Mining is a critical sector in India, contributing significantly to the economy through employment generation, export revenues, and the supply of raw materials for key industries. The regulatory framework governing mining in India is complex, involving both central and state governments. Let’s explore the nuances of mining rights, public access to mineral data, licensing procedures, environmental considerations, and government participation, offering a holistic understanding of the mining landscape in India.
State Control and Private Ownership of Mining Rights
In India, the regulation of mining rights operates under a dual governance structure. The central government oversees the overall development of the mining sector, while state governments manage the allocation of concessions and the collection of royalties for minerals found on state-owned lands. This framework ensures a balance between national interests and local administration.
Historically, mineral rights were granted on a first-come, first-served basis. However, since 2015, the government has adopted a competitive auction system for most mineral concessions, particularly for major minerals like iron ore, coal, and bauxite. This shift aims to ensure transparency, maximize revenue, and encourage efficient resource utilization.
Private entities granted mining leases enjoy comprehensive rights over the specified minerals, subject to end-use restrictions in some cases. Interestingly, a significant portion of mineral-rich land in India remains under private ownership. In 2013, the Supreme Court affirmed the ownership rights of surface landholders over the mineral wealth beneath their properties, strengthening the legal position of private owners. However, the obligation to pay royalties on these privately owned minerals remains a contentious issue, with no definitive resolution to date.
To lease their land for mining, surface landowners must secure prior approval from the state government. This process involves compliance with central mining regulations and the submission of a mine-closure plan, supported by a security deposit. These measures aim to ensure environmental restoration and community welfare after mining operations cease.
Public Access to Mineral Data
India provides extensive access to mineral and exploration-related data through multiple public platforms. The Indian Bureau of Mines (IBM) manages the National Mineral Inventory, which offers state-wise and mineral-specific data, including geological characteristics, location, infrastructure, and lease status. This centralized database facilitates informed decision-making for stakeholders.
Complementing the IBM, the Geological Survey of India (GSI) conducts nationwide geoscience surveys. Under the National Mineral Exploration Policy (2016), baseline geoscience data is made freely accessible to all interested parties, promoting transparency and encouraging investment in mineral exploration.
Additionally, organizations like the Mineral Exploration Corporation Limited and various state geology directorates contribute detailed exploration data. Mine operators are required to submit periodic reports on mineral extraction, employment statistics, and stock levels. This data is consolidated and published by the IBM, ensuring accountability and fostering trust among stakeholders.
Furthermore, all geological and geophysical data collected by concession holders must be shared with the GSI and state governments. This mandatory data-sharing mechanism ensures a comprehensive understanding of the country’s mineral wealth and aids in sustainable resource management.
Acquisition and Tenure of Mining Rights
Private parties in India can acquire various types of mining rights, including reconnaissance permits, prospecting licenses, exploration licenses, mining leases, and composite licenses. These rights are awarded exclusively through competitive bidding processes, ensuring a fair and transparent allocation system.
A composite license is particularly advantageous as it allows holders to transition seamlessly from prospecting to mining. In contrast, standalone reconnaissance or prospecting license holders do not enjoy preferential rights for obtaining subsequent mining leases. This policy aims to encourage serious investment in exploration activities. The applicable rate on services by way of grant of mineral exploration and mining rights is 18% in terms of entry 17 (viii) (Leasing or rental services, without operator) of Notification No. 11/20171 w.e.f. January 1, 2019.
Rights holders must adhere to stringent obligations, including:
- Obtaining all requisite permits and approvals.
- Initiating operations within two years of lease execution.
- Following approved mining plans and adhering to safety standards.
- Maintaining accurate records of operations and royalty payments.
- Undertaking land restoration and compensating affected communities.
Licensing Duration and Transferability
Mining leases in India are granted for a fixed term of 50 years, with no provision for renewal. Exploration licenses are initially valid for five years and can be extended for up to two additional years. Prospecting licenses may also be renewed for a maximum period of five years.
The transfer of mining leases or licenses requires approval from the respective state government, as stipulated under the Mines and Minerals (Development and Regulation) Act, 1957. The transfer process mandates joint applications from both the transferor and transferee. State governments are required to respond within 90 days; failure to do so implies tacit approval. This streamlined process facilitates the seamless transfer of mining rights, encouraging investment and operational continuity.
Distinction Between Domestic and Foreign Acquisitions
India restricts the direct holding of mineral concessions to Indian nationals or entities incorporated in India. However, foreign investors can participate indirectly by acquiring equity stakes in Indian companies. The government permits 100% foreign direct investment (FDI) in the mining sector through the automatic approval route, provided the investment complies with environmental and regulatory norms.
This policy framework balances the need for foreign investment with the protection of national interests. It also ensures that the benefits of mining activities accrue primarily to domestic stakeholders.
Protected Areas and Environmental Concerns
Mining activities in India are subject to stringent environmental regulations, particularly in designated protected areas such as wildlife sanctuaries, national parks, and tribal-dominated “scheduled areas.” In these regions, mining is either prohibited or heavily regulated, with stricter governance mechanisms in place.
Obtaining permissions for land acquisition or transfer in protected areas involves additional scrutiny. Moreover, the government retains the authority to terminate mining rights prematurely for reasons such as environmental protection, public safety, and mineral conservation. However, license or leaseholders are entitled to a fair hearing before any termination order is issued.
Mine operators are also required to prepare and implement mine-closure plans, ensuring environmental restoration and sustainable land use. These plans must include a financial guarantee in the form of a security deposit, which is returned only upon satisfactory compliance with restoration obligations.
Government Participation and Expropriation
Public-sector enterprises dominate the Indian mining landscape, particularly in the extraction of major minerals like coal and iron ore. The government actively participates in mineral projects, either directly or through joint ventures with private entities.
While mining companies are not required to be publicly listed, all entities must be registered in India. The government retains the right to expropriate mining licenses for reasons such as environmental preservation, public health, or mineral conservation. In such cases, affected parties are entitled to compensation as per the law, ensuring a balance between public interest and private rights.
Significant Judicial Development: Mineral Area Development Authority v. Steel Authority of India (2024)
A landmark judgment in the case of Mineral Area Development Authority v. Steel Authority of India (2024) further clarified the legal framework surrounding mining rights and royalty obligations in India. Furthermore it clarified the debate over royalties paid to the state and tax on the said royalties. The court also granted relief on interest and penalties imposed on the cases of such nature and applied the judgement retrospectively. The Supreme Court ruled that royalty payments are a statutory liability tied directly to the extraction of minerals and not contingent on whether the minerals are owned by private parties or the state. The Court emphasized the need for equitable revenue sharing between private operators and state authorities, reinforcing the principle of resource sovereignty. This decision has significant implications for both private and public stakeholders, providing clarity on royalty obligations and setting a precedent for future disputes.
Conclusion
India’s mining sector operates within a robust regulatory framework designed to balance economic development with environmental sustainability and social equity. The joint governance model involving central and state governments ensures efficient resource management while accommodating local interests.
The transition to a competitive auction system has enhanced transparency and revenue generation, while the comprehensive database managed by entities like IBM and GSI promotes informed decision-making. The stringent obligations and compliance requirements for rights holders underscore the commitment to sustainable mining practices.
However, challenges remain, particularly in resolving ambiguities around royalty obligations for private owners and addressing environmental concerns in ecologically sensitive areas. The prohibition on mining in protected regions reflects India’s dedication to conservation but also poses hurdles for resource exploitation.
Foreign investment policies strike a delicate balance, allowing global participation without compromising national interests. The focus on land restoration and community compensation demonstrates a progressive approach to mitigating the adverse impacts of mining.As the sector evolves, continued reforms and technological advancements will be crucial in unlocking India’s vast mineral potential while upholding principles of sustainability and inclusivity. By fostering collaboration between public and private stakeholders and leveraging data-driven decision-making, India can establish itself as a global leader in responsible mining practices.
Author: Apoorva Lamba, 2nd Year LLB. Student of Madhav Mahavidyalaya, Jiwaji University, Gwalior
Wish to read similar articles? Click the link to read a commentary on BHARATIYA NYAYA SANHITA, 2023: https://jpassociates.co.in/bharatiya-nyaya-sanhita-2023/
Link to BHARATIYA NYAYA SANHITA, 2023: https://www.mha.gov.in/sites/default/files/250883_english_01042024.pdf
