How does the Mines and Minerals Bill 2023 aim to encourage private players?
The Bill omits at least six previously mentioned atomic minerals from a list of 12 which cannot be commercially mined.
Being on the atomic minerals list, the exploration and mining of these six — lithium, beryllium, niobium, titanium, tantalum and zirconium, was previously reserved for government entities.
The Act prohibits pitting, trenching, drilling, and sub-surface excavation as part of reconnaissance, which included mapping and surveys. The Bill allows these prohibited activities.
The Bill also proposes a new type of licence to encourage reconnaissance — level and or prospective stage exploration by the private sector.
This exploration licence (EL), for a period of five years (extendable by two years), will be granted by the State government by way of competitive bidding.
In these auctions, eligible explorers would bid on their desired percentage share of the auction premium which will be paid eventually by a mining lease holder up the sale of a successfully explored mine by the State government.
The lowest bid by an explorer would win the EL auction.
This licence will be issued for 29 minerals specified in the Seventh Schedule of the amended Act, which would include critical, strategic, and deep-seated minerals.
It also specifies the maximum area for exploration; activities in up to 1,000 sq km will be allowed under a single exploration licence.
The licence will be allowed to retain up to 25% of the originally authorised area after the first three years after submitting a report to the State government stating reasons for retention.
While most auctions are reserved for State governments in the Act, the Bill also reserves the conduct of auctions for composite licence and mining lease for specified critical and strategic minerals for the central government.
What are some of the possible issues and recommendations with the Bill’s proposals?
The primary way of generating revenue for a private company that has an exploration licence would be a share of the premium paid by the miner, which would come only after a successfully discovered mine is auctioned and operationalised.
Trends show that such a process could take years to materialise owing to government timelines for clearances or may not happen at all considering depending on the complexity of the deposit and geography.
Example : Ghorabhurani-Sagasahi Iron Ore Mine, a greenfield captive mine, which was auctioned in 2016. Even though it was a bulk mineral, production started only in late 2021, taking close to six years to receive the necessary clearances.
The explorer would not know how much revenue they will receive as the auction premium would be known only when a mine is successfully auctioned.
It’s feasible to auction something that has a known value (like a spectrum or a discovered mineral deposit), it is difficult to auction something for which exploration has not begun.
Besides, in its 2012 ruling, the Supreme Court had observed that since big capital investments go into discovering natural resources through exploration and mining contracts, companies would only want to spend big amounts if they’re assured of utilising any discovered resources.
In the new policy, only the government can auction what an explorer has discovered and the latter would only get a share of the premium at an unknown stage.
This is unlike other global jurisdictions where private explorers can sell their discoveries to miners.
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