “The GoM must understand that it is a law and order issue. Is anybody asking from where does the explosive come for blasting stones in an illegal mine?” he asked.

Another expert voiced a similar opinion. “A regulator may not be effective in this matter, as it will not have control over the machinery of the state government to enforce law and order and check illegal mining,” said Gokul Chaudhri, Partner and Leader, Energy and Infrastructure Practice, BMR Advisors.

Another issue being considered in new mining legislation is granting ownership to locals in mining projects. The resistance from locals and the prevalence of Naxalism in the mining belt are the primary reasons for this move. Companies like Posco, Vedanta and ArcelorMittal have been facing protests against land acquisition in Jharkhand, Chhattisgarh and Orissa.

The GoM has already decided “in principle” to make local populace stakeholders in mining in tribal areas. While some members of GoM suggest that people should be given a part of the annual profits, others suggest giving tribals an equity stake.

Stiff industry opposition has ensured delaying the GoM’s decision on the matter. In a recent letter to Finance Minister Pranab Mukherjee, Federation of Indian Chamber of Commerce and Industry (Ficci) Secretary General Amit Mitra cautioned against mining projects becoming unviable in case the proposal was implemented, as it would put “very heavy financial burden on mining companies”.

Ficci argues that if profits of mining companies can be shared with tribals, then even losses should be shared. The chamber has also pointed out that the proposal would not only lead to tribals misusing compensation money, it would also make the promoter vulnerable to hostile takeover.

Experts believe the new legislation will bring about a major overhaul of the mining sector, which is currently functioning on laws enacted in the 1950s. However, absolute reforms will have to wait until at least coal mining is commercialised, to allow the private sector enter and ramp up production.


The Business Standard, 19 August, 2010, http://www.business-standard.com/india/news/centre-plans-overhaulmining-sector/405068/


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