Page 15 - The Mineral Development and Regulation Framework in India (English Version)
P. 15
Discussion Paper
insist on value addition (mineral, metal, or product the existing terms and conditions, rather than leave
making) within the State, with the expectation that it for an open-ended decision of renewal, however,
this will provide employment, income, and revenues. favourably structured towards the lessee. Logically,
While normally, (particularly, for bulk minerals like it is necessary to provide for extension of leases
iron ore, bauxite, placer minerals, and limestone), the as long as a mineable deposit is available, rather
cost of mineral transportation favours setting up of than renewal.
the value addition plant fairly close to the mine or well
connected to it, issues of other inputs such as coal, Mining revenues, bidding
power, water, and land availability, infrastructure, and processes, and royalties
other considerations favouring better investment
returns and more investment security also determine Given the fact that mining in India is a mix of small as
decisions on siting of the value adding unit. The bid well as large mines; public sector as well as private
amount is intended to reflect the cost on this account, sector, there is a perception that:
and the State will obviously need to endeavour to
mitigate these costs to obtain higher bid values. Minerals are scarce and non-renewable public
resources and the State should receive adequate
In passing, it may be noticed that unlike compensation for their appropriation for private
reconnaissance and prospecting licenses, where profit;
only intimation may need to be given to the State
Government, transfer of mining leases will clearly The State is expending public funds for the
need prior approval of the State Government. The exploration of minerals and as such should
reason is that an exploration concession instrument receive a market-based value for the mines (or
is in the nature of a temporary permission to enter an rather mineral deposits which are potentially
area and conduct specified non-invasive or invasive mineable) that the exploration uncovers;
scientific operations for a limited period on payment
of compensation; the mining lease, on the other hand, Large mines actually retain a high surplus due in
is a binding document delivering physical possession substantial part to the economy of scale, captive
of the land and creating long-term rights and liabilities use of resources or locational advantages, as
between the parties, and thus the transfer of the lease well as to market fluctuations giving “windfall
by one party needs the clear approval of the other gains”, and that some of the surplus ought
party specifying the extent of the land so transferred. legitimately to constitute revenues of the States
for developmental purposes;
Renewal and extension of leases
Minerals that occur within a State should
Perhaps partly as a result of the recommendation for contribute towards the industrial development
disposal of mining leases through bidding based on a of the State, and mining should lead to “value
valuation of the “fully prospected” ore body, the Hoda addition” through metal making and other
Committee recommended ‘‘extension’’ of a lease
on the expiry of its term till economic exhaustion of
the ore body. The 1957 Act provides for ‘‘renewal’’,
which in legal terms often means a fresh lease with all
the attendant issues of statutory approvals. However,
since in a bidding situation for a mining lease, the bid
ought to be for the entire extractable ore body, in
the interest of equity (and also efficient and scientific
mining) it is clearly necessary to extend the lease on
JANUARY 2015 15
insist on value addition (mineral, metal, or product the existing terms and conditions, rather than leave
making) within the State, with the expectation that it for an open-ended decision of renewal, however,
this will provide employment, income, and revenues. favourably structured towards the lessee. Logically,
While normally, (particularly, for bulk minerals like it is necessary to provide for extension of leases
iron ore, bauxite, placer minerals, and limestone), the as long as a mineable deposit is available, rather
cost of mineral transportation favours setting up of than renewal.
the value addition plant fairly close to the mine or well
connected to it, issues of other inputs such as coal, Mining revenues, bidding
power, water, and land availability, infrastructure, and processes, and royalties
other considerations favouring better investment
returns and more investment security also determine Given the fact that mining in India is a mix of small as
decisions on siting of the value adding unit. The bid well as large mines; public sector as well as private
amount is intended to reflect the cost on this account, sector, there is a perception that:
and the State will obviously need to endeavour to
mitigate these costs to obtain higher bid values. Minerals are scarce and non-renewable public
resources and the State should receive adequate
In passing, it may be noticed that unlike compensation for their appropriation for private
reconnaissance and prospecting licenses, where profit;
only intimation may need to be given to the State
Government, transfer of mining leases will clearly The State is expending public funds for the
need prior approval of the State Government. The exploration of minerals and as such should
reason is that an exploration concession instrument receive a market-based value for the mines (or
is in the nature of a temporary permission to enter an rather mineral deposits which are potentially
area and conduct specified non-invasive or invasive mineable) that the exploration uncovers;
scientific operations for a limited period on payment
of compensation; the mining lease, on the other hand, Large mines actually retain a high surplus due in
is a binding document delivering physical possession substantial part to the economy of scale, captive
of the land and creating long-term rights and liabilities use of resources or locational advantages, as
between the parties, and thus the transfer of the lease well as to market fluctuations giving “windfall
by one party needs the clear approval of the other gains”, and that some of the surplus ought
party specifying the extent of the land so transferred. legitimately to constitute revenues of the States
for developmental purposes;
Renewal and extension of leases
Minerals that occur within a State should
Perhaps partly as a result of the recommendation for contribute towards the industrial development
disposal of mining leases through bidding based on a of the State, and mining should lead to “value
valuation of the “fully prospected” ore body, the Hoda addition” through metal making and other
Committee recommended ‘‘extension’’ of a lease
on the expiry of its term till economic exhaustion of
the ore body. The 1957 Act provides for ‘‘renewal’’,
which in legal terms often means a fresh lease with all
the attendant issues of statutory approvals. However,
since in a bidding situation for a mining lease, the bid
ought to be for the entire extractable ore body, in
the interest of equity (and also efficient and scientific
mining) it is clearly necessary to extend the lease on
JANUARY 2015 15
