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Achhe din for mining sector PDF Print E-mail
Saturday, 21 March 2015 01:22
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Transparent auctions as mining bill gets passed

 

Those despairing of the legislative logjam in recent months have reason to rejoice. While the land Bill continues to be stuck, the government has got three key pieces of legislation through—on insurancecoal mining as well as one for other minerals. The latter two are historic since nogovernment can ever again give out mines through an opaque committee-process; mines will have to be given out only through auctions and they can be given to merchant miners as well. Parliament passing two Bills in one day is historic enough, but what is noteworthy is the government’s back-channel work that ensured this while, at the same time, conceding the Opposition’s demand to send the Bills to a select committee for a quick examination. Perhaps why, when the votes for the coal Bill were flashing on Parliament’s screen, Rajya Sabha deputy chairman PJ Kurien joked that he was seeing ‘some conversion’, a reference to how some Opposition members had voted for the Bill —the Bill was supported by the AIADMK, the Biju Janata Dal, the Telugu Desam Party and the Trinamool Congress. This is hardly surprising since, as part of its philosophy of cooperative federalism, the government’s attempt has been to provide more funds and autonomy to the states—whether this translates into support for the landordinance remains to be seen, though coal and power minister Piyush Goyal suggested this in his briefing.

Apart from the massive increase in tax devolution due to the Finance Commission’s recommendations, the government had raised royalty rates in August and now, under the Mines and Minerals Development and Regulation (MMDR) Bill, existing miners will have to pay 100% more to a District Mineral Foundation (DMF) while new miners will have to pay a third of royalties to this fund—the fund, to be set up by the state governments, is to be used for development in the districts affected by the mines. In addition to the funds states will get from the current round of coal auctions, this means a sizeable amount of money for states that have large mineral reserves. And, under the MMDR law, the Centre will no longer need to grant prior approval to the states before mines are auctioned.

There is some reservation about how the current auctions are being held—a Crisil report talks of how, for just the power plants, the costs of the current auctions that cannot be passed on to consumers will be R4,500 crore per year. But if state governments keep the imposts to the minimum since they decide the DMF imposts, and mines are auctioned on a revenue-share basis as is done for oil and gas, there is no reason why this shouldn’t trigger off a mining boom—the currentsystem of bidding per tonne of coal is unlikely to yield the same results. There are some grey areas that need to be ironed out—since the royalties on Coal India’scoal will double, these will have to be passed on to consumers and it remains to be seen how state electricity boards and regulators respond to this. India may just be on the cusp of a mining revolution.

 

 

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