Country Q&A

MULTI-JURISDICTIONAL GUIDE 2014

ENERGY AND NATURAL RESOURCES

Mining in India: overview

Alice George, Manasvini Raj & Paridhi Adani
Amarchand & Mangaldas & Suresh A. Shroff
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OVERVIEW  State - List II.

1. Provide an overview of the recent developments in the
exploration and extraction of mineral resources in
your jurisdiction.
India is wealthy in its mineral resources and is largely self sufficient in the
primary mineral raw materials used in industry. The primary mineral
resources found are:
 Mineral fuels coal and lignite.
 Bauxite, chromite, iron and manganese ores.
 Metallic minerals Ilmenite and rutile.
 Almost all industrial minerals with the exception of chroysotile asbestos,
borax, fluorite, kyanite, potash, rock phosphate and elemental sulphur.
According to the latest reports released by the Indian Bureau of Mines (IBM)
in 2013, the mining and quarrying sector accounted for about 2.4% of total
GDP at US$32.381 billion. The mining sector also provides employment to
around 0.6 million people.
Some of the current major mining projects in India are:
 Development and operation of coal blocks in the State of Chhattisgarh by
Adani Mining Private Limited (a joint venture company with Rajasthan
Rajya Vidyut Utpadan Nigam Limited).
 Iron ore mining project in Kandhadhar Mines in the State of Odisha being
undertaken by POSCO.
 Iron ore mining project in Gua in the State of Jharkhand being
undertaken by Steel Authority of India.
Recent developments in mining include the introduction of the Mines and
Minerals (Development and Regulation) Bill 2011 (the MMDR Bill), which is
aimed at replacing the existing Mines and Minerals (Development and
Regulation) Act 1957 (MMDR Act). The MMDR Bill seeks to provide a better
environment for attracting both investment and technology in the mining
sector (see Question 12).
REGULATORY STRUCTURE
Regulation
2. Describe the regulatory framework for the exploration
and extraction of mineral resources in your
jurisdiction.
Regulatory framework
India has a federal structure. Power and responsibilities are divided between
the Union and the states in accordance with three lists contained in the
Seventh Schedule of the Constitution of India 1950 (Constitution). These lists
are:
 Union - List I.
 Concurrent List - List III.
The union parliament has the exclusive power to make laws on matters
enumerated in List I, the state legislatures on matters enumerated in List II
and both the Union and the states have the power to legislate on matters
enumerated in List III.
Under the Constitution, state governments have been given powers under
entry 23 of List II to regulate mines and the development of minerals, subject
to entry 54 of List I, which allows the central government to exercise powers
concerning the regulation of mines and the development of minerals to the
extent that such regulation and development is declared by the parliament to
be in the public interest. Apart from these entries, the state governments
have been granted the power to impose taxes on mineral rights under entry
50 of List II.
Minerals are classified into minor minerals and major minerals. Minor
minerals include building stones, gravel, ordinary sand and any other
minerals that the central government may declare to be a minor mineral
(Mines and Minerals (Development and Regulation) Act 1957 (MMDR Act)).
Minerals other than minor minerals are typically treated as major minerals,
including coal, manganese ore, iron ore as well as other minerals used for
industrial purposes.
The MMDR Act contains substantive and procedural law relating to the grant,
renewal and termination of reconnaissance permits (RPs), prospecting
licences (PLs) and mining leases (MLs) (see Question 4). It also sets out the
legal framework for the development of all minerals (other than petroleum
and natural gas) and the regulation of mines.
Among other things, the Mineral Concession Rules 1960 (MC Rules) outline
the procedures for obtaining an RP, PL and/or ML and the terms and
conditions of such licences or leases. In addition, the Mineral Conservation
and Development Rules 1988 (MCD Rules) ensure that mining is done on a
scientific basis, while conserving the environment.
The provisions of the MC Rules and MCD Rules are, however, not applicable
to coal, atomic minerals and minor minerals, which are regulated separately.
There are additional laws that govern the framework of coal mining in India,
which are not covered here.
The general restrictions on the undertaking of mining operations contained in
sections 4 to 9 of the MMDR Act have no application to minor minerals. The
state governments have formulated minor mineral concession rules, under
the MMDR Act, to regulate, among other things, the exploitation of minor
minerals in the respective states.
The Offshore Areas Mineral (Development and Regulation) Act 2002
regulates the development of mineral resources in territorial waters,
continental shelf, exclusive economic zone and other maritime zones of
India.
In addition to the legislation listed above, several environmental, health and
safety laws apply to the mining industry (see Questions 6 and 7).
Regulatory authorities
The Ministry of Mines is responsible for the administration of mining laws in
India. In addition, the Indian Bureau of Mines monitors and regulates mining
activity through the processing and approval of mining plans and also

© This article was first published in the Energy and Natural Resources Multi-Jurisdictional Guide 2014
and is reproduced with the permission of the publisher, Thomson Reuters.
The law is stated as at 1 March 2014.
Country Q&A
advises the government on matters in relation to the mineral industry, export
and import policies, trade, mineral legislation and related matters (see box,
The regulatory authorities).
The state governments grant mineral concessions for all minerals located
within the boundary of their respective area.
Ownership
3. How are rights to the mineral resources held, and who
holds those rights?
Proprietary rights
The relevant state government is the licensing authority in relation to all
minerals located within the boundary of the state (Mines and Minerals
(Development and Regulation) Act 1957 (MMDR Act) and Mineral
Concession Rules 1960 (MC Rules)).
The Supreme Court recently conferred rights to mineral wealth on
landowners rather than vesting them in the state (Threesiamma Jacob and
Ors. v. Geologist, Dptt. of Mining and Geology and Ors [2013 (9) SCALE 1]).
However, judicial precedent is still evolving and the Supreme Court is yet to
rule on certain aspects of ownership of minerals such as the liability of
private owners to pay royalties.
Surface rights
The holder of a reconnaissance permit (RP), prospecting licence (PL) or
mining lease (ML) has the right to enter lands over which the permit, lease or
licence has been granted and carry out all such operations as may be
prescribed (MMDR Act). The holder of a permit, licence or lease is also liable
to pay compensation in such manner as may be prescribed for any loss that
is likely to arise or has arisen from or in consequence of its operations.
In addition, where the land is not owned by an applicant for any of an RP, PL
or ML, such an applicant is required to obtain surface rights over the area or
obtain the consent of the owner to start prospecting or mining operations
(MC Rules).
Authorisation
4. What are the key features of the leases, licences or
concessions which are issued under the regulatory
regime? Can these rights be leased by the right-
holder?
The following licences are issued by the state government (Mines and
Minerals (Development and Regulation) Act 1957 (MMDR Act)):
 Reconnaissance permit (RP): an RP is for the purpose of undertaking
reconnaissance operations and is a right to perform any operations
undertaken for preliminary prospecting of a mineral.
 Prospecting licence (PL): a PL is for the purpose of undertaking
operations with respect to exploring, locating or proving mineral deposits.
 Mining lease (ML): an ML is a lease, which also includes a sub-lease,
for the purpose of undertaking mining operations with respect to
extracting minerals from the relevant mine.
For certain minerals, such as hydro carbon energy minerals (like coal),
atomic minerals, metallic and non-metallic minerals, the state governments
can only grant the licences/permits listed above with the prior approval of the
central government.
Lease/licence/concession term
RPs and PLs can be granted for any mineral or prescribed group of
associated minerals for a maximum period of three years. There is no
provision for extension by renewal of the period of an RP. The relevant state
government can renew a PL up to a maximum aggregate period of five
years. An ML must be granted for between 20 and 30 years.
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Fees
RP. An application for an RP must be accompanied by a non-refundable fee
at the rate of INR5 per square kilometre. The holder of an RP must also pay
a permit fee fixed by the state government, which cannot be less than INR5
per square kilometre nor more than INR20 per square kilometre of land held
by the permit holder for each year or part of a year.
The applicant must also pay a security deposit of INR20 per square kilometre
or part.
PL. An application for a PL must be accompanied by a non-refundable fee at
the rate of INR250 for the first square kilometre or part and INR50 for each
additional square kilometre or part. The licensee must pay a prospecting fee
as fixed by the relevant state government, which cannot be less than INR1
nor more than INR10 per hectare of land covered by the licence for each
year or part of a year of the period for which the licence is granted or
renewed.
In addition, the applicant must pay a security deposit of INR2,500 per square
kilometre or part.
ML. An application for an ML must be accompanied by a non-refundable fee
of INR 2,500. The holder of an ML must pay dead rent and royalties to the
state government (MMDR Act).
In addition, the applicant must pay a security deposit of INR10,000. The
lessee must also pay surface rent and water rates in accordance with the
Mineral Concession Rules 1960.
Liability
RP. The primary obligations of the permit holder include to:
 Progressively relinquish the area.
 Adhere to the minimum expenditure commitment and specific physical
targets specified in the order of grant of the permit, failing which the
permit may be cancelled.
 Maintain accurate accounts of expenses.
 Submit a report of the work done during the period and refrain from using
any forest area without prior permission.
PL. The primary obligations of the licence holder include:
 To report the discovery of any mineral to the relevant state government
within 60 days of discovery.
 A restriction on the transfer of the licence without the prior permission of
the state government.
 The payment of compensation for surface rights.
ML. The primary obligations of the lessee include duties to:
 Report to the relevant state government the discovery in the leased area
of any mineral not specified in the ML within 60 days of such discovery.
 Pay compensation for the surface area used by the lessee for the
purposes of mining operations.
 Commence mining operations within two years of the date of execution of
the lease.
An ML can contain any other conditions that the relevant state government
deems necessary.
Termination of leases/licences
Where there is a breach of any condition imposed on the holder, the RP, ML
or PL can be cancelled by the relevant state government and/or the amount
deposited as security deposit (as applicable) may be forfeited in whole or in
part.
The central government can, after consultation with the relevant state
government, cancel an ML or a PL if it is in the public interest to do so
(MMDR Act).

Restrictions
Eligibility restrictions. An RP, PL or ML can only be granted to an Indian
national or a company registered in India under the Companies Act 1956, as
amended from time to time (MMDR Act).
Restrictions on transfer. A PL can only be transferred with the prior
approval of the relevant state government (Mineral Concession Rules 1960
(MC Rules)).
In relation to an ML, the lessee cannot, without the prior written consent of
the relevant state government (MC Rules):
 Assign, sublet, mortgage, or in any other manner, transfer the mining
lease, or any right, title or interest to it.
 Enter into any arrangement, contract or understanding under which the
lessee will or may be directly or indirectly financed to a substantial extent,
or under which it may allow itself to be controlled by any trust, syndicate,
corporation, firm or person.
However, such prior consent is not required where the mortgagee is an
institution, bank or corporation as specified in Schedule V of the MC Rules.
5. How are such leases, licences or concessions
awarded?
An application for a licence or lease must be made to the relevant state
government in the prescribed form, and be accompanied by the prescribed
fee (Mines and Minerals (Development and Regulation) Act 1957 (MMDR
Act)). The state government grants a lease or licence, having regard to the
provisions of the MMDR Act and any rules made in accordance with it.
The holder of a reconnaissance permit (RP) has a preferential right to obtain
a prospecting licence (PL). Where a PL has been granted in respect of any
land, the licensee has a preferential right to obtain a mining lease (ML) in
respect of that land.
ENVIRONMENT
6. What are the main ongoing requirements
environmental protection?
The key environmental permits required in relation to mining operations are:
 Consent as required under the Forest (Conservation) Act 1980 for any
mining activity in a forest area.
 Consent from the relevant state Pollution Control Board before
establishing or operating any industry or process likely to pollute the
environment (required under the Air (Prevention & Control of Pollution)
Act 1981 and the Water (Prevention & Control of Pollution) Act 1974).
 Consent as required under the Hazardous Wastes (Management and
Handling) Rules 1989 in respect of "hazardous waste". Such consent
must be obtained from the relevant state Pollution Control Board.
 Environmental clearance from the Ministry of Environment and Forests,
as required under the Environment Protection Act 1986, including the
provisions of Environmental Impact Assessment Notification 2006.
HEALTH AND SAFETY
7. What are the main ongoing requirements
compliance with health and safety regulations?
Employers must ensure that they comply with requirements under the
following key labour welfare and safety-related legislation:
Country Q&A
 The Mines Act 1952, which contains requirements relating to the safety
and welfare of workers in mines.
 The Mines Rules 1955, which set out health and sanitation provisions for
workers in mines.
 The Metalliferous Mines Regulations 1961, which are applicable to all
mines other than coal mines and oil wells concerning notification of an
accident or disease inside a mine.
 Mines (Rescue) Rules 1985, which relate to the welfare of workers in the
event of accidents inside mines and rescue operations.
FOREIGN OWNERSHIP
8. Are there any restrictions concerning the foreign
investment and ownership of companies engaged in
the exploration and extraction of mineral resources in
your jurisdiction?
Foreign direct investment is permitted in mining up to 100% under the
automatic route (under the Consolidated Foreign Direct Investment Policy of
5 April 2013):
 For mining and exploration of metals and non-metal ores (subject to the
Mines and Minerals (Development and Regulation) Act 1957 (MMDR
Act)).
 For mining and mineral separation of titanium bearing minerals and ores,
value addition and integrated activities, subject to approval of the Foreign
Investment Promotion Board, sectoral regulations and the MMDR Act.
 For mining of coal and lignite for captive consumption for power projects,
and iron and steel (among other things), and for setting up coal
processing plants.
TAX
9. What payments, such as taxes or royalties, are
payable by interest holders to the government?
for
State royalties
The holder of a mining lease (ML) must pay royalties and dead rent at
specified rates (Mines and Minerals (Development and Regulation) Act 1957
(MMDR Act)).
Corporate income tax
Mining, like any other industrial sector, attracts corporate taxes under the
Income Tax Act 1961. The corporate tax rate for domestic companies is 30%
and foreign companies (defined as companies that are not registered in India
and whose management control is exercised from a foreign country) are
taxed at 40%. A surcharge and education cess is also applicable in certain
situations.
Tax on dividends
Indian companies are liable to Dividend Distribution Tax (DDT) at the time of
declaration, distribution or payment of a dividend, whichever is earlier.
10. Does the government derive any other economic
benefits from the exploration and extraction of the
mineral resources?
for
Certain additional economic benefits derived by the government from mining
activity include, among other things, revenue from the auctioning of mining
blocks for captive use through competitive bidding; and value added tax on
the sale of goods within a state and forex from mineral exports.
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Country Q&A

REFORM

12. Are there any plans for changes to the legal and
regulatory framework?

11. What taxes and duties apply on the import and export
of mineral resources?
Customs duty is an indirect tax levied on the import of goods including
mineral resources into India, as well as goods exported from India. The
import duties imposed include import taxes, true countervailing taxes,
additional customs taxes and anti-dumping duties.
A bill amending the Mines and Minerals (Development and Regulation) Act
1957 (MMDR Act) has been proposed to overhaul the mining regime. The bill
addresses issues relating to:
 Sustainable mining.
 Local area development.
 Ensuring transparency, equity, and effective redress and regulatory
mechanisms.
 Incentives encouraging good mining practices, technology absorption
and the exploitation of deep-seated minerals.

THE REGULATORY AUTHORITIES

Ministry of Mines
Address. 3rd Floor, A wing
Shastri Bhawan
New Delhi 110001,
India
T +91 11 2338 8121
F +91 11 2338 3011
E dom@nic.in
W http://mines.nic.in/
Main responsibilities. The Ministry of Mines is responsible for the administration of mining laws in India.
Indian Bureau of Mines (IBM)
Address. 2nd Floor, Indira Bhawan, Civil Lines
Nagpur 440001, India
T +91 712 256 0041
F +91 712 256 5073
E cg@ibm.gov.in
W http://ibm.gov.in/
Main responsibilities. The IBM monitors and regulates mining activity through the processing and approval of mining plans and also advises the
government on matters in relation to the mineral industry, export and import policies, trade, mineral legislation and related matters.
Petroleum and Natural Gas Regulatory Board
Address. First Floor, World Trade Centre
Babar Road
New Delhi 110001,
India
T +91 11 2345 7700
F +91 11 2370 9151
E contact@pngrb.gov.in
W www.pngrb.gov.in
Main responsibilities. Regulates the refining, processing, storage, transportation, distribution and marketing of petroleum products.

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 Country Q&A
Practical Law Contributor profiles

Alice George, Partner Manasvini Raj, Associate

Amarchand & Mangaldas & Suresh A. Shroff & Co. Amarchand & Mangaldas & Suresh A. Shroff &
T +91 22 2496 4455 Co.
F +91 22 2496 3666 T +91 22 2496 4455
E alice.george@amarchand.com F +91 22 2496 3666
E manasvini.raj@amarchand.com

Professional qualifications. Admitted to the Bar Council of Maharashtra and
Goa, 2006. BA, LL.B(Hons), MSc in Development Management.
Areas of practice. Projects; project finance; private equity.
Recent transactions
Advised a large Indian conglomerate in its acquisition of assets, liabilities and
operations of various cement units of a company in India including acquisition
of various prospecting licences and mining leases and their transfer; and on
the required consent of the relevant state government for such acquisition.
Languages. English
Professional qualifications. Admitted to the Bar Council of Uttar Pradesh,
India, Advocate, 2010. BA, LL.B (Hons).
Areas of practice. Project finance; infrastructure.
Recent transactions
Has acted for lenders as well as developers. Has done several deals in the
power sector including renewable energy projects as well as the ports and
roads sectors. Has recently advised a large Indian conglomerate in relation to
supply of mining equipment and provision of mining services in relation to an
offshore mining project.
Languages. English

Paridhi Adani, Associate

Amarchand & Mangaldas & Suresh A. Shroff &
Co.
T +91 22 2496 4455
F +91 22 2496 3666
E paridhi.shroff@amarchand.com

Professional qualifications. Admitted to the Bar Council of Maharashtra and

Goa, India, 2014. LL.B.
Areas of practice. Corporate; projects (especially ports and mining).
Non-professional qualifications. Bachelor of Commerce (accountancy and
finance)
Recent transactions
Has been involved in various joint venture agreements for rail and port
projects.
Languages. English

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