Iron Ore Miners in a Spot over MMDR Act Cap on Mining Lease Areas

It seems iron ore miners, whose leases are expiring, are in deep trouble even before the much-touted mineral auctions in 2020 have begun. As per a clause in the Mines and Minerals (Development and Regulation) Act, 1957, amended in 2015, a miner holding more than 10 sq km of the mining lease area will not be able to participate in the upcoming auctions.

The amended MMDR Act, 2015, sets a 10 sq km limit for mining rights granted to an individual or company in a state.

"Iron ore miners holding more than 10 sq km of area might not be allowed to participate in the upcoming mines and mineral auctions, 2020," a major sponge iron manufacturer based out of Central India told SteelMint. The sponge iron maker also revealed an exchange of 2 recent government letters which disallows participation by any individual or company who/which holds mining leases covering more than 10 sq km.

It was revealed that Aditya Prasad Padhi, Chief Secretary, Odisha, in a letter, sought from Anil G. Mukim, Secretary, Ministry of Mines, more clarification relating to the auction of mineral blocks in Odisha with reference to the area limit under Section 6 of the Mines and Minerals (Development and Regulation) Act, amended, 2015 (MMDR Act). The letter was dated June 18, 2019.

Padhi asked whether persons holding mining leases in excess of the area limit under Section 6(1) (b) could be allowed to participate in the auction of the mining block or not.

In reply to the above letter, dated July 1, 2019, Dr Veena Kumari Dermal, Director, Ministry of Mines, Government of India, clearly stated the following clarification. "Disallow participation of persons who are holding or may, in the event of becoming highest bidders in the auction, hold the area in excess of the area limit under Section 6 (1) of MMDR Act. It may, however, be noted that the area limit would be governed as per the provisions under Sections 6 (1) of the MMDR Act."

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Tata Steel on Violation of MMDR Act

In 2018, Tata Steel had participated in the auctions despite this restrictive clause and received a warning from the state government it won't be issued any letter of intent (LoI) even if it emerged as the successful bidder in the auction process.

Another steel giant, JSW Steel, had moved the High Court of Delhi last year against Tata Steel's participation in 2 iron ore blocks put up for auction. It has since been decided to withdraw its notice inviting tender for the Chandiposhi (33.7 million tonnes of reserves) and Purheibahal (38.3 mt of iron ore deposits) blocks, rendering JSW's petition invalid.

Tata Steel, at present, has 6 iron ore/manganese (an associated mineral) leases in the state with a combined lease area of about 50 sq km. Though the company had wanted the maximum area limit to be raised to 120 sq km, the state government set-up committee recommended to the Centre to increase it to 75 sq km from 10 sq km.

It has been more than a year since the Odisha government has written to the Centre to increase this limit. The Centre expanded the cap for bauxite mines, allowing state-owned Nalco (in Odisha) to operate a second mine, and similarly expanded the cap for limestone mines in Maharashtra.

What is the MMDR Act?

The Mines and Minerals Development and Regulation Act (MMDR), 1957 was amended in 2015. The Act forms the basic framework of mining regulations in India. It says, all the non-coal mines have to be auctioned by the respective state governments in a transparent manner through e-auction.

Section 6 (1) (b) of MMDR Act 2015

According to the Mines and Minerals (Development and Regulation) Amendment Bill, 2015, Section 6 (1) (b) is explained under General Restrictions. No person shall acquire in respect of any mineral or prescribed group of associated minerals (like manganese ore) in a state covering a total area of more than 10 sq km, it is explained.

Furthermore, it provides that if the Central government is of the opinion that in the interests of the development of any mineral, it is necessary so to do, it may, for reasons to be recorded by it, in writing, permit any person to acquire one or more prospecting licences or mining leases covering an area in excess of the aforesaid total area.