The government is working on a new mines and mineral policy under which it also plans to rationalise royalties on mining of different minerals
Niti Aayog has called for awarding deep-seated mines on a first-come-first-serve basis to accelerate their mining and production and attract large private sector investment, according to a senior official at the government think-tank.
Another crucial change that the body wants the government to bring in is to club the three permits of reconnaissance, prospecting and mining which would reassure investors and give them more hope of getting adequate returns, the official said.
Private sector presence in India’s mining sector has been negligible because of government laws that are both tough and vague. Environmental issues, problems in land acquisition and alleged exploitation of tribals in forest areas have ensured domination of the sector by government-owned companies that mostly deploy outdated technologies.
“There are now technologies available that can extract these deep-seated minerals without damage to the environment. It is also costly and the technology is available with only a few companies. Niti Aayog believes that to attract large private sector investments in the sector, it is important that we give them on a first-come-first-serve basis with mining rights,” the official said.
The government is working on a new mines and mineral policy under which it also plans to rationalise royalties on mining of different minerals as well as offer a more rewarding environment for miners.
Speaking at an event in the national capital on August 17, Bipul Pathak, joint secretary in the ministry of mines, had said that the new policy was expected to be out in two months. It is currently undergoing deliberations with views of various stakeholders being gathered and thrashed out for incorporation in the policy.
“So if a company prospecting for the mineral, which itself requires huge deployment of man, machine, technology and money, and the company still has no surety of being able to secure the mining licence, then why will it come forward? So to attract private investment, Niti Aayog is proposing that we give the same company prospecting and mining licences both, something that is not guaranteed right now,” the unnamed official said.
A reconnaissance permit issued by the government allows preliminary prospecting of a mineral through regional, aerial, geophysical or geochemical surveys and geological mapping, but does not include pitting, trenching and drilling. Prospecting licence means a licence granted for the purpose of exploring, locating or proving mineral deposits. The state governments are empowered to grant prospecting licences.
The third stage after reconnaissance and prospecting licence is the issue of mining licence which allows an entity to go ahead and carry out mining to extra the mineral. If Niti Aayog’s suggestion is accepted, all three exercises will be carried out by one company.
Deposits of rare earth elements like tungsten, cobalt and lithium are almost non-existent in India. Both cobalt and lithium are essential for making batteries that are used in electric vehicles as well as mobile phones. Some of these elements are deep inside the surface of the earth and their mining and extraction is a tough act, not to forget environmental issues and damage to tribal livelihoods.
Last month, speaking at the fourth national conclave on mines and minerals organised by the ministry of mines, at Indore, Steel Secretary Aruna Sharma had said there was a strong need to rationalise royalty on minerals and also allow offset of input costs under the Goods and Services Tax.
“There is a strong need to rationalise royalty. The industry is willing to pay royalty but there is a need to rationalise the central royalty and the District Mineral Foundation,” she said.
The central government has the power to fix and revise royalty in case of major minerals while states fix the same for minor minerals. Common major minerals are coal, chromite, diamond, gold, iron ore, manganese ore, nickel, silver, zinc, copper, and bauxite.
Minor minerals include stone, sand, marble, slate, boulder and brick earth. Crude oil and gas form a separate category called mineral oils and government by central laws.
Different minerals attract different rates of royalty. Chromite attracts 15 percent of the average sale price on ad valorem basis while 11.5 percent royalty is levied on diamonds and 15 percent on iron-ore, a key raw material for making steel.
District Mineral Foundation or DMF has been created to ensure the welfare of the people affected by mining. DMF is funded by way of contributions at the prescribed rates from holders of mining lease. It is imposed at the rate of 30 percent of the royalty for leases granted till January 11, 2015, and 10 percent for leases granted thereafter.
Royalty and DMF contributions are both outside the purview of GST and payments towards them are currently not offset under the indirect tax regime.