India: Centre steps in to offer mineral exploration licences across states

Unhappy with the pace and lack of response to auction of exploration licences by state governments, the Union government has decided to step in. The Centre proposes to offer exploration licences across states together.

The concept of an exploration licence to boost mining of deep-seated minerals was introduced in August of 2023 by amending the Mines and Minerals (Development and Regulation) Act. The high risk business of exploration is usually rewarded with mining grants in other parts of the world. Having mandated auctions (by way of revenue share) as the only means to granting mining rights, India cannot do that under its current mining laws. Instead, it is offering a share of mining revenues and will let the agency that seeks the smallest share explore large areas. An incentive scheme announced in June this year, further extends reimbursement of up to 50% (up to a maximum of INR 20 crore) of certain exploration costs from the National Mineral Exploration Trust (NMET) to "mitigate risk involved in exploration".

The Geological Survey of India handed over geological reports for 20 blocks to 14 states where they are found in January this year. However, since then, only 12 blocks have been tendered, from just six states, and these too have been received very poorly. The Centre now reckons that 'specialised exploration agencies' or junior explorers may not have been comfortable dealing with individual states, and that since this was a first for the country a "concerted effort for requisite awareness and ease of participation" should have been undertaken.

Twenty nine critical and deep-seated minerals were specified in the Seventh Schedule of the Act covering exploration licences, with the Centre retaining the sole right to later auction any block containing critical or strategic minerals, that is 21 of the 29 minerals in the schedule.

"Thus, in most of the cases the blocks explored under exploration licence will be auctioned for mining lease by the Central government" and so, explains a government memo dated 21 October 2024, the Centre may as well auction the blocks, offering a reasonable number in various states together allowing exploration agencies greater choice, as opposed to scattered auctions of one or two blocks in different states. The power to notify the blocks for auction and conduct auction of exploration licences shall henceforth be exercisable by a designated officer in the Ministry of Mines. Any auction process of exploration licences initiated by states stands annulled.