Coal, mines bills will boost reforms

The passage of the Coal Mines Bill and the Mines and Minerals (Development and Regulation) Bill (MMDR Bill) by parliament will provide a major boost to the economic reforms agenda. Mining is an important economic activity but the sector has been so bedevilled by government control and bad practices that it could not play the vital role it has in development. The two bills will help clean up the sector and introduce the best practices for extraction and use of natural resources. Both had been promulgated as ordinances and the government has managed to get them passed in the Rajya Sabha too, where it had faced some uncertainty in the beginning. The coal bill was necessitated by the cancellation of allocation of over 200 coal blocks by the Supreme Court after the 2012 scam.  It paves the way for commercial mining and facilitates auctioning of coal mines. The MMDR bill also introduces auctioning of mines that produce minerals like iron ore and bauxite.

The most important gain from the bills is that mining decisions will now become transparent and governments will not be able to resort to the arbitrary and opaque committee-based method for allocation of any mines.  The coal bill opens up the sector and gives the government the power to allow merchant mining. Till now, only captive mining was allowed and only companies which need coal for their own use got the licence. Under this practice, the government had lost and the companies made, according to the Comptroller and Auditor General, around Rs 2 lakh crore. Now, private companies can mine and sell coal in the open market and it marks an end to state monopoly. The government has assured the workers of Coal India that their interests would be protected, but it can allow commercial mining by private parties if need arises.  The minerals bill also seeks to introduce a system of auction to grant prospecting licences, as in the case of coal mines.  

The government was able to ensure the passage of the bills in the Rajya Sabha because it could convince a number of regional parties that the states would gain from the new laws on mining. Many states want resumption of mining which has been hampered by bans and stays imposed by courts. The government also did well by providing for higher royalty to the states and for creation of a fund at the state level to which miners will contribute for development of the districts where the mines are located. States now gain more financially from mining in their areas. The bills may be seen as key elements of a good and efficient energy policy and resource utilisation system, which are needed for economic development.