India Mining Regulation
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:
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.
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.
See India Environment Regulation.