KOLKATA (miningweekly.com) - Under new Indian mining legislation, mineral-bearing provinces have been fully empowered to auction mineral resources; however, guidelines and auction documents would need to adhere to templates established by the federal government.

According to a Mines Ministry official, standardised rules for auctions and templates for bid documents would be completed within the next few months and, thereafter, it would be entirely up to the provinces to conduct auctions for resource allocation.

He said that under the new legal dispensation, the federal government had ceded a significant amount of control over the governance of the mining sector to the provinces and it was expected that local governments would hasten the process of restarting stalled mining operations and get greenfield projects established within the shortest possible time.

Moreover, since the bulk of revenue from the auctions and royalties from mining would directly accrue to the provincial governments, it would be in the interest of these governments to get the mining sectors within their respective geographies back on the rails, he said.

“The power to grant mining lease was always with the provincial government. The power to renew the lease was also with them. But only in respect of certain minerals like iron-ore and manganese. Before granting a lease they had to take concurrence of the federal government,” Mines Secretary Anup Pujari said.

“Now everything will be auctioned and they do not need concurrence. So in a sense you can say that we have empowered the provinces because we have surrendered certain power, which also becomes unnecessary because when someone is going for auction, there is no question of prior approval,” Pujari said.

The government last week mustered the necessary support in both houses of Parliament to get the Mines and Minerals (Development and Regulation) Amendment (MMDRA) Bill 2015 approved, which promised to significantly change the legal environment for governance of the mining and mineral industry in the country.

Apart from opening up the mineral sector for domestic and foreign investors and adoption of the auction route for allocation of resources, the MMDRA Act also proposed the creation of a District Mineral Fund (DMF) with mandatory contributions of one-third of royalty payable toward local area development.

Other provisions included the extension of maximum mining lease period from 30 years to 50 years and mandatory contribution towards setting up a National Mineral Exploration Trust for the federal government to expand mineral exploration across the country.

The Mines Ministry had already identified 199 mines that contained minerals such as iron-ore, bauxite and manganese ore that could be auctioned. These are located in the mineral-rich provinces of Karnataka, Madhya Pradesh, Odisha, Gujarat and Maharashtra.

But despite the revenue bonanza accruing to the provinces from auction bids, royalties and the DMF, the mining industry has expressed reservations that the new legal governance would increase the cost of production.

“As miners will have to pay towards the DMF, production costs will go up, which they will obviously pass on to end-users,” Federation of Indian Mineral Industries secretary-general R K Sharma said.