MODULE-2 Flashcards
Objectives of MMDR Act
- To provide for the development and regulation of mines and mineral under the control of the Union.
- Regulation of Mineral Development: Ensures systematic and efficient mineral exploitation under Union control.
- Granting of Mineral Concessions: Procedures for granting prospecting licenses and mining leases by central and state governments.
- Ownership of Minerals: All minerals are vested in the state for public benefit.
- Mining Lease Conditions: Defines lease terms, obligations, and penalties for non-compliance.
- Conservation of Minerals: Promotes scientific mining to prevent wastage.
- Government Roles: Central government regulates; state governments grant licenses and monitor compliance.
- Environmental Protection: Provisions for minimal environmental impact during mining activities.
- Penalties for Violations: Fines and penalties for unauthorized mining and environmental damage.
- Mineral Development Fund: Fund for conservation and sustainable management of mineral resources.
Mineral Concession Rules, 1960
Governs the granting of reconnaissance permits, prospecting licenses, and mining leases under the MMDR Act, 1957.
State Governments primarily issue concessions, while the Central Government regulates strategic minerals.
Lessees must pay royalties and comply with statutory obligations.
Provisions for cancellation of leases in case of non-compliance or illegal mining.
Mineral Conservation and Development Rules, 1988
Ensures systematic mining and conservation of mineral resources.
Mandates scientific mining practices to prevent wastage.
Requires environmental protection measures, including reclamation and rehabilitation of mined areas.
Leaseholders must submit mining plans and periodic reports to regulatory authorities.
Penal provisions for violations, ensuring responsible mining operations.
Geomin Minerals & Marketing (P.) Ltd. v. State of Orissa & Ors. (2013) 7 SCC 571
The appellant, Geomin Minerals, applied for a prospecting license for a mineral block in Odisha. The State of Orissa had invited applications for the concession, but the issue arose regarding the priority of applications when multiple applicants came forward.
The Supreme Court upheld the Right of First Application principle. The applicant who applies first, meeting all legal requirements, gets
priority. Ensured fairness in mineral concession allocation.
After 2015 Amendment, The Right of First Application removed. The Mining leases now granted through competitive auctions
Open Mineral Access (OMA) – The
Earlier System
Principle: First-come, first-served basis for granting mining leases.Governed by Section 11(1) of the MMDR Act (before 2015).
Process:
Any interested party could apply for a mineral concession.
Priority was given to the first applicant who met the eligibility criteria.
Holders of Prospecting Licenses (PL) had preferential rights for obtaining Mining Leases (ML).
Issues with OMA:
Lack of transparency – led to allegations of favoritism and corruption.
Speculation and hoarding – companies acquired mineral-rich land but
didn’t always develop it.
Revenue loss – the government couldn’t maximize earnings as leases were
not auctioned.
Shift to Competitive Regime – The 2015 Amendment
Competitive Auction System Introduced: Mining leases & composite licenses are now granted through bidding processes. Highest bidder gets the mineral block, ensuring fair market pricing.
Prospecting License (PL) & Mining Lease (ML) linkage removed: Holders of PL no longer have a preferential right to a mining lease.
New Provisions:
Section 10B: Competitive bidding for granting Mining Leases.
Section 11A: Auction of mineral blocks by the government.
Competitive Regime – Post-2015
✔ Transparent e-auctions for mining leases.
✔ Fair pricing & revenue maximization.
✔ Eliminates hoarding & favoritism.
Challenges: High entry costs, bureaucratic delays.
Mineral Concession
Mineral concession refers to the legal grant or authorization given by the government allowing them explore, prospect, or mine specific mineral resources within a designated area.
It typically includes the following key elements:
Exclusive Rights: The holder of the concession has the exclusive right to explore or mine minerals in a specified region.
Conditions: The concession is subject to specific conditions, such as environmental regulations, royalty payments, and adherence to mining laws.
Duration: The concession is granted for a defined period, which may vary based on the type of mineral and applicable regulations.
Resource Tender (Competitive Resource
Tender - CRT)
Competitive Resource Tender (CRT) refers to the process of allocating mineral resources through a competitive bidding process, primarily via e-auctions. This system ensures transparency, efficiency, and maximization of government revenue.
The MMDR (Amendment) Act, 2015 established competitive auctions as the primary method for granting mineral concessions, replacing the
previous “first-come, first-served” approach. Key provisions include:
Section 10B: Competitive bidding for Mining Leases (ML).
Section 11A: Auctioning of mineral blocks by Central or State Governments.
Section 17A: Allows the reservation of certain minerals for specific uses.
Mineral (Auction) Rules, 2015: Outlines procedures for conducting mineral auctions.
Reconnaissance Permit
Section 3
(ha) “reconnaissance operations” means any
operations undertaken for preliminary prospecting of a mineral through regional, aerial, geophysical or grochemical surveys and geochemical mapping, and include pitting, trenching, drilling and sub-surface excavation
(hb) “reconnaissance permit” means a permit granted for the purpose of undertaking reconnaissance operations
(g) “prospecting licence” means a licence granted for the purpose of undertaking prospecting operations
(h) “prospecting operations” means any operations undertaken for the purpose of exploring, locating or proving mineral deposits
How Exploration Licences Are Granted
(Reconnaissance & Prospecting)
Process of Grant
State Government identifies areas for exploration and notifies them for auction.
E-auction is the mandatory process for granting Exploration Licences (EL) for reconnaissance and prospecting, as per Section 10BA(6).
Central Government may intervene if the State Government fails to conduct the auction process and may even conduct it themselves (Section 10BA(7)).
Term of Grant (Duration)
Exploration Licences (EL) are granted for 5 years from the date of execution of the licence (Section 10BA(10)(a)).
After 3 years, if the holder needs more time to complete exploration, they can apply for an extension.
The extension can be granted for a maximum period of 2 more years (Section 10BA(10)(b)).
Conditions of Grant
Land Retention:
After 3 years, the holder can retain only 25% of the total area covered under the EL for further reconnaissance or prospecting.
The remaining 75% must be surrendered after submitting a report to the State Government. This is to ensure that the exploration is
meaningful, and land is not unnecessarily held without progress (Section 10BA(11)).
Geological Report Submission:
The holder must submit a geological report within 3 months of completion of the operations or upon expiry of the EL, whichever
is earlier. This report should explain the findings of the reconnaissance and prospecting operations (Section 10BA(12)).
If the geological report is not submitted, the State Government may impose penalties or take other actions (Section 10BA(13)).
Renewal of Exploration Licence
Exploration Licence (EL) can be extended once for a maximum of 2 years beyond the initial 5-year period if the holder is unable to complete the exploration due to reasons beyond their control (Section 10BA(10)(b)).
After 3 years of exploration, only 25% of the area can be retained, with the remaining 75% surrendered
Mining Lease Auction after Exploration
Government must initiate the auction for Mining Lease (ML) within 6 months of receiving the geological report (Section 10BA(14)).
Complete ML auction within 1 year of geological
report submission.
If the auction is not completed, the Exploration
Licence holder may receive compensation.
Financial Share for EL Holders
Exploration Licence holders are entitled to a share from the Mining Lease (ML) auction proceeds if mineral deposits are discovered (Section 10BA(8)).
Procedure for Allotment of Mining Lease as per MM(D&R) Amendment Act, 2015:
-
Identification of Mineral block:
Mineral bearing block(s) alongwith the non-mineralization area for ancillary activities (dumping, stocking etc.) shall be identified by the State Govt. -
Demarcation of the identified mineral block area:
a) Detailed survey of the mineral bearing block(s) by using electronic total station and demarcation of the boundary coordinates by using DGPS.
b) Preparation of a precise map with revenue survey details and classification of land (Govt. land, Forest land, other than Govt. land etc). -
Resource evaluation of mineral block:
Preparation of geological report upto G2 level of mineralization established in the area to be auctioned in accordance with Minerals
(Evidence of Mineral Content) Rules, 2015. -
Eligibility for Mining Lease:
Applicant shall be an Indian National, or a company as defined in Section 5(1)(a) of Mines & Minerals (Development & Regulation) Act, 1957 and Schedule-I of Mineral (Auction) Rules, 2015. -
Electronic Auction:
a. Auction only through an online electronic auction platform.
b. State Govt. shall utilize any online electronic platform which meets the technical & security requirements as specified in the guidelines for
compliance to quality requirements of e-Procurement Systems issued by the Standardization Testing and Quality Certification Directorate, Dept. of Information Technology, Ministry of Communications & Information Technology, Govt. of India.
c. Platform provider for e-auction is Metal Scrap Trade Corporation Limited (MSTC) and for Legal/Technical Bid Provider is SBI Capitals Ltd appointed by the Ministry of Mines, Govt. of India. -
Bidding Parameters:
The State Govt. decides the minimum percentage of the average price of mineral, arrived by mineral despatched in a month and sale price of the mineral (grade-wise and State-wise) as published by Indian Bureau of Mines for such month of despatch which shall be known as the ‘reserve price’. -
Bidding Process:
a. Notice inviting Tender:
State Govt. issues notice inviting tenders with particulars of mineral block, land classification, estimated mineral reserves in terms of
quality & quantity as per the Mineral (Evidence of Mineral Content) Rules, 2015.
b. Tender Document:
State Govt. issues Tender Document with particulars of geological report specifying details of estimated quantities of all mineral(s)
discovered in the area as per Minerals (Evidence of Mineral contents) Rules, 2015 alongwith Revenue survey and land classification details.
c. State Govt. provide fixed period to study tender document and bidding process shall commence only on expiry of such period. - The auction is by an ascending forward online electronic auction and comprises of the following (2) rounds.
a. First Round:
i. Bidder shall submit a technical bid comprising amongst others:
a. Documentary evidence to confirm eligibility as per the provisions of the Act and Rules.
b. Bid security and such other documents.
c. Payments as may be specified in the tender document.
d. An initial price offer which shall be a percentage of value of mineral despatched.
ii. Only those bidders who are found to be eligible, whose initial price offer is equal to or greater than the reserve price, referred to as
“technically qualified bidders”, shall be considered for the second round of auction.
iii. The highest initial price offer amongst the technically qualified bidders shall be the ‘floor price’ for the second round of online
electronic auction.
iv. The technically qualified bidders shall be ranked on the basis of the descending initial price offer submitted by them and the technically qualified bidders holding the first fifty percent of the ranks (with any fraction rounded off to higher integer) or the top five
technically qualified bidders, whichever is higher, shall qualify as qualified bidders for participating in the second round of electronic
auction.
Provided that where the total number of technically qualified bidders is less than three, then no technically qualified bidder shall
be considered to be qualified bidder and the auction process shall be annulled.
Provided further that the State Govt. may, in its discretion, decide not to annul the auction process if even in the third or subsequent
attempt the total number of technically qualified bidders continues to be less than three and the State Government may, in such case,
decide to consider the technically qualified bidders as qualified bidders so as to continue with the bidding process.
Provided also that if the number of technically qualified bidders is between three and five, then all the technically qualified bidders
shall be considered as qualified bidders.
Provided also that in the event of identical initial price offers being submitted by two or more technically qualified bidders, all such
technically qualified bidders shall be assigned the same rank for the purposes of determination of qualified bidders and in such case, the aforementioned fifty percent shall stand enhanced to fifty percent plus the number of technically qualified bidders, whose initial price offers are identical less the number of such identical initial price offers.
b. Second Round:
i. The qualified bidders may submit their ‘final price’ offer which shall be a percentage of value of mineral despatched and greater than
the ‘floor price’.
Provided that the final price offer may be revised till the conclusion of the auction as per the technical specifications of the auction
platform.
ii. The auction process shall be annulled if none of the qualified bidders submits a final price offer on the online electronic auction
platform.
iii. The qualified bidder who submits the highest final price offer shall be declared as the “preferred bidder” immediately on conclusion of
the auction. -
Grant of Mining Lease:
(1) The preferred bidder shall submit the first installment being ten per cent of the upfront payment.
(2) State Govt. issues ‘letter of intent’ to preferred bidder.
(3) Preferred bidder shall be considered to be the “successful bidder” upon
(a) Compliance of all the terms & conditions of eligibility;
(b) Payment of the second installment being ten per cent of the upfront payment.
(c) Furnishing ‘performance security’, an amount of 0.50% of the value of estimated resources, which shall be adjusted every five years so that it continues to correspond to 0.50% of the
reassessed value of estimated resources.
(d) Submission of Approved Mining Plan.
(4) The successful bidder shall sign the Mine Development & Production Agreement with the State Govt. with all requisite permissions/clearances for commencement of mining operations.
(5) The successful bidder shall pay the third installment being eighty per cent of the upfront payment and upon such payment the State Govt. shall grant a mining lease to the successful bidder.
(6) The Mining Lease Deed shall be executed by the State Govt. within thirty days of the date of completion of the conditions.
(7) Where subsequent to the auction, any new mineral is discovered, the holder of mining lease shall follow Mineral Concession Rules for
inclusion of such new mineral in the Mining Lease Deed.
(8) Where, prior or subsequent to the auction, presence of minor mineral is established or discovered, such minor minerals shall be dealt in accordance with such rules made by the State Govt.
(9) The date on which a duly executed Mining Lease Deed is registered shall be the date of commencement of the mining lease.
Upfront payment for mining lease:
(1) An amount equal to 0.50% of the value of estimated resources shall be the upfront payment.
(2) The upfront payment shall be payable to the State Govt. in three installments of ten per cent; ten per cent; and eighty percent and shall be adjusted in full against the amount paid within the first five years of commencement of production of mineral.
