I

TOPIC- MINES AND MINERALS LAWS IN INDIA:

A CRITICAL ANALYSIS.

II

DECLARATION

I declare that the Assignment entitled “Mines and Minerals laws in India: A Critical

Analysis” is the outcome of my own work conducted under the supervision of Assistant

Professor Mr. Manish Yadav at Seedling School of Law and Governance, Jaipur National

University, Jaipur (Raj.)

I further declare that to the best of my Knowledge the dissertation does not contain any part

of any work, which has been submitted for the award of any degree either in this University

or in any other University / Deemed University without proper citation.

AKASH SHRIVASTAVA

Dated:-

III

CERTIFICATE OF THE SUPERVISOR

This is to certify that the research work entitled “Mines and Minerals laws in India: A

Critical Analysis” is the work done by Akash Shrivastava under my guidance and

supervision for the Partial fulfilment of the requirement of B.A.LLB. (Hons.) degree of

Seedling School of Law and Governance, Jaipur National University, Jaipur (Raj.) India.

To the best of my Knowledge and belief the assignment: (i) embodies the work of the

candidate himself; (ii) has been duly completed; and (iii) is up to the standard both in respect

of contents and language for being referred to the examiner.

Mr. Manish Yadav

Assistant Professor of Law

Supervisor

IV

ACKNOWLEDGEMENT

I would like to express profound gratitude to Mr. Manish Yadav, for his invaluable

support, encouragement, supervision and useful suggestions throughout this research work.

His moral support and continuous guidance enabled me to complete my work successfully.

His intellectual thrust and blessings motivated me to work rigorously on this study. In fact

this study could not have seen the light of the day if his contribution had not been available.

It would be no exaggeration to say that it is his unflinching faith and unquestioning support

that has provided the sustenance necessary to see it through to its present shape.

I am grateful to our Hon’ble Director Professor V. S. Mani, Seedling School of Law

& Governance, Jaipur National University, Jaipur, for his evincing keen interest in the

B.A.LLB (Hons.) course and continuous encouragement given during our period of study. I

express my regards to my all learned teachers who rendered all help as and when required.

His most valuable suggestions while vetting the study always proved handy.

My sincere appreciation also extends to all my colleagues for a fruitful and enjoyable time in

preparing for this dissertation. I must also thank and express my heartfelt gratitude to the

library staff of Jaipur National University, Jaipur, for helping me out in carrying out the

research necessary for the Assignment.

I express my deep sincere gratitude towards my mother for their blessing, patience, and

moral support in the successful completion of B.A.LLB (Hons).

AKASH SHRIVASTAVA

V

CONTENTS:

Declaration ................................................................................................................................ II

Certificate Of The Supervisor .................................................................................................. III

Acknowledgement ................................................................................................................... IV

List of Cases ............................................................................................................................. VI

Chapter 1 Introduction .......................................................................................................... - 1 -

1.1 Backdrop ................................................................................................................ - 1 -

1.2 Scheme of Study..................................................................................................... - 3 -

A. Statement of Problem ......................................................................................... - 3 -

B. Methodology ....................................................................................................... - 3 -

Chapter 2 evolution of the Mines and Minerals Laws in India. ............................................ - 6 -

3.1 Establishment of Indian Bureau Mines: ................................................................. - 6 -

3.2 Contributions and Achievements of IBM in form of Law Making: ...................... - 7 -

3.3 Legal Architecture of Mining ................................................................................. - 8 -

Chapter 3: Constitutional arrangements regarding the regulation of Mines and Minerals. .. - 9 -

3.1 Introduction ............................................................................................................ - 9 -

3.2 Constitutional Provisions : ..................................................................................... - 9 -

3.3 Judicial Scrutiny of these constitutional Guarantees: .......................................... - 12 -

Chapter 4: State Government’s Role in the implementation of Mines and Minerals Laws. - 13

-

Chapter 5: Licencing For Minerals .................................................................................... - 14 -

Chapter 6 The Mines and Minerals (Development & Regulaion) Amended Act 1957: .... - 15 -

6.1 Introduction .......................................................................................................... - 15 -

6.2 Various Provisions of The Act: ............................................................................ - 15 -

3.4 Salient features of the amended mining legislation: ............................................ - 18 -

3.5 Promulgation Of Various Rules to Implement the Provisions of Act: ................ - 21 -

Chapter 7 The Mines and Minerals (Development and Regulation) Bill, 2011 ................. - 22 -

7.1 Highlights of the Bill ............................................................................................ - 22 -

7.2 Key Issues and Analysis ....................................................................................... - 22 -

Chapter 8 Conclusion:......................................................................................................... - 24 -

VI

LIST OF CASES

Cases

Baijnath Kadio v. State of Bihar 1969 (3) SCC 83 ............................................................. - 12 -

Bharat Coking Coal Ltd. v. State of Bihar and Ors. 1990 (4) SCC 557 ............................. - 12 -

Krishna Chandra Gangopadhyaya.. v. Union of India & Ors. AIR (1975) SC 1389 ........... - 2 -

Monnet Ispat and Energy v. Union of India and Ors, (2012) 11 SCC 1 ............................. - 12 -

Pratik Sarkar, M.B. Suresh and Jitendra Laxman Thorve v. State of Jharkhand 2008 (56) 1

BLJR 660 ........................................................................................................................ - 12 -

State of Orissa v. M.A Tulloch and Company AIR 1964 SC 1284 .................................... - 12 -

State Of West Bengal vs. Union Of India 1964 SCR (1) 371. .............................................. - 1 -

State Of West Bengal vs. Union of India AIR 1963 SC 1241 .............................................. - 1 -

Union of India v. R. S. Dhillon, [1972] 2 SCR 33. ............................................................... - 2 -

- 1 -

CHAPTER 1 INTRODUCTION

1.1 BACKDROP

The essence of federalism lies in the sharing of legal sovereignty by the Union and the

federating units. And, in general, the most precise way of demarcating the respective areas of

the federation and federating units is to demarcate their respective areas in regard to

legislation.1 There are many reasons for this; but one of the most important, is the

demarcation of legislative power which helps in defining boundaries that of the executive

power also, as usually the former controls the latter.

The Indian Constitution is a federal form of constitution and under the Constitution of India

the Political sovereignty is divided between the constitutional entities, that is the Union and

states, who are juristic personalities possessing properties and functioning through the

instrumentalities created by the Constitution. The Indian Constitution accepts the federal

concept and distributes the sovereign powers between the coordinate constitutional entities,

namely, the Union and the states. 2

This is regulated by other provisions of the Constitution and there is no provision which

enables one unit to take away the property of another except by agreement.3 Both Parliament

and the Legislature of a State can make a law providing for the acquisition and requisitioning

of property for Union or State purposes.

The obvious intention behind the Act is to enable the machinery of democratic Government

to function more efficiently and effectively.4 It could hardly be construed is an Act meant to

thwart democratic methods of Government.

1 Mr. Justice, E. S. Venkataramiah and P. M. Bakshi, Indian Federalism (1992), pages 72-73, para 7.1

2 J. Subba Rao, State Of West Bengal vs. Union of India AIR 1963 SC 1241, 1964 SCR (1) 374.

3 State Of West Bengal vs. Union Of India 1964 SCR (1) 371.

4 Union of India v. R. S. Dhillon, [1972] 2 SCR 33.

- 2 -

Development of mines and minerals 'to the extent to which such regulation and development

under the control of the Union is declared by Parliament by law to be expedient in the public

interest.5 Power to legislate for regulation and development of mines and minerals under the

control of the union would by necessary implication include the power to acquire mines and

minerals.6

5 Krishna Chandra Gangopadhyaya.. v. Union of India & Ors. AIR (1975) SC 1389.

6 State of West Bengal v. Union of India, AIR 1963 SC 1241

- 3 -

1.2 SCHEME OF STUDY

A. Statement of Problem

To study and analyze the laws related to Mines and Minerals in India. To study the

Legislative framework or constitutional arrangement for the regulation and development for

the same. To analyse the process of adjudication in case of let-down to follow the rules

guaranteed under the specific laws made in this behalf Methodology. To scrutinize the

judicial approach in determining the conflict arose between the centre and state.

B. Methodology

a) Objectives

The objectives of the study are as follows:

(i) To trace the history and development of laws relating to Mines and Minerals.

(ii) To Study the constitutional mechanism for the development of Mines and

Minerals.

(iii) To analyse the provisions of the Mines and Minerals (Development and

Regulation) Act, 1957(Amended Act 2012.)

(iv) To analyse the modification under the Mines and Minerals (Development and

Regulation) Bill, 2011.

b) Hypothesis

The era of globalization and privatization has brought changes in the prevailing

circumstances of the country’s scenario and the demands of the people has to be fulfilled

in accordance of that.

Although the power to legislate over the issues of mines and minerals has been

guaranteed to state also but the ultimate power has been given in the hands of the Union

and the state is just working as care taker of the property which is having a ownership of

the Union.

- 4 -

c) Data Collection

In order to approach the prescribed objectives of study, doctrinal model of research methodology

is proposed, intensive literature review on the subject would be applied and the issues under

study would be examined in a systematic manner. E-resources have majorly contributed in

writing of this dissertation for getting the most relevant and latest information on the relevant

websites which has helped the researcher to explore the subject through various dimensions. The

data from secondary sources such as, journals, cases and news articles are critically analysed to

bring the research in this shape. The researcher has collected information from all these sources

and has attempted to critically analyse the same and form a reasoned paper giving importance to

the core issues. The broad facets of the study are indicated in terms of proposed chapters.

- 5 -

CHAPTERISATION

The Present study is divided into eight chapters. The First chapter deals with the necessity

behind adoption of these laws. The Second Chapter provides an insight about the evolution

of the Mines and Minerals Laws in India. The Third Chapter deals with The Constitutional

arrangements regarding the regulation of Mines and Minerals Laws. The Fourth Chapter

deals with the State Government’s Role in the implementation of Mines and Minerals Laws.

The Fifth Chapter deals with Licencing for Minerals. The Sixth Chapter deals with the

provisions of the MMDR Act, 1957. The Seventh Chapter deals with provisions and the

adaptions which are pending as The Mines and Minerals (Development and Regulation) Bill,

2011. The Eighth Chapter deals with the conclusion.

- 6 -

CHAPTER 2 EVOLUTION OF THE MINES AND MINERALS LAWS IN INDIA.

Minerals and metals have played an important role in civilization and progress of mankind.

From Stone Age to the present day, minerals have played a vital role in the growth of

civilization.

Many evidences show that exploitation of minerals like coal, iron ore; copper, lead zinc has

been going on in the country from time immemorial. The earliest and most authentic record

of information relating to minerals in India is found in ‘Arthasastra’, a treatise composed by

Kautilya famously known as Chanakya, between 321 and 296 B.C. This treatise gives a

comprehensive account of the properties of ores of minerals and metals with the methods of

their large scale production and treatment as well as the manufactures of alloys like brass,

bronze and also gold and silver alloys with base metals.

3.1 ESTABLISHMENT OF INDIAN BUREAU MINES:

The Mineral Policy Conference held in January 1947 resulted in adoption of the Mines and

Minerals (Regulation and Development) Act, 1948, the first legal framework in independent

India for the regulation and development of mines. The Mines and Mineral (Regulation and

Development) Act 1948 received the assent of the Governor General on 8th

September 1948.

The Act empowers the Central Government to regulate mines and oilfields and mineral

development on the lines contemplated in the Industrial Policy Resolution of the 6th April

1948. The deliberations of the conference led to the establishment of the Indian Bureau of

Mines (IBM) in March 1948 as the main regulatory agency for monitoring and supervising

mining activity in the country.

With the adoption of the Constitution of India on 26th January 1950, the legislative powers of

the Central government and the State governments were clearly defined. Entry 54 of List I in

the Seventh Schedule of the Constitution empowered the Central government to regulate

mining activities and the development of minerals. Entry 23 of List II in the Seventh

- 7 -

Schedule empowered the state governments to frame rules and regulations in 4 respects of

mining activities and mineral development, subject to the provisions of List I.

3.2 CONTRIBUTIONS AND ACHIEVEMENTS OF IBM IN FORM OF LAW MAKING:

The important contributions and achievements made by IBM since its constitution are

enlisted:

During the first two years, IBM functioned mostly as an advisory body7 and helped the

Government in framing mining legislation namely:

Mines & Minerals (Regulation & Development) Act, 1948.

Mineral Concession Rules 1949.

Petroleum Concession Rules, 1949.

Mineral Conservation & Development Rules, 1955.

Mineral Conservation & Development Rules 1958.

Mining Leases (Modification of Terms) Rules, 1956.

IBM extended advisory role to the Government in framing the Mineral Conservation and

Development Rules 1988.8

In pursuance of the reforms initiated by the Government of India in July, 1991 in fiscal,

industrial and trade regimes, the National Mineral Policy was announced in March, 1993. The

National Mineral Policy recognized the need for encouraging private investment, including

foreign direct investment and for attracting state-of-the-art technology in the mineral sector.

Further, the policy stressed that the Central Government, in consultation with the State

Governments, shall continue to formulate legal measures for the regulation of mines and the

development of mineral resources to ensure basic uniformity in mineral administration so that

7 JOURNEY OF INDIAN BUREAU OF MINES, page 10, available at; http://ibm.gov.in/reportch1.1.pdf , last

accessed on 24th

Sep 2013.

8 Ibid, page 22.

- 8 -

the development of mineral resources keeps pace, and is in consonance with the national

policy goals.

In furtherance of the objective of the National Mineral Policy, the MMDR Act, 1957 has

been amended twice in 1994 and 1999. The Mineral Concession Rules, 1960 (MCR) and the

Mineral Conservation and Development Rules 1988 (MCDR), framed under the MMDR Act,

1957 have also been modified.

3.3 LEGAL ARCHITECTURE OF MINING

- 9 -

CHAPTER 3: CONSTITUTIONAL ARRANGEMENTS REGARDING THE REGULATION OF MINES

AND MINERALS.

3.1 INTRODUCTION

The Constitutional arrangements regarding the regulation of Mines and Minerals

Development are generally on the lines of Government of India Act, 1935, except that the

Entry relating to “Oil fields” has been dealt with in a separate Entry, of the Union List in the

Constitution. (Entry 53 List I).

Parliament has enacted the Mines and Minerals (Regulation and Development) Act, 1957

(MMRD Act) to “provide for regulation of mines and the development of minerals under the

control of the Union” in public interest.

3.2 CONSTITUTIONAL PROVISIONS :

The Provisions under Indian Constitution on the subject of distribution of legislative powers

between the Union and the States are spread out over several articles (articles 245-254).

In the federal structure of India, the State Governments are the owner of minerals located

within the boundaries of the State concerned. Although mineral wealth vests with the State

Govt., yet the subject of regulation of Mines and Minerals development is covered under 7th

schedule of constitution of India. Rule making powers in respect of minor minerals have been

delegated to the States under section 15 of the MMDR Act, 1957.9

In accordance with article 297 of the Constitution, the Central Government is the owner of

the minerals underlying the ocean within the territorial waters or the Exclusive Economic

Zone of India. In this connection, entry at serial No. 23 of List II (State list) to the

Constitution provides that ‘Regulation of mines and mineral development subject to the

provisions of List I with respect to regulation and development under the control of the

Union’, are within the purview of States while entry at serial No. 54 of List I states that

9 Mines and Minerals (development and regulation) Act, 1957.

- 10 -

‘Regulation of mines and mineral development to the extent to which such regulation and

development under the control of the Union is declared by Parliament by law to be expedient

in the public interest’ shall be within the purview of the Central Government. In pursuance to

entry at serial No. 54 of List I, Parliament has passed legislation titled ‘The Mines &

Minerals (Development and Regulation) Act, 1957’ as Central Act (No. 67 of 1957)

Conflicts do arise as to how much of the field of Entry 23 of List II has been taken over by

Parliament by enacting the MMRD Act, 1957 by virtue of Entry 54 of List I. Conflicts can

also arise when States impose taxes under Entries 18, 49 and 50 of List II. The Constitutional

position with regard to Entries on regulation of mines and minerals development and the

related Entries in List I and II, therefore, needs to be examined. The Supreme Court has

considered these points in a number of reported cases.

The power of the State legislature under Entry 23 has been made subject to the provisions of

List I with respect to regulation and development under the control of the Union. Parliament

enacted the MMRD Act. A question arose in regard to the extent of the legislative power of

the State following an enactment under Entry 54 of List I. It was held by the Supreme Court:

“The jurisdiction of the State legislature under Entry 23 is subject to the

limitations imposed by the latter part of the Entry. If Parliament by its law has declared that

regulation and development of mines should in public interest be under the control of the

Union, to the extent of such declaration the jurisdiction of the State Legislature is excluded.

In other words, if a Central Act has been passed which contains a declaration by Parliament

as required by Entry 54, and if such declaration covers the field occupied by the impugned

Act, the impugned Act, will be ultra vires not because of any repugnance between the two

statutes but because the State legislature has no jurisdiction to pass a law. The limitation

imposed by the latter part of Entry 23 is a limitation on the legislative competence of the

State Legislature itself”.

- 11 -

The findings in this case have been followed in other cases. In a subsequent case, the Supeme

Court held:

“Subject to the provisions of List I, the power of the State to enact Legislation on the

topic of “mines and minerals development” is plenary. To the extent to which the Union

Government had taken under “its control” “the regulation and development of minerals”

under Entry 54 of List I so much was withdrawn from the ambit of the power of the State

Legislature under Entry 23 of List II and legislation of the State which had rested on the

existence of power under that Entry would, to the extent of the “control”, be superseded or be

rendered ineffective; for here we have a case not of mere repugnancy between the provisions

of the two enactments but of denudation or deprivation of State legislative power by the

declaration which Parliament is empowered to make under Entry 54 of List I and has made.

The Central Act 67 of 1957 covered the entire field of minerals development that being the

“extent” to which Parliament had declared by law that it was expedient that the Union should

assume control”.

The result, therefore, of Parliament having occupied the entire field is that the State

legislature thereafter lacks legislative competence and consequentially, executive authority in

regard to regulation and development of mines and minerals. Therefore, where a law is

attributable in pith and substance to Entry 23 of List II, it would not be valid in as much as

Parliament has occupied the entire field.

States have legislative competence with respect to land and connected matters under Entry 18

of List II and regarding taxes on lands and buildings under Entry 49 of List II. Conflicts have

arisen in the matter of levies under Entries 18, 49 and 50 of List II on the ground that they

impinge upon Entry 54 of List I. These Entries should also be read with Entry 54 of List I.

The State Legislatures' competence is not taken away unless it is shown that in pith and

substance the enactment relates to Entry 23 of List II.

- 12 -

3.3 JUDICIAL SCRUTINY OF THESE CONSTITUTIONAL GUARANTEES:

State is just an owner of the land and the Minerals:

Under the Mines and minerals ( Development and regulation) Act, 1957 State Legislature

was completely denuded of its power to legislate in respect of mines and minerals and

consequently, the State Government had ceased to have any Executive power in respect of

mines and minerals though it remained to be owner of the land and the minerals.10

10

State of Orissa v. M.A Tulloch and Company AIR 1964 SC 1284; Baijnath Kadio v. State of Bihar 1969 (3)

SCC 838; Bharat Coking Coal Ltd. v. State of Bihar and Ors. 1990 (4) SCC 557; Pratik Sarkar, M.B. Suresh and

Jitendra Laxman Thorve v. State of Jharkhand 2008 (56) 1 BLJR 660; Monnet Ispat and Energy v. Union of

India and Ors, (2012) 11 SCC 1.

- 13 -

CHAPTER 4: STATE GOVERNMENT’S ROLE IN THE IMPLEMENTATION OF MINES AND

MINERALS LAWS.

The State Governments grant the mineral concessions for all the minerals located within the

boundary of the State, under the provisions of the Mines and Minerals (Development and

Regulation) Act, 1957 (MMDR) and Mineral Concession Rules, 1960 ( MCR) framed

thereunder. Under the provisions of the MMDR Act, 1957 and MCR, 1960, prior approval of

the Central Government is required in the following cases:

Granting mineral concessions in respect of minerals specified in the First Schedule to

the Mines and Minerals (Development and Regulation) Act, 1957.

Granting areas under prospecting licence and mining lease to a person in excess of

limits prescribed under Section 6(1) (a) and Section 6(1) (b) of the Act.

Imposing special condition(s) in mining lease under Rule 27(3), in prospecting licence

under Rule 14(3) and in reconnaissance permit under Rule 7(3) of Mineral

Concession Rules, 1960 over and above the conditions prescribed in MCR, 1960.

Granting mineral concession in an area previously reserved by the Government, or

previously held under a mineral concession, without first notifying the same by

relaxing the provisions of Rule 59(1) under # Rule 59(2) of MCR, 1960.

Revision of any order made by State Government with respect to any mineral except a

minor mineral. (Section 30 of MMDR Act.)

Relaxation of Rules in special cases under Section 31 of the Act, keeping in view the

interest of mineral development.

- 14 -

CHAPTER 5: LICENCING FOR MINERALS

There are three kinds of mineral concessions, (i) Reconnaissance Permit (RP), (ii)

Prospecting License (PL) and (iii) Mining Lease (ML).

RP is granted for preliminary prospecting of a mineral through regional, aerial, geophysical

or geochemical surveys and geological mapping. The RP for any mineral or prescribed group

of associated minerals is granted for 3 years and for a maximum area of 5,000 sq. km, to be

relinquished progressively. After 2 years, the area should be reduced to 1,000 sq. km or 50%

of the area granted, whichever is less. At the end of 3 years, area held under an RP should be

reduced to 25 sq. km. In a State, a person can be granted a maximum area of 10,000 sq. km

under RP subject to the condition that area in a single RP does not exceed 5000 sq. km. A RP

holder has preferential right to obtain PL(s) in the area concerned.

PL is granted for undertaking operations for the purpose of exploring, locating or proving

mineral deposit. A PL for any mineral or prescribed group of associated minerals is granted

for a maximum period of 3 years. A PL can be renewed in such a manner that the total period

for which a PL is granted does not exceed 5 years. In a State, a person can be granted a

maximum area of 25 sq. km in one or more PLs, but if the Central Government is of the

opinion that in the interest of development of any mineral it is necessary to do so, the

maximum area limit can be relaxed. A PL holder has preferential right to obtain ML in the

area concerned.

ML is granted for undertaking operations for winning any mineral. A ML for any mineral or

prescribed group of associated minerals is granted for a minimum period of 20 years and a

maximum period of 30 years. A ML can be renewed for periods not exceeding 20 years each.

In a State, a person can be granted a maximum area of 10 sq. km in one or more MLs, but if

the Central Government is of the opinion that in the interest of development of any mineral it

is necessary to do so, the maximum area limit can be relaxed.

- 15 -

CHAPTER 6 THE MINES AND MINERALS (DEVELOPMENT & REGULAION) AMENDED ACT

1957:

6.1 INTRODUCTION

The MMDR 1957 is basically the main legislation which lays down the (legal) framework for

the regulation of mines and development of minerals other than petroleum and gas. Since its

enactment, the Act has undergone a series of amendments from time to time. Prior to 1990,

the amendments made in the Act (in 1972 and 1986) basically enhanced government control

on mining.11

On the other hand, the amendments carried out in 1994 and 1999 and the

associated revision of the relevant rules have somewhat liberalized the procedures for

granting mineral concessions and facilitating private sector including foreign investment into

the sector. Also, provisions relating to environment have been introduced through those

amendments.

6.2 VARIOUS PROVISIONS OF THE ACT:

The MMDR Act 1957 as amended is divided into the following broad areas:-

Preliminary (Section 1-3)

General restrictions on undertaking reconnaissance, prospecting and mining

operations (Sections 4-9a)

Procedure for obtaining reconnaissance permits, prospecting licenses or mining

leases in respect of land in which the minerals vest in the Government (Sections

10-12)

11

SUSTAINABLE DEVELOPMENT Emerging Issues in India’s Mineral Sector, Sponsored by Planning

Commission Government of India, May 2012, page 56. available at;

http://planningcommission.nic.in/reports/sereport/ser/isid_mining%20_report1206.pdf, Last accessed on 24th

September 2013.

- 16 -

Rules for regulating the grant of prospecting licenses and mining leases (Sections

13-16)

Special powers of the Central Government to undertake reconnaissance,

prospecting and mining operations in certain cases (Sections 17-17A)

Development of minerals (Sections 18-18A)

Miscellaneous issues (Sections 19-33)

The First Schedule – Specified Minerals

The Second Schedule – Rates of Royalty

The Third Schedule – Rates of Dead Rent

The MMRD Act, 1957 mainly deals with general restrictions on prospecting and mining

operations and the rules and procedures for regulating grants of prospecting licences and

mining leases. Section 2 of the Act makes a declaration that it is expedient in the public

interest that the Union should take under its control the regulation of mines and the

development of minerals to the extent provided in the said Act. In Section 3, the words

“Minerals”, “Mineral Oils”, “Minor Minerals” have been separately defined. State

Governments are competent to give licences for prospecting and for granting mining leases.

The Act specifically provides that in the case of minerals included in the First Schedule to the

Act, the State Governments shall not grant or renew, prospecting licences or mining leases

without the prior permission of the Union Government.12

Section 4 lays down that reconnaissance and prospecting for minerals and subsequent mining

operations can be undertaken only after obtaining the relevant concessions from the

Government in the form of reconnaissance permit, prospecting license or mining lease

respectively. This and the following sections 4Ato 8 prescribe various conditionalities under

12

Ibid page 58.

- 17 -

which these concessions can be granted by the concerned State Governments in respect of the

minerals present in their respective territories.

The main limitation and condition governing the State Government’s powers to grant mining

licenses and leases is the requirement in Section 5 that “in respect of any mineral specified in

the First Schedule no reconnaissance permit, prospecting licenses and mining lease shall be

granted except with the previous approval of the Central Government”. Most of the important

major minerals like coal and lignite, (part of Schedule I) atomic minerals, (Part B) iron ore,

zinc, gold, zinc and precious stones (Part C) are covered by this condition.

Another requirement laid down in Section 5(2)(6) is that no mining lease can be granted by

the State Government unless it is satisfied that there is a mining plan duly approved by the

Central Government (or the State Government in specified areas) for the development of

mineral deposits in the area concerned.

Section 6, 7 and 8 prescribe the maximum area and period for which reconnaissance permits

(ten thousand square kilometers and three years), prospecting license (twenty five square

kilometers and five years) and mining leases (ten square kilometers and thirty years) can be

granted. The Central Government, however, has the power to relax the area ceiling if such

relaxation is considered necessary for mineral development. There are also provisions for

renewal of mining leases by the State Government with the rider that the renewal of mining

leases in respect of coal and lignite and atomic minerals prior approval of the Central

Government will be mandatory.

Section 11 gives preferential right to the holders of a reconnaissance permit or prospecting

license for obtaining a prospecting license and mining lease respectively over any other

person in respect of the mineral explored in a particular area of land.

- 18 -

Sections 4 to 12 of the Act deal with the conditions and procedures and other allied matters

regarding the prospecting or mining operations under licence or lease. Sections 13 and 13A

deal with the rule making power of the Central Government.

It is, however, significant that Section 14 provides that Sections 4 to 13 of the Act shall not

apply to minor minerals. Further, Section 15 provides that the State Government's may by

notification in the Official Gazette make rule for regarding grant of quarry-lease, mining-

lease or other mineral concessions in respect of minor minerals and for the purposes

connected therewith. A combined reading of Section 4 to 13 and Section 14, 15 and 18 show

that while Parliament's enactment (viz., the MMRD Act) has occupied the entire field, it has

specifically exempted minor minerals from the application of Sections 4 to 12 and has also

empowered the State Governments in respect of minor minerals.

3.4 SALIENT FEATURES OF THE AMENDED MINING LEGISLATION:

(i) There is no restriction on foreign equity holding in mining sector companies

registered in India.

(ii) There is a greater stability of tenure of mineral concessions, since the minimum

period of a mining lease is twenty years and a maximum period of thirty years. A

mining lease may be renewed for a period not exceeding twenty years and may again

be renewed for a period not exceeding twenty years in respect of minerals specified in

Part C of the First Schedule of the Act. In respect of minerals specified in Part A and

B of the First Schedule of the Act such renewal may be granted with the previous

approval of the Central Government. The period of prospecting license now is three

years, with possibility of renewal for a further period of two years.

(iii) Thirteen minerals like iron ore, manganese ore, chrome ore, sulphur, gold, diamond,

copper, lead, zinc, molybdenum, tungsten, nickel and platinum group of minerals

- 19 -

which were reserved exclusively for exploitation by the public sector, have now been

thrown open for exploitation by the private sector.

(iv) With the 1999 amendment, a concept of reconnaissance operations, as a stage of

operation distinct from and prior to actual prospecting operations, was introduced.

The period of reconnaissance permit is three years. A reconnaissance permit holder

enjoys preferential right for grant of prospecting licence.

(v) Area restrictions notified for reconnaissance permit, prospecting license and mining

lease have been made applicable state-wise, instead of the country as a whole.

(vi) In 1994, fifteen minerals were removed from the list of minerals included in the First

Schedule to the MMDR Act, 1957. With further amendments in 1999, the mineral

limestone was deleted from the First Schedule, and permission of the Central

Government is now required for grant of mining lease, prospecting license, and

reconnaissance permit in respect of only ten non-fuel and non atomic minerals. These

minerals are asbestos, bauxite, chrome ore, copper ore, gold, iron ore, lead,

manganese ore, precious stones and zinc.

(vii) State Governments have been delegated powers to grant mineral concessions even for

areas which are not compact or contiguous.

(viii) State Governments have been empowered to permit amalgamation of two or more

adjoining mining leases.

(ix) State Governments have been empowered to renew prospecting licenses/mining

leases in respect of specified minerals listed in Part C of the First Schedule, and

approval of Central Government is not necessary.

(x) State Governments have been delegated powers to approve mining plans in respect of

29 non-metallic/ industrial minerals in case of open cast mines.

- 20 -

(xi) A time limit of ninety days has been prescribed for the Indian Bureau of Mines and

the State Governments to convey the decision on mining plans submitted for

approval.

(xii) Time limits have been prescribed for conveying a decision on applications for mineral

concessions, viz. six months for reconnaissance permits, nine months for prospecting

licences and twelve months for mining leases.

- 21 -

3.5 PROMULGATION OF VARIOUS RULES TO IMPLEMENT THE PROVISIONS OF ACT:

A number of rules have been promulgated in order to implement the provision of the MMDR

Act. Important rules in force under the Act are the Mineral Concession Rules (MCR) 1960,

the Mineral Conservation and Development Rules (MCDR) 1988, the Granite Conservation

and Development Rules 1999, the Marble Development and Conservation Rules 2002 and the

Colliery Control Rules 2004. The Mineral Concession Rules 1960 outline the procedures and

conditions for obtaining reconnaissance permit, prospecting license on mining lease. Access

to land, both State and private, is available for exploration and mining except in certain areas

where the Government reserves through a notification. The Mineral Conservation and

Development Rules 1988 lay down the guidelines for ensuring mining on a scientific basis

while at the same time conserving the environment. The minor minerals are separately

notified and come under the purview of the State Governments. The State Governments have

for this purpose formulated their own Minor Minerals Concession Rules.

The provision of the Mineral Concession Rules (MCR) and the Mineral Conservation and

Development Rules (MCDR) are, however, not applicable to coal, atomic minerals and

petroleum and gas. In the case of coal mining, the operators are required to comply with the

inspection and enforcement of conservation measures of the Coal Controller under the Coal

Mines (Conservation and Development) Act 1974 with a view to ensuring scientific mining.

The other important legislation relating to coalmining is the Coal Mines (Nationalization)

Act, 1973 which nationalized all coal mines (hitherto held in the private sector) and reserved

coal mining for the public sector. By an amendment to the Act in 1976, two exceptions to the

policy were introduced i.e. (i) captive mining by private companies engaged in the production

of iron and steel and (ii) sub-leasing to private parties of isolated small pockets not

amendable to economic development and not requiring rail transport. In 1993, the Act was

- 22 -

further amended to allow captive coal mining in the private sector for power generation,

washing of coal obtained from mine, cement production and the like.

CHAPTER 7 THE MINES AND MINERALS (DEVELOPMENT AND REGULATION) BILL, 2011

7.1 HIGHLIGHTS OF THE BILL

The Bill requires every person to obtain a license or lease for carrying on mining or

related activities.

A new concession instrument called a High Technology Reconnaissance-cum-

Exploration License has been introduced.

The Bill provides for two methods of granting a mineral concession – competitive

bidding where mineralisation is established and first-come-first-serve otherwise.

A District Mineral Fund (DMF) will be established in each district where there are

mining operations to make payments to affected persons.

A mining leaseholder will pay an annual amount to the DMF for the benefit of

affected persons. This will be equal to 26 per cent of profits in case of coal, and

royalty paid during the year for other minerals.

Mining leaseholders will be liable to provide annual compensation and at least one

non-transferable share to persons affected by mining operations.

7.2 KEY ISSUES AND ANALYSIS

The Bill permits allocation of mineral concession in tribal areas to a non-

tribal. There are two conflicting Supreme Court judgments on the legality

of such a provision.

- 23 -

Royalty rates are set to achieve an optimum balance between attracting

investments while maximizing revenues for the state. Mandating additional

payments to the DMF could disturb this balance.

The Bill mandates the issue of a non-transferable share to affected

persons. The Companies Act, 1956 does not permit the issuance of non-

transferable shares.

Any gap in the minimum compensation to be paid to affected families by the

DMF is to be covered by the state government. This could put pressure on

state government finances.

The Bill does not clearly define some terms, such as ‘High Technology

Reconnaissance-cum-Exploration License’.

- 24 -

CHAPTER 8 CONCLUSION:

There is a duality of control over mineral resources in India. This is the consequence of the

constitutional arrangements which provide proprietary title of onshore minerals to constituent

States while keeping the regulatory powers with the Central Government. From the initial

years after independence (1947) till about 1991, the government policy in India considered

minerals as ‘basic’ or ‘strategic’ materials and accordingly laws and regulations were

designed to strictly regulate their exploration and development which remained mostly with

public sector agencies. There was limited role for private companies and foreign investment.

During the period 1991 to 2006, the mining sector was gradually liberalized and was opened

for both domestic and foreign investment. This shift signaled a move towards

“commoditization” of minerals instead of treating them as “strategically” important as was

being done prior to 1990. Although a high-level (Hoda) Committee of the Planning

Commission recommended in 2006 for reforming the mining law, the Government has so far

produced a National Mineral Policy in 2008 and has recently (in December 2011) introduced

a Draft Mines and Minerals (Development and Regulation) Bill 2011 in Parliament for its

consideration.

The Mines Act 1952 and the Mine and Minerals (Development and Regulation) Act 1957 and

the Rules framed under these two laws are the basic legislation for the mining sector. The

environmental and forest conservation laws also infringe on the sector. A multiplicity of

central and state bureaucracies play somewhat ineffective role in administering and managing

the sector. This has resulted in illegal mining across a number of states.

The Draft Mines and Minerals (Development and Regulation) Bill 2011 is designed to

address the sector’s problems including that of sustainable mineral development. There are

doubts if the proposed legislation will be able to address the twin problems of increasing

investment and bringing about sustainable development in mining effectively.