Indian parliament approved Mining & Minerals Development Regulation (MMDR) bill, which will bring much needed transparency and efficiency in allocating mineral resources like Iron ore, Manganese ore, Bauxite ore through auction process.
With the passing of the Coal Mines (Special Provision) Bill and Mines and Minerals (Development and Regulation) Amendment Bill, a surge of expectations has begun sweeping the country. Even as Congress resiled on its promise of backing up the bills in the Parliament, the BJP-led government emerged victorious and the bills are now designated as Acts after receiving the President’s consent.
The passing of the Acts in the Rajya Sabha is being seen as a major progressive step towards bringing order to the economy of the mining industry in India. It is receiving approvals and is being welcomed by analysts with cheer.
The mining industry, dotted with scams and run at whim of a handful of players for over 50 years, is now prepared for a transparent system of allocation of mines via e-auction. The auctioning of mines is expected to establish a smooth, quick and fair procedure for allocation of mines, providing opportunity for new players to come into the picture.
The Act allows for competitive bids for 50 year leases of various mines, extended from 30 year leases that were granted earlier. The extended period will be a comfort to the investors to execute long term planning. Increased royalty to the government on new mining leases may cause strengthening the government funds, similar to the results of Coal block auctioning.
What does MMDR Act mean for Indian mining industry ?
- All mineral leases will be granted through competitive bidding process
- Mining leases will be Valid for 50 years (current 30 years)
- Transition period for existing mining leases will be valid till 2030
for captive miners and 2020 for merchant miners
- Miners to contribute one third of royalty to DMF
- Royalty and other contribution made to state and central level will cost around 20%
- Around 199 mines will come for auction in initial round
- Auction may begin from May/June 2015
The participation from new entrants, who mostly probably would be the already existing manufacturers and end users, is likely to create a breach in the oligopolistic mining industry and may open ways for price correction of the mined minerals. Auctions may also garner interest from global contenders and thus the bill could prove to be the focal point of changes that might occur in the industry.
While opportunities seem abundant, it will take a while to determine how deep an impact this new Act will create, beginning with the level of enthusiasm from new bidders, endeavors of existing players to retain stronghold, sentiments over increased royalty and its effect on costs and benefits from mining etc.
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