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India to amend legislation to allow for auctions of offshore minerals

4th September 2017

By: Ajoy K Das

Creamer Media Correspondent

     

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KOLKATA (miningweekly.com) – India’s Mines Ministry is reframing the rules and legislation for offshore mineral exploration and extraction to bring them in line with legislation governing onshore mineral auctions.

The Mines Ministry has drawn up amendments to the Offshore Areas (Mineral Development and Regulation) Act 2002 for circulation among various stakeholders, leading to a 2017 Bill to be put up for Parliamentary ratification, a government official has said.

The highlight of the proposed changes was to bring offshore developments in line with the laws governing the onshore sector, which among other things, included the auction of a composite licence for offshore mineral blocks as prevailed in onshore mineral blocks, the official added.

The proposed Bill was designed to put in place a mechanism for the granting of a composite exploration-cum-production licence through competitive bidding to ensure a “transparent and nondiscriminatory regime of operating rights in the offshore area”, a Ministry statement stated.

According to the circulated draft, the scheme for composite licences envisages that a successful bidder will bear the entire cost of its exploration project and factor in risks to establish mineralisation. If exploration proves successful, the licensee will have the right to be granted a production lease.

In a bid to make the scheme attractive to foreign and domestic investors and offer easy exit routes, every stage of licensing would be easily transferable by the first holder of the licence, the official pointed out.

At the same time, in a related move, the Mines Ministry has also initiated an exercise to amend Mineral Auction Rules 2015.

Some of the proposed changes include that an auction process may be annulled in the case of an investor not executing a mining lease deed after a letter of intent was issued. The entire auction process will then have to be restarted.

As for the new eligibility criteria, the amended rules stipulate a minimum net worth of a bidder at 2% of the value of the estimated resource of the block auctioned if the estimated value of the resource is less than Rs5-billion, and net worth of at least 1% if the estimated value is higher than this amount.

However, significantly, the draft of proposed amendments does not mention any changes in definition of ‘captive mining’.

Last month, Mining Weekly Online reported that the Mines Ministry was considering changes in definition of ‘captive mining’ under which auction blocks allocated through future auctions for captive use would offer greater flexibility to miners. This was expected to include operational freedom to a captive mine owner to offer the part of production in excess of its end-use plant requirements, for merchant sales.

A government official said that it was possible that changes to the definition of captive mining would require parallel amendments to the Mines and Minerals (Development and Regulation Act) 2015, but it had been left out from amendment of the rules.

Edited by Creamer Media Reporter

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