By Nageshwar Patnaik in Bhubaneswar, June 11, 2021: The treasury has its source in the mines. Kautilya also known as Chanakya or Vishnugupta – one of one of the earliest known political thinkers and king makers, has said this in Arthasasthra. Minerals bring revenue to the government and the state owns all the minerals above or under the ground. Mineral resources in India are adequately rich, widespread and are of huge varieties which provide the nation with a strong industrial base.

However, in our country mining accounts for a meager 1.75% Gross Domestic Product (GDP) compared to 7% of the GDP of South Africa and Australia. Still worse is the fact that of the 2,904 large mining leases for major minerals like iron ore and coal, 1,900 have been lying unused for years. States have been able to auction off only seven mining leases so far out of the 143 such mines listed for auctioning since 2015. The states were getting about Rs 10,000 crore as revenue from these mines.

Besides, mining lease in relation to 334 blocks expired on 31 March 2020, out of which 46 are working mines. Only 28 blocks have been auctioned till date. It is crystal clear that the potential is underutilised and therefore the logic follows that the Central government must intervene in the matter and streamlines the auctions which would help in better utilisation of mines and ensure flow of minerals for industries to improve production.

While no one will dispute the need for more mining, the Narendra Modi led Central government, in its attempt to speed up reforms in the mining sector, has already usurped powers of mineral-rich states by amending several provisions of Mines and Minerals (Development and Regulation) Act (MMDR). These provisions pave the way for the Centre to interfere in matters so far in the domain of states.

The structural reforms in the mines sector have come for a sharp rap from the green activists and adivasi rights activists. The reforms include doing away with the distinction between the captive and non-captive mines for future auctions, reallocation of non-producing blocks of state-owned firms, and amending some sections of the MMDR Act to help auction more mines.

The Act eliminates the restrictions on transfer of mineral concessions for the non-auctioned mines. The Act, 1957 empowers the States to manage and oversee the auction of mineral concessions except the coal, lignite, and atomic minerals. The new amendment now empowers the Central Government to notify the area and conduct auction in cases where the State Governments face trouble or fail in notifying the areas and conducting auction in a stipulated timeline. It has thus created a complex scenario where either the states will auction off mines much below par to maintain their autonomy or will have to make way for the Centre.

The essence of federalism lies in the sharing of legal sovereignty by the Centre 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. There must be resource federalism by allowing the States to manage and control their resources without interference by the Centre.

Prior to liberalization of the economy, mining leases were given mostly to public sector companies like the National Mineral Development Corporation and Steel Authority of India. For these, the states stand to collect a premium or royalty per tonne of mineral extracted. Most mineral-rich states such as Chhattisgarh, MP, Odisha, Jharkhand, Maharashtra, Goa and Rajasthan draw a huge amount of their revenue from mining.

The first and foremost change that the new Act will bring in is direct interference in the state subject. It has reduced the power of the State over control of the royalty fund available with the State. Even the State has no power to spend its own non-tax revenue. The mineral bearing States must have power to lease or decide to whom they want to lease out the mines for their maximum utilization and profit.

Even some experts apprehend that mining companies may form cartels and decide not to bid if the state government is too demanding and will then turn to the Centre to solve the issue for them. The state will then be left with the responsibility to clear all hurdles on the ground for the mining company. This assumes significance in the face of other changes that have been made in the Wildlife Act and environment policies at the central level. The powers of the gram sabha to stop mining in its area have also been diluted.

The Central government’s intrusion to the State’s domain has become amply clear with the Centre deciding to control the District Mining Fund (DMF) in the Amended Act. DMFs till now have been in the exclusive control of the district collector and through him, the state government. It is collected from mining operations in the district and often used as an emergency fund, besides its statutory use as a development fund.

For instance, Odisha utilised DMF in several districts to build fully equipped Covid-19 hospitals. But now the Centre will control the DMF directly as it reasons that 45% of the entire fund in the country remains unused because collectors don’t know where to use it and are in severe need of guidance.

Besides, the MMDR provides that a mining lease can lapse if a company does not mine for two years and the states will be able to extend concession only once, after which the mine will pass into the control of the Union government. Time only will say the long-term impact of the changes brought in the MMDR Act for states and the entire mining sector.