India: Legal notice challenges upcoming mining reforms for non-coal block auctions
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The Mines Ministry and Odisha government have been served with a legal notice warning them against moves to reduce cost at mines auctioned in January this year.
The notice dated 9 August 2020 and addressed to union Minister for Mines, Coal and Parliamentary Affairs, Pralhad Joshi, Odisha Chief Minister Naveen Patnaik, Principal Secretary in the Prime Minister's Office, PK Mishra and other senior officials is from Supreme Court Advocate, Manohar Lal Sharma.
Fifty-year mining rights to 20 iron ore and manganese deposits were bagged by companies such JSW Steel and the Arcelor Mittal-Nippon JV at steep premiums averaging to more than 105 per cent of sale price. The notice's contention is that terms and conditions under which auctions had taken place only six months ago were now being changed at the behest of and to benefit the new lessees.
Atma Nirbhar reforms
The notice refers to proposed reforms that the Narendra Modi government is working on as part of its Atma Nirbhar Bharat push announced in May. The biggest among these was allowing commercial mining of coal. This is intended to be followed by putting to auction as many as 500 new non-coal blocks.
Joshi, addressing a webinar organised by industry association FICCI recently, promised to introduce "more industry-friendly, production friendly reforms" very soon.
As reported by media, these deal with captive conditions, duties and taxes and a national mineral index for non-coal minerals:
- Captive mines have been allowed to sell 25 per cent of their production in the open market. The notice claims the Ministry intends increasing this to 50 per cent and may even do away with captive conditions altogether for future allocations.
- It claims the royalty rates are to be reduced from 15 per cent to 5 per cent.
- Industry has complained that Indian Bureau of Mines prices for Odisha are inclusive of royalty, obliging them to pay royalty on royalty. To avoid a cumbersome dispatch condition of stacking they also pay royalty applicable on the highest grade.
- A National Mineral Index, modelled after the National Coal Index, is being proposed in place of the current method through which the IBM arrives at grade-wise, state wise average price based on which royalty is levied. The notice claims a national index would be lower than a state price, and lead to lesser royalty earnings for the state.
While the Centre hasn't made public any details of its proposed reforms, Sharma contends that changing terms and conditions that played a role in deciding who participated and who wins post auctions was unfair and illegal. The reserve price for each block for example had been based on IBM's state- specific sale price.
Who is ML Sharma
The advocate is famous or infamous as the first petitioner in the coal block allocation case and a lawyer for one of the Nirbhaya rape accused and had been accused of being too quick to file Public Interest Litigations. However, one of these, challenging the Modi Government's 2015 decision to extend merchant and captive leases while introducing auctions, is being heard by the Supreme Court.
This, however, is only a legal notice and not a petition before any regulatory body or court.
