Impact of MMDR Amendment propositions - My interview with Power Line magazine

• What are the key positives and negatives of the MMDR Bill?


Positives of the new bill are the provisions for making investments in exploration and prospecting attract risk capital and have exit options. These will help private sector investments in much needed exploration and also allow specialized firms to invest in various stages in the life of a mine. By removing restrictions in transactions of licenses, the objectives of creating better investment environment can be achieved. This will build upon the other positive move made earlier of the inclusion of competitive bidding for allocation of mineral resources. This has set the platform for efficient and transparent mechanism for allocation of resources to deserving players. While the details of the processes for various minerals are still emerging, this provision has the potential to instill confidence in the process of allocation.

The negative seems to emanate from the concerns regarding the 26% profit share for coal and one-time royalty equivalent payment for other minerals aimed at social development. The benefits of adopting sustainable development approach to mining are manifolds, which are the reasons why the Indian mining industry is willing to invest in the societies around their operations and obtain their social license to mine. Risks of antagonizing the social set up can manifest in projects being shelved or substantial cost overruns. In view of these making a mandated payment for the same, while there are challenges in effective delivery of these social goods through government-owned mechanisms has been a drawback.

• Do you think the Bill will enable speedy implementation of coal mining projects?

Speedy implementation of projects depend upon land acquisition, rehabilitation & resettlement and several clearances & approvals. The profit share for social development may help to a certain extent as the project affected people may see reasons to believe that their long term interests are likely to be protected. However, degree of its effectiveness will largely depend on the expectation of government machinery to deliver. On the clearances and approvals, whose process are labyrinthine and involve both central and state agencies, the Bill may not have provided a relief. The long standing demand from the industry for a single-window clearance system remains unmet.

• What will be the impact of the Bill on captive miners?

For the captive coal miners, in particular, the cost of power generation or any other approved end use will increase. Although in the scenario of competitive electricity procurements by the utilities, it will remain to be seen how much of the additional cost can be passed on to the consumer. This may have an impact on the attractiveness of investments in coal mining as well as power generation industries. On the operational side, the issues of determination of optimum cost of coal mining and appropriate transfer price will arise soon, which will typically determine the extent of profit share.

• What aspects, in your view, need modification or are missing?

There is a need to make process of clearances and approvals of mining and prospecting licenses predictable and time bound. The process needs objectivity and must have a defined measurable parameters for an application to be evaluated. The procedure also needs to have close coordination between the central and state agencies, which could be institutionalized through appropriate provisions in the Bill.