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  • Population, mn: 1,311.1
  • GDP, US$bn: 2,259.9
  • GDP per capita, US$: 1,706.6
  • Inflation, CPI ave: 4.5
  • Budget Balance, % of GDP: -6.5
  • FX, LCY/US$: 67.2
  • Mining GVA, US$bn: 46.0
  • Mining Industry Value, US$bn: 23.4
Regulatory Risk Rating
33
0
100
Score: 33
Severe Risk
Much like driving from Delhi to Jaipur, the Indian mining law offers disused lanes, bumpy shoulders and muddy fields for the Ferraris, Fords and jingle trucks that might wish to use them. If you insist on driving, keep your hand on the horn and shout loudly and frequently to confirm your direction.

Corruption Potential Index

Score: 20
Extremely High Corruption Potential

Corruption Risk Index

Score: 59
Moderate Corruption Risk

Regulatory Risk Rating

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Mining Overview Commentary plus sign

India Mining Regulation

General

The mining sector constitutes an important part of the Indian economy through employment, investments, payment of government taxes and multiplier effects from business linkages to other sectors. Mining and minerals activity currently comprises 2.26 per cent of the Indian economy and 17.9 per cent of its exports (2012-2013). The country produces 79 different minerals, including iron ore, manganese, mica, bauxite, chromite, limestone, asbestos, fluorite, gypsum, ochre, phosphorite and silica sand.

India is ranked 81st out of the 109 countries on the Fraser Institute Policy Potential Index (2015).This was mainly due to improvements in investor perceptions, availability of labour and skills, and reduction in trade barriers and regulatory inconsistencies. India is also ranked as the 17th most secure location for mining investment based on the Behre Dolbear survey (2014).

Principal Legislation and Regulator

The primary legislation regulating mining in India is the Mines and Minerals (Development and Regulation) Act, 1957 (“MMDRA”) and the Mines Act, 1952 (“Mines Act”), which should be read together with the Mineral Concession Rules, 1960 (“MC Rules”) and the Mineral Conservation and Development Rules, 1988 (“MCD Rules”). The Ministry of Mines, a branch of the Government of India, is responsible for the administration of mining laws in India. Notwithstanding this fact, the respective state governments grant mineral concessions (which is meant to include all forms of mineral title) for all minerals located within the boundary of its state (s. 10, MMDRA). Nevertheless, minerals such as iron ore, gold, copper and lead require the state to consult with the central government before approving mining concessions (Schedule 1, MMDRA).

Grants and Forms and Mineral Title

The Indian Constitution does not vest all minerals in the state; this was the subject of consideration in the case of Threesiamma Jacob and Others v. Geologist, Department of Mining and Others (2013), where the Court stated that: “The Constitution of India recognized the fact that the mineral wealth obtain[ed] in the land mass (territory of India) did not vest in the State in all cases; and that under the law, as it existed, proprietary rights in minerals (subsoil) could vest in private parties who happen to own the land [Arts. 294 and 297]. This conclusion gets fortified from the provisions of the Mineral Concession Rules, 1960. While Chapter 4 of the Rules deals with the lands where the minerals vest in the Government, Chapter 5 deals with the lands where the minerals vest in a person other than the Government.”

In recent years, the Indian government has tried to pass:

  • National Mineral Policy 2008 (“NMP”); and

  • Mines and Minerals (Development and Regulation) Bill 2011 (“MMDR Bill”).

The NMP, however, has yet to be passed by parliament and the MMDR Bill simply lapsed while waiting to be voted upon. There is currently no initiative by the Indian government to seek parliamentary approval for either the NMP or MMDR Bill. Although not passed, the NMP was used by the central government to prepare a Model State Mineral Policy to assist the state governments in preparing their own state policies.

Mining concessions granted under the MMDRA include:

  • Reconnaissance permit (“RP”) – allows the holder exclusive access to the permit area to perform any operations undertaken for preliminary prospecting purposes (s. 24A(1), MMDRA). A RP is restricted to 10,000 sq km, but subject to relinquishment (the area shall be reduced to 1,000 sq km or 50 per cent after two years and to 25 sq km by the third year) (s. 6(1)(aa), MMDRA and s. 7, MC Rules). A RP may be granted by the state for a period no longer than 3 years (s. 7(1), MMDRA). RPs are also subject to strict conditions relating to expenditure, targets, rules and reporting requirements (s. 7(i)-(xi), MC Rules). Both the MMDRA and MC Rules are silent on the transfer of a RP.

  • Prospecting License (“PL”) – allows the holder exclusive access to the licensed area to explore and undertake mining activities to locate and prove mineral deposits (s. 24A(1), MMDRA). A PL is restricted to 25 sq km, unless an extension of area is granted by the central government (s. 6(1)(a)-(b), MMDRA). A PL may be granted by the state for a period no longer than 3 years and may be renewed so long as the aggregate period does not exceed 5 years (s. 7(1)-(2), MMDRA). A PL may also be transferred to a third party (s. 13(2)(l), MMDRA and ss. 14 and 15A, MC Rules).

  • Mining Lease (“ML”) provides the holder with a right to extract minerals exclusively in accordance with the lease (s. 24A(1), MMDRA). A ML is restricted to 10 sq km unless an extension of area is granted by the central government (s. 6(1)(b), MMDRA). A ML may be granted by the state for a period no longer than 30 years, but not less than 20 years. A ML may be renewed by the state for a period of 20 years (s. 8(1)-(3), MMDRA). A ML may also be transferred to a third party with the approval of the state and central government (s. 13(2)(l), MMDRA and s. 37(1), MC Rules). MLs are also subject to strict conditions relating to royalty payments, payments of dead rent and a fee for the use of the surface area (s. 27, MC Rules).

A holder of a mining concession is also liable to compensate any landowners or occupiers of the surface for any loss or damage that is likely to arise or has arisen as a consequence of the mining concession, which is determined by the state in accordance with Land Acquisition Act 1894 (s. 24A(2)-(3) MMDRA). Additionally, a mining concession can only be granted to an Indian national or a company as defined in s. 3(1) of the Companies Act, 1956 (s. 5(1)(a) MMDRA). There are currently no express rights nor obligations contained in the MMDRA that permit the central or state government free carry rights or options to acquire shareholdings.

Development Considerations

Pursuant to s. 15 of the MMDRA the central government may make rules regulating mining concessions. Section 22(4) of the MC Rules require that a mining plan be submitted to the central government for approval before a mining concession can be granted by the state. Each mining plan requires details identifying the natural watercourses, reserves, forest, density of trees, and an assessment of impact of mining activity on the environment.

In 2006, the central government approved the National Environment Policy (“NEP”). In line with the objectives of the NEP, the Minister, pursuant to s. 3(1)(v)(2) of the EP Act and s. 5(d)(3) of the EPR, published Notification S.O. 1533 (“Notification”). The Notification introduced restrictions and prohibitions on new projects and restrictions on the expansion of existing projects, unless environmental clearance was obtained first. The schedule to the Notification also defines projects as either falling under Category A or Category B, where Category A projects are approved by the Minister and Category B projects are approved by an appointed State Level Environment Impact Assessment Authority (“SEIAA”) with recommendation from a State Expert Appraisal Committee (“SEAC”). Both Category A and B projects are subject to a four-stage environmental impact assessment process (screening, scoping, public consultation, appraisal/environmental clearance).

Other consents that may be required include: (a) a consent under the Forest (Conservation) Act 1980 if the proposed project is located in a forest area; and (b) an authorisation for the export of minerals (called an ‘Importer Exporter Code’) from the Director General of Foreign Trade before exporting goods out of India.

Environment Regulation

See India Environment Regulation.

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Environmental Overview Commentary plus sign

India Environment Regulation

General

India is located in south Asia and forms the Indian subcontinent. It is the seventh-largest country in the world, with a total area of 1,222,559 sq mi. The western region is dominated by the Punjab Plain and the Thar Desert, and borders Pakistan. The northern region borders China, Bhutan, Nepal and is defined largely by the Himalayan mountain range, including the World Heritage listed ‘Great Himalayan National Park’. The east of India situates Khasi Hills, Mizo Hills, Indo-Gangetic Plain and borders Bangladesh, whilst southern India is bound by the Indian Ocean and Arabian Sea. The Ganges is India’s largest river (1,569 mi) and is the third largest river in the world by discharge.

The ecology of India is very unique and one of the most bio diverse regions in the world. It hosts three of the world’s 34 biodiversity hotspots, including the Western Ghats, the Eastern Himalayas and Indo-Burma. Indian wildlife consists of a wide variety of animals native to the country, including the Bengal Tiger, Deer Python, Sloth Bear, Crocodile, Indian Camel, Bandar Monkey, Hog Deer, Gaur Bison and Asian Elephant. The region's rich and diverse wildlife is preserved in the 89 national parks, 18 bio reserves and 400 wildlife sanctuaries across the country. Lying within the Indomalaya ecozone, India is home to 7.6 per cent of the world’s mammals and 12.6 per cent of all bird species.

Principal Legislation and Regulator

The Indian constitution states that “the State shall endeavour to protect and improve the environment and to safeguard the forests and wild life of the country” (Art 48A) and indicates that it is the duty of every citizen “to protect and improve the natural environment including forests, lakes, rivers and wild life, and to have compassion for living creatures” (Art. 51A(g)). The principal piece of legislation applicable to the protection of the environment is the Environmental Protection Act 1986 (“EPA”), which must be read together with the Environment (Protection Rules) 1986 (“EPR”).

The Minister for Environment and Forests (“Minister”), with support from the Ministry of Environment and Forest (“MOEF”), administers the EPA. The Supreme Court of India recently ordered the central government to implement an independent national environment regulator by March 31, 2014. The order requires that offices of the National Environmental Appraisal and Monitoring Authority be established in all states to oversee the implementation of projects that impact the country’s environment. To date, the central government has yet to implement the Supreme Court order.

EIA Process

In 2006, the central government approved the National Environment Policy (“NEP”). The NEP indicates that, among other things, the agencies are to recognise the following principles in their application of environmental policy, namely, the Right to Development and Polluter Pays. In line with the objectives of NEP, the Minister, pursuant to section 3(1)(v)(2) of the EPA, along with section 5(d)(3) of the EPR, published Notification S.O. 1533 (“Notification”). The Notification introduced restrictions and prohibitions on new projects, which included restrictions on the expansion of existing projects, unless approval was first obtained. The schedule to the Notification also defines projects as either falling under Category A or Category B, where Category A projects are approved by the Minister and Category B projects are approved by a duly appointed State Level Environment Impact Assessment Authority (“SEIAA”) with recommendation from a State Expert Appraisal Committee (“SEAC”). As such, over 25 SEIAA’s and SEAC’s have been formed and each consists of a Chairman and five members.

The EIA process begins once a project site has been selected and the miner submits a pre-feasibility report to either the MOEF or an Expert Appraisal Committee (“EAC”) set up by the MOEF. They will then determine whether the proposed project (or existing) falls under Category A or Category B pursuant to Schedule 1 of the Notification based on the following:

  • Category A - mining lease including an area of 50 ha, or 150 ha for a coal mining lease, and any form of asbestos mining irrespective of mining area.

  • Category B - mining lease including area of less than 50 ha, or less than 150 ha for a coal mining lease.

Additionally, any Category B project that is located in whole or partly within 10 km from the boundary of a protected area, critically polluted area, eco-sensitive area or state and national boundary, will be treated as a Category A project. Prospecting activities that do not involve drilling are exempt from approval.

The EIA process then follows four stages including screening, scoping, public consultation and appraisal. More detail on each of these stages is set out below.

  • Screening – In relation to category B projects, the SEAC will screen these and determine whether or not the project requires further environmental studies for preparation of an Environmental Impact Assessment Report (EIA report), which forms part of its appraisal prior to the grant of environmental clearance. The projects requiring an EIA report are termed Category B1 projects and the remaining projects are termed Category B2 projects.

  • Scoping – In relation to Category A projects, the EAC (and SEAC, in the case of Category B1 projects) will determine a detailed and comprehensive set of Terms of Reference (“TOR”) listing all relevant environmental concerns that the applicant needs to address in their EIA report.

  • Public consultation – All Category A and Category B1 projects will be subject to a public consultation process. Applicants are then required to address all the material environmental concerns expressed during this process and make appropriate changes in the draft EIA report. The final EIA report is then submitted to the appropriate regulatory authority for appraisal.

The final stage (Appraisal) will lead to a decision on whether or not environmental clearance (“EC”) will be granted and involves detailed scrutiny of the project by either the EAC or SEAC. The EAC will report their recommendation to the Minister or MOEF, who will then either grant or reject EC. The SEAC will report their recommendations to the SEIAA, who will either grant or reject EC. Both Category A and Category B projects are also required to undergo EIA monitoring, once EC is granted.

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