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India’s proposed mining legislation silent on profit sharing

2nd December 2014

By: Ajoy K Das

Creamer Media Correspondent

  

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KOLKATA (miningweekly.com) - India’s proposed legislation to reform the governance of the mining sector makes no mention of profit sharing by mining companies, indicating the government’s lingering indecision on the issue.

According to an official in the Mines Ministry, the Mines and Minerals Development and Regulation Amendment Bill 2014 (MMDR) currently did not have a clause for a mandatory 26% profit sharing with communities affected by the resource projects.

The previous version of the Bill, which had lapsed owing to the end of the previous Parliament's tenure, incorporated such a provision, which had been hailed by people in mineral-rich provinces but denounced by investors and miners who claimed that it would increase the costs of mineral exploitation.

The current version of the MMDR legislation sought to replace the five-decade-old legal environment governing the country’s mining sector, and was currently before Parliament. However, profit sharing had been kept out of it, the official said, adding that a last minute reversal on the government’s stand could not be ruled out before the document was formally placed before lawmakers.

Instead, provisions had been incorporated for establishing a ‘mineral foundation’ in regional mining areas to create social infrastructure in mining-affected regions to be funded through a levy linked to royalty payable by miners, the official said.

It was pointed out that a panel of Parliamentarians set up by the previous government had recommended against any mandatory profit sharing provision for mining companies on the grounds that such a move would be a major disincentive for attracting private investments into the investment-starved sector and would increase the costs of mineral resources to the detriment to end-use consumers.

While attempting to make the new laws more investor friendly, the government has included more stringent provisions for violators of mining laws.

For example, criminal violations of mining permissions granted or illegal mining had been made a cognizable offence with violators subject to maximum prison sentences of five years, up from a maximum prison term of two years as stipulated in older laws.

Edited by Esmarie Iannucci
Creamer Media Senior Deputy Editor: Australasia

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