FREQUENTLY ASKED QUESTIONS ON MINES AND MINERALS (DEVELOPMENT AND REGULATION) ACT 2011

1.

What would be the status of existing concessions under the New Mines and

Minerals (Development and Regulation) Act (New Act)? Answer: All valid concessions under the existing regime shall continue under the New

Act [proviso to Section 4(1)] and extension shall be given irrespective of the size [Section 7(7)].

2.

What would be the status of applications pending with state government at the time

of commencement of the New Act? Answer: (i) (ii) (iii) Except for applications which have been made for

seamless transition from RP to PL and PL to ML; applications which have received prior approval of Central Government, and applications where a Letter of Intent (LOI) to grant a concession has been issued,

all other applications shall abate [Section 4(6)].

3.

When the New Act comes into force, what would prevent everyone to apply on Day

one of new Act and create a grid-lock? Answer: The New Act provides that:

No direct mining lease unless area is notified by the State Government [Section 13(5) and Section 25(1)].

 Moratorium upto 3 years for applying for PL [Section 137(5)] enabling the States to notify areas for inviting applications for grant of PL if they wish (with different dates for different Districts). State may set aside an area for reconnaissance / exploration through its Directorate of Mining and Geology for a period of 3 years for reconnaissance and for 6 years for prospecting [Section 4(2)], and State Government can further set aside any area thereafter for a further period of 3 years for notification under section 13 of the new Act [Section 4(4)]. In case the State Government completes prospecting, the area can be given for ML under competitive bidding [Section 13(5)]. If the State Government does not intend to conduct /complete prospecting, it may grant PL under competitive bidding [Section 13(3)]. If after prospecting the State does not discover adequate mineralisation, it can notify the area for release [Section 13(1)], or the area can also be released on lapse of the 3 or 6 years period of reconnaissance or exploration, if not sequestered for notification [section 4(4)]

4.

What happens in case some areas are inadvertently left-out by the State Government

while keeping a prospected area aside under section 4(4) for inviting competitive offers? Answer: Such areas would in the normal course become available for PL applications under Section 22.

 However, State Government have powers to call for Swiss challenge on an application made for PL in such areas [Section 13(2)]. 5. If applications are not processed as per time limits, what are the remedies? In cases of delay, either at State Government or in some instances the Central

Answer:

Government level (in the case of Atomic Minerals, Beach Sand Minerals etc.), National Mining Tribunal can be approached for relief for major minerals [Section 85(1)(a)] and in case of minor minerals, the State Mining Tribunals [Section 99(1)(a)].

6.

Can people/ Panchayat object to grant of concessions? The New Act provides for the following

Answer:

Before notification of an area (public land) for grant of mineral concessions, consultation with Gram Sabha/ District Council/ District Panchayat is mandatory [Section 13(10)]. In all areas, reporting and disclosure of CSR activities mandatory through Mining Plan [Section 26(3)]. Mining Plan to be prepared in accordance with Sustainable Development Framework (SDF) [section 26(1)]. consultation. Since minimum area for mining leases is prescribed at 10 hectares for major minerals and 5 hectares for minor minerals, environmental clearance which involves public hearing compulsory [Section 6(2) and Section 6(3)]. The SDF procedures will dovetail with this process and will not be a separate process. The Framework will prescribe detailed procedure for

 In case of minor minerals, State Government can reduce the minimum area limit further in consultation with the Ministry of Environment and Forest but in such a case the public hearing process will still continue under SDF. SDF compulsory for all mines, and includes consultation process from pre-mining to post closure [Section 46(4)(j)]. For grant of PL / ML for minor minerals concurrence of Panchayat necessary [section 13(13)] and in view of section 4 (k) and (l) of the PESA Act read with Rules framed by State Government under the MMDR Act.

7.

What are the provisions for mine closure? The Act provides:

Answer:

Disclosure of progressive mine closure plan of mining to Panchayats mandatory at the outset of mining and every five year period [Section 32(4)]. Consultation of the Agency approving the closure plan with Panchayat necessary [section 32(4)] Final mine closure plan to be approved by the approving agency in consultation with Panchayat with respect to land use planning which has to be in consonance with local community wishes[Section 32(8)]. SDF covers the life cycle of mine [Section 46(4) (f) & (k)] and includes consultative process with the Stakeholders. All mines to deposit a security amount of Rupees One lakh per hectare with the State Government which can be forfeited in case of default of terms and conditions [Section 24(1)(n)] including implementation of progressive and final mine closure plans.
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8.

If there is violation of mining lease conditions, can the Central Government cancel

the mining lease? Answer: No, it cannot do so even under the existing Act, because the State Governments

are the owners of minerals and execute the lease. However, the New Act provides: Technical regulator to continue with powers under sub-legislation to recommend to State Government for termination of mining lease for serious violations (to be provided in sub-legislation). In case of large scale organized illegal mining or inter-State illegal mining operations, National Mining Regulatory Authority can investigate and launch prosecution [Section 69(2)]. All mineral concessions can be cancelled on conviction for mining without a licence or for disobeying a direction of the State Government under the Act [section 119 (2)]. Special Courts will be constituted [Section 105] Lease can be determined on direction of Central Government for unlawful activities [section 30(4)]

9.

Does Central Government has powers to issue directions to State Governments? Yes. The Central Government can issue directions:

Answer:

In cases of illegal and unscientific mining to State Governments [Section 127(2) and section 127(3)].

 In cases where mining activity is related to organized crime or anti-national activities, Central Government can direct the State Government to determine the mining lease [Section 30(4)].

10.

What are the penalties for illegal mining? The penalties include:

Answer:

Fine extending to 10 times the value of mineral mined or 3 years imprisonment or both [Section 110(1)(ii)]. Debarment for obtaining future concessions [Section 119(1)]. Cancellation of mineral concessions held by the convicted person [Section 119(2)]. 11. How will the New Act prevent illegal mining? The New Act provides:

Answer:

Minimum lease size increased to 10 hectares (major) and 5 hectares (minor) [Section 6(2) and Section 6(3)] making it easier to detect and demarcate. Registration of person in mining or dealing with minerals [Section 5(2) and Section 44(5)] to help track ore movement. Deterrence due to cancellation, ineligibility of all leases on conviction for violation of lease conditions [section 12 and section 119(1) & (2)]

12.

How can we restrict mining so that our scarce natural resources are not exported in

raw form? Answer: The Act provides:

 All direct MLs to be given on competitive bid and State can put a condition which gives preference to value adders [Section 13(6)]. Central Government can impose restrictions on mining of strategic minerals in the interest of conservation [Section 46(6)]. Central Government may reserve area for conservation restricting grant of concessions [Section 37] for at least 10 years, on extendable basis. In public interest lease can be prematurely determined with appropriate compensation [section 31] 13. How can royalty evasion be prevented? End-to-end accounting of minerals can be possible through reporting systems

Answer:

enabled under this Act and to be laid down in sub-legislation [Section 5(2) and Section 44(5)].

14.

How does New Act prevent large areas from being blocked, which may not be in

National interest or interest of mineral development? Answer: The New Act provides that:

RP is non-exclusive [Section 8(1)], and so in that sense, the area granted under RP is not blocked as multiple applicants can obtain licence for conducting RP over the same area. HTREL holders are required to relinquish area each year and exit within six years [Section 6(5)]. High licence fees will restrict non-serious players fees will be between Rs.50 per square Km and Rs.500 per sq. km for RP [Section 19(1)(j)] and upto Rs.50 per hectare of Rs.5000 per sq. km for HTREL [Section 21(1)(g)].
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 In case of HTREL, this could mean an annual licence fee of Rs 2.5 crore per year for the maximum area of 5000 sq km that a concessionaire can get in a State. RP and HTREL concessionaires need to complete their survey and investigation efficiently, relinquishing areas with less potential for mineralization as early as possible and narrowing down their area of interest for which they are eligible for purposes of PL (in case of RP holder) or ML (in case of HTREL holder) as the case may be, i.e. up to 500 sq. km for PL and up to 100 sq. km for ML. The concessionaire has to complete his PL within 3 years, extendable by 2 years and narrow down to his eligibility for ML [section 7(3)]. Holders of PL or HTREL would be entitled to ML (upto the maximum area provided in the Act) only to the extent that he prepares a Mining Plan to extract minerals [section 26(2)]. As such the areas will not get blocked.

15.

What happens to existing small deposits? All small leases will continue [Section 4(1)]. They are also allowed to be

Answer:

extended [Section 7(7)] till the deposit is exhausted.

16.

What happens to new small deposits ?

Answer: Small deposits can be given as clusters [Section 6(6)] and in scheduled areas to cooperatives [Section 6(7)].

17.

Will the Act address the perception of Industry that mining is highly taxed? The new Act provides:
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Answer:

 clear revenue outflow for a miner in the form of royalty [section 41], dead rent [section 42], payment to DMF [section 43] and cess [section 44 and 45]. National Mining Regulatory Authority can review royalty and other rates and also suggest mechanisms to moderate royalty to incentivise investment in remote areas or for induction of technology, beneficiation, value addition, production of strategic materials and infrastructure creation [section 68(1) (g) to (k)]

18.

What are the Reporting and Disclosures requirements under the new Act? Will it

lead to more transparency and better management of mineral resources? Answer: A comprehensive framework for disclosure on website and portals for

Government and concessionaires is mandated. This includes (drawing from provisions in various Sections of the Act) Information relating to the various mineral resources including available resources, data regarding fines extraction and consumption [section 46(7)]. Information regarding management of the concession grant process, including notification inviting applications and granting concessions [section 13]. Information regarding CSR, and mining plan and mine closing plans for the mines [section 26(3)]. Data generated by public agencies like GSI in the course of their surveys [section 4(10)] and by concessionaires in relinquished areas [section 19(1)(f) and section 21(1)(d)] Information regarding receipt of revenues by the District Mineral Foundation and their disbursal, including socio-economic infrastructure projects funded from the revenues [section 56(5)].
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 Annual Reports of agencies including that of the District Mineral Foundations [Section 57(3)].

19.

How will the New Act achieve the objective of attracting more investment for finding

deeper deposits, particularly base metals (like copper, lead, zinc), precious metals (like gold, silver, platinum) and strategic minerals (like Rare Earth elements)? Answer: The New Act provides for :

A new concession instrument for technology and investment intensive exploration exclusively for deep deposits called High Technology Reconnaissance cum Exploration licence (HTREL) to be granted on first-in-time basis [section 22(3)] HTREL to be granted over a maximum area 5000 Sq.Kms in a State [Section 6(1)(b)] and minimum area of 100 Sq Kms [section 6(2) (a)] HTREL would be given for a single tenure upto six years which can be extended by two more years [section 7(2)]. HTREL would be subject to rigorous requirements of technology inputs, financial investments and data disclosure and will only enable highly professional agencies to apply [section 21(1)(b)(vi) and (vii)]. HTREL cannot be granted for iron ore, bauxite, limestone, coal minerals or other bulk minerals [section 6(1)] but will be available for base metals, precious metals and precious stones only. The HTREL licence would be required to use high technology including advanced geophysics to locate deep seated and concealed minerals and can apply for a direct mining lease based on the data [section 25(1)].
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 The data generated by HTREL in respect of relinquished areas would facilitate public agencies to do exploration or allow applications for PL [section 21(1)(d)]

20.

How will the new Act promote the concept of zero waste mining to promote

conservation and economic extraction of minerals? Answer: The new Act provides that:

The State Government may give preference to value adders and mineral beneficiation in grant of PL/ML for areas of known mineralization through competitive bidding.[section 13(3 (c) and section 13 (6) (c)] Stringent regulation through Mining Plan will ensure scientific methods of mining including beneficiation, economic utilisation, and induction of technology to ensure extraction and best use of run-of-mine [section 26(1)] Feasibility studies based on process R&D will be insisted upon in Mining Plan so that byproduct metals can also be economically extracted from poly-metallic ores [section 26(1) and (10)]. Independent Authority will oversee the effectiveness of regulation of Indian Bureau of Mines [section 68(1)].

21.

How will regulatory environment be improved to make it more transparent in

allocation of concessions? Answer: The new Act provides that:

Where State Government is aware of mineralization because of availability of data as per prescribed and internationally accepted
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methods

(United Nations Framework

Classification or UNFC compatible method), the deposit will be put to bid for prospecting or mining after assessment of the deposit as per norms in the UNFC standard. In case the State is not aware of mineralization because no public agency (like the GSI or the State Directorate of Geology) has done the general exploration work in the area, it is not possible to notify the area. As such, these areas are left open for applications. Applications can be for reconnaissance (i.e. a Reconnaissance Licence), deep exploration (a High Technology Reconnaissance cum exploration licence), or prospecting (Prospecting Licence for relatively shallow deposits). In mineral exploration, there are two paradigms. One is of people (and investments) competing for scarce mineral resources. The bidding process is an appropriate (subject to many caveats) way of dealing with this situation. The other paradigm, which has not been analysed so well is of countries and areas with inadequate or no data of these mineral resources competing for scarce knowledge (e.g. technology) and scarce financial resources (exploration budgets). In the latter case, bidding for the area is totally

inappropriate because the scarcity value attaches not to be land or a possible mineral bearing area but to the investment. This is particularly issue of global exploratory

budgets, which flow to countries and jurisdictions which offer most facilities and security for investment. In such cases, a transparent first-in-time principle works best to attract investments and technology at exploration stage (it is of course inappropriate to apply it to mining stage and this Act does not do so). As such the Act provides that where there is no knowledge of mineralization, PL can be granted on first-in-time basis. However to prevent misuse of this provision, a swiss

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challenge system has also been provided in the interest of scientific development of mineral resources [Section 13(2)]

22.

How will special care be taken to protect the interest of host and indigenous (tribal)

population through developing models of stakeholder interest? Answer: The new Act provides that:

For all exploration activities suitable compensation shall be payable to the person or family holding occupation or usufruct or traditional rights on the area of exploration [section 43(1)] All Mining Lease holders to pay annually into District Mineral Foundation (DMF) [section 43(2)] o a sum equivalent to royalty in case of major minerals (other than coal) and a sum equivalent to 26% of profit in case of coal minerals; o And in case of minor minerals a sum prescribed by the State Government (since royalty for minor minerals are set by States and vary from State to State) will be payable to DMF. Mining companies allot at-least one share at par to each person of the family affected by mining [section 43(3)], so as to give a sense of ownership in the enterprise. Mining Companies provide employment or other compensation as stipulated under R&R policy [section 43(5)]. This provision ensures that implementation of R&R is a condition of the lease so that violation has consequences at lease level. It does not imply any additional payments.

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 After mining is complete, mining companies need to pay for damages, if any, to affected persons [section 43(7)] as part of the mine closure and restoration process. A portion of the amount paid into the DMF by the leaseholders will be used partly to making recurring payments to people affected by mining related operations [section 56(6)(i)]. In case a family is not already headed by a woman, half the monetary benefits distributed to the affected family, shall accrue to the eldest woman member of the family [section 43(10(c)]. For the purpose of identification of persons or families affected by mining operation, 1.1.1997 shall be reckoned as the cut off date [section 43(11)].

23.

Can CSR spend be set off against royalty like payments to District Mineral

Foundation? Answer: The spending on the CSR activities cannot be set-off against the payment to

District Mineral Fund, which is a separate cost to the lessee in the nature of a fee under the new Act whereas CSR is by its nature voluntary.

24.

How will 26% profit of the tax be estimated in case of captive coal mines? In case of captive coal mines, a mine level profit after tax for the purpose of

Answer:

calculation of 26% of the profits would be worked out on the basis of notional pit mouth value of coal minerals after deducting the expenses. This would require a separate mine level accounting centre to be maintained by every lessee.

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25.

Why should mining industry pay additionally for local area development when

States are already getting royalty and should be developing these areas? Answer: The basis for mining industry to additionally pay an amount to the District level

Fund lies in the need for the mining industry to share mining benefits with the local population to obtain social licence to mine in the area. While royalty paid to the State Government accrues into the State Consolidated Fund, which can be used for developmental activities in the entire State (including the mining area), the amount paid into the District Mineral Foundation shall be required to be spent in the same district itself. Further the Fund accumulated in the District Mineral Foundation cannot lapse at end of each year in case it is not spent, implying that the Fund would be allowed to grow for greater benefit of the District.

26.

In case R&R payments are already being paid by Industry, will paying additional

amount through DMF not be a double benefit to the same people? Answer: The intention of the DMF is not to compensate or provide rehabilitation or

resettlement, but to give a stakeholder share to the local population affected by mining in the mining benefits, thus giving greater acceptability for mining amongst the local population. R&R payments are given under the Land Acquisition Act and R&R Policy related to land loss and displacement. Compensation through DMP is in the nature of recurring payment to persons adversely affected by mining related activities which may not involve land less.

27.

Some Districts will get huge funds into the DMF, while the population may be very

small. Will it not lead to needless blockage of funds? How will such funds be used?
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Answer:

The new Act provides that funds available with the District Mineral Foundation

shall be used for distribution of monetary benefit to persons or families affected by mining related operations in the district; and undertaking such other activities as are in furtherance of the object of the Foundation, including creation, management and maintenance of such local infrastructure for socio-economic purposes in areas affected by mining related operations and facilitating the implementation of the Sustainable Development Framework. Where populations are small (but mining revenues are large) clearly the pressure to create/maintain mining related or mining affected infrastructure including roads is likely to be less, and also the State Governments allocation of funds may not be high because of the low population. Funding through DMF compensates this imbalance.

[For further clarifications query may be sent at anil.sub@nic.in, pps.dom@nic.in ]

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