The Mines and Mineral Development and Regulation (MMDR) Bill
2011 (the Bill) was approved by the Cabinet in September 2011.
It introduces provisions aimed at providing compensation to
stakeholders, sustainable mining, and local area development,
as well as ensuring transparency, equity and elimination of
discretion by local authorities in the mining process.
Once passed, it will have significant financial implications
for the mining industry. Some legal practitioners, however, are
not optimistic that the Bill will be passed successfully
despite the Government of India's (GOI's) hard stance, as they
expect its execution to be very difficult.
The Bill was introduced in the Lok Sabha in December 2011
and, at the time of going to press, was awaiting approval.
After being approved, the Bill should be passed in the monsoon
session (July to September) of parliament. Once passed, it will
replace the Mines and Minerals (Development and Regulation)
Act, 1957, with the aim of comprehensively regulating the
mining regime in the country.
The Bill introduces provisions that are aimed at providing
compensation to stakeholders, especially to families affected
by mining operations, as well as sustainable mining and local
area development. Mining operators will be required to
compensate project-affected persons including those with
occupation rights, usufruct rights or traditional rights over
A general increase in the amounts payable as royalties or
dead rent to the central or state government is also proposed.
Mining lease holders will be required to contribute 26% of
their annual profit from mining-related operations for coal and
lignite, and one year's royalties for other major minerals, to
the district mineral foundation. This will be on a pro rata
basis to actual production. And the amounts are additional to
any compensation or other amount payable to project-affected
To increase transparency in the process of granting mining
leases or prospecting licenses, the Bill has also proposed the
implementation of a competitive bidding process in mine
allocations. It is hoped that this will encourage the
participation of private parties, and also incentivise the GOI
to invest in sustainable exploration and mining.
In March 2012, a report drafted by the Comptroller and
Auditor General of India (CAG) that discusses 'the coal
licensing scam' was leaked and published by The Times of
India. The report says that the GOI extended 'undue
benefits' of Rs 1,067 trillion in total by allocating coal
mines to private parties without auction in the years 2004 to
Phoenix Legal partner Saket Shukla says that the Bill
reflects a greater awareness by the GOI of the social
responsibilities of developers. "The Bill will replace existing
legislation and seeks to introduce significant reforms in the
mining sector by encouraging scientific mining, providing for
revenue sharing with the population impacted by mining
operations, encouraging sustainable development, and promoting
a more transparent mine allocation system."
But the Bill will also complicate the mining process as
extensive administrative effort will have to be spent on
negotiating compensation with local communities as well as
involving them in the bidding process. This is expected to have
serious financial implications for mining operators.
"A significant amount of money may have to be spent by the
project developers to comply with the new regulations," says
Shukla. "Foreign investors will also be affected as there is
significant investment in the sector, especially in metals and
Some legal practitioners also hold the view that the Bill
will be impossible to pass in the near future, as various
regulatory issues are yet to be overcome. For example, the Bill
overlaps with legislation such as the new Companies Bill, which
requires companies to contribute 2% of net profit to corporate
social responsibility (CSR) activities. A similar provision
also exists in the Bill.
In addition, there are also concerns over whether the Bill
will overlap with some of the provisions of the National Land
Acquisitions Rehabilitation and Resettlement Bill 2011, which
also aims to address compensation to project-affected persons.
The Land Acquisition Bill is currently under review in
Capacity to execute the Bill is also a big problem. One law
firm partner who wished to remain anonymous says that the
legislation is "completely unrealistic and very difficult to
execute". He adds: "It is very difficult to define which people
are being affected. The compensation and negotiation process is
very hard to execute as well. It is unlikely that the Bill will
be passed when these execution problems are yet to be
But other legal commentators believe that the introduction
of a mining legislation programme in India is inevitable, with
the country already beyond the initial stages of development.
JSW Steel's legal and group general counsel Girish Gokhale
says: "There will be pains in the process, but if India is to
develop it will need a robust environment programme. And unless
such a programme is implemented, goals of further developing
India in the long-term will not be met. Companies should also
adopt the right mindset in order to comply with an
environmental programme that will soon be implemented."
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