WHY THE NEW MINES AND MINERALS (DEVELOPMENT AND

REGULATION) AMENDMENT ACT, 2021 WILL RESOLVE THE LONG

PENDING ISSUES THAT HAVE SLOWED THE GROWTH OF THE MINING

SECTOR IN INDIA?

Introduction

The Mines and Minerals (Development and Regulation) Act, 1957 (“1957 Act”) was the

principal legislation which was enacted with a view to regulate the minerals and mining

sector in India. The 1957 Act has undergone meticulous amendments in the years 2015,

2016 and 2020 to bring sweeping reforms in the mineral sector with the changing times.

To effusively utilize the potential of the mineral sector, increase employment

opportunities and investment in the mining sector including coal, resolve long pending

issues that have slowed the growth of the mining sector, the Ministry of Coal,

Government of India introduced the Mines and Minerals (Development and Regulation)

Amendment Bill, 2021 which sought to amend the 1957 Act. On 28th March 2021, The

Mines and Minerals (Development and Regulation) Amendment Act, 2021

(“Amendment Act, 2021”) received the assent from the President of India and was

published in the the Official Gazette by the Government of India. 

 This article highlights and discusses certain key amendments, which have been

made keeping in mind the issues and challenges faced by the erstwhile 1957 Act and with

the aim of making it adept for future requisites.

NOTABLE CHANGES

A. No more restrictions on end utilization of Captive mines

The new Amendment Act, 2021 has brought the most significant change under the new

legal regime of the 1957 Act, by eliminating the distinction between captive and

merchant mines. Under the old regime of 1957 Act, companies acquiring any mine

(other than coal, ignite and atomic minerals) through auctions were allowed to utilize the

produce only for “prescribed end-uses like power generation and steel production” and

not for any other purpose. Such mines were known as captive mines.

The Amendment Act, 2021 now removes this circumscription on the utilization of

mines by such companies. The mines will not be limited to just a specific

purpose/industry/sector and the companies will be permitted to carry on coal mining

operations for their own consumption, sale or for any other purposes, as may be

prescribed by the central regime.

B. Transfer of statutory Approvals

Section 8B of the 1957 Act which dealt with ‘transfer of statutory clearances’, provided

that upon the expiry of mining lease of the lessee, mines were to be leased to new persons

through auction. On the transfer of such lease, statutory clearances acquired by anterior
lessee were to be transferred to the incipient lessee for a period of two years. The

incipient lessee was required to obtain fresh clearances within these two years.

The Amendment Act, 2021 replaces this provision and quite valiantly provides

that all the statutory clearances and licenses shall be valid till exhaustion of mineable

reserves and post expiry or termination of the lease, the government will conduct an

auction process and all the statutory rights will stand transferred to the next successful

bidder.

C. Sale of Ores & Minerals Extracted from Captive mines

Previously, there was no provision under the 1957 Act, regarding sale of minerals

extracted from captive mines. However, a noteworthy amendment has been brought in

Section 8 of erstwhile 1957 Act by adding a new sub-section to Section 8, which provides

that the captive mines (other than atomic minerals) may sell up to 50% of their yearly

mineral production within the open market after meeting their own needs, but the lessee

will be required to pay extra charges to the government for mineral sold within the open

market.

Furthermore, some provisos to Section 8 of the erstwhile 1957 Act have been added

which can be adumbrated below:

 The Central government may by notification in the Official Gazette and for the

explanations to be recorded in writing, increase the said rate (i.e.,50%) of coal

or lignite which may be sold by a government company or corporation.

  The sale of coal shall not be permitted from the coal mines distributed to a

company or organization that has been granted a power venture on the premise

of competitive bid for tariff (which includes Ultra Mega Power Projects)

D. Allocation of Mines, Extension and Lapse of Mining Lease

The recent Amendment Act, 2021 empowers the State Government to decide the

period of mining leases including existing mining leases for Government

Companies or Corporations. It also introduces the payment of an additional

amount in cases where the State Government extends the time period for mining

lease of Government Companies or Corporations.

 Allocation of mines with expired leases to government company

The newly substituted Section 8B of the new legal regime of 1957 Act,

provides that in cases where the auction process for granting mining lease is

not completed or the new lease has been terminated within 1 year of auction

then the State Government can grant a lease for such mine to a Government

Company. The period of lease can however be for a period 10 years or until

the selection of new lessee, whichever is earlier.

 Lapse and Extension of mining lease

The erstwhile 1957 Act provided that where the mining operation is not

commenced by the lessee within 2 years of grant of a lease or the mining

operation has been discontinued for two years, the mining lease shall be

deemed to be expired from such period. The new legal regime has
 introduced a noteworthy provision stating that the mining lease will not

lapse at the end of the said period if a concession is granted by the State

Government upon an application by lessee. It also provides for the

extension of the mining lease by declaring that the State Government can

extend the threshold period of lapse of the lease only once and up to one

year.

E. Involvement of Central Government in conducting auction of mineral

concessions.

Under the erstwhile 1957 Act, States were empowered to manage and conduct the auction

of mineral concessions except the coal, lignite, and atomic mineral. The new Amendment

Act, 2021 brings a sweeping reform by adding a new proviso to sub-section 4 of Section

10B and sub-section 5 of Section 11 to the erstwhile 1957 Act, which provides that if the

State Government fails to conduct the auction of mineral concessions in respect of

notified minerals or otherwise, within the stipulated time period fixed by the Central

Government in consultation with the State Government, then the Central Government

shall step in and conduct the auctions.

F. District Mineral Foundation

District Mineral Foundation(“DMF”) was first bought into picture in 2015, by way of

Mine and Minerals Development Regulation (Amendment) Act, 2015 (“2015

Amendment Act”). DMF is a non-profit body established to work for the interest and
benefit of persons and areas affected by mining or mining related operations. Vide, the

said amendment, the State Governments were vested with the responsibility of setting up

DMFs in every mining district of the respective States and to prescribe the composition

and functioning of DMFs including utilization of the funds. The new Amendment Act,

2021 now empowers the Central Government to direct the utilization of the DMF’s.

G. Rights of certain existing concession holders

The 2015 Amendment Act provided that the mines will be leased through an auction

process. Vide, the said amendment certain rights were bestowed to existing concession

holders and the applicants. The holder of reconnaissance permit or prospecting license

had the right: (a) to obtain prospecting license or mining lease, and (b) for grant of

mining license in cases where the Central Government had given their approval or letter

of intent issued by the State Government before the commencement of the 2015

Amendment Act.

The new Amendment Act, 2021 quiet valiantly provides that on the date of

commencement of this Act, the right to obtain a prospecting license or a mining lease will

lapse. To protect the interest of such person(s) whose rights has been lapsed, the

Amendment Act, 2021 provides that such person(s) will be reimbursed for any

expenditure incurred towards reconnaissance or prospecting operation in such a manner

as may be prescribed by the Central Government.

Conclusion
The amendments made by the Government is a step towards attainting mineral security of

the country. The new legal regime while nullifying the restrictive practices that prevailed

in the erstwhile 1957 Act, has tackled various issues related to mining including auctions,

transfer of statutory clearances, functioning of District Mineral Foundation (DMF) Trusts

and etc. The idea behind the amendment is to create employment, to escalate the

contribution of mining sector in the GDP of the nation from 1.75% to 2.75% and to

captivate domestic as well as foreign investment. It will be however noteworthy to

witness how the new legal regime will stand the test of time and judicial review.