Engine of Economic Growth

The mining sector is a core driver of India’s economic development. It contributes significantly to the gross domestic product, and is a major source of employment and a catalyst for growth in other vital industries (such as power, steel and cement) that are, in turn, critical for overall economic growth.

As aptly stated in India’s National Mineral Policy, 2019 (NMP): “[m]inerals are a valuable natural resource being the vital raw material for the core sectors of the economy. Exploration, extraction and management of minerals have to be guided by national goals and perspectives, to be integrated into the overall strategy of the country’s economic development.”

Mineral Resources

India is richly endowed with metallic and non-metallic mineral resources – the country produces as many as 95 minerals, including four fuel, ten metallic, 23 non-metallic, three atomic and 55 minor minerals.

India is largely self-sufficient in minerals that are primary input for industry (such as iron and steel, aluminium, cement, refractories, ceramics, glass) and in bauxite, chromite, limestone, iron ore and sillimanite.

The country is deficient in kyanite, magnesite, rock phosphate, manganese ore, etc, which are imported to meet demand. To meet the increasing domestic demand for uncut diamonds, emeralds and other precious and semi-precious stones, India is dependent on imports of raw uncut stones for their value-added re-exports.

Major and Minor Minerals

The legal and regulatory framework broadly classifies minerals into two categories:

• “minor minerals”, which are defined to include building stones, gravel, ordinary clay, ordinary sand and any other minerals so declared by the central government; and
• minerals other than minor minerals, which are referred to generally as “major minerals”.

Concessions in respect of both major minerals and minor minerals are awarded at the level of the state governments. However, the central government has primacy with regard to the legal and regulatory framework for major minerals, while the regulation of minor minerals is largely left to the state governments.

Unless otherwise specifically mentioned, the responses set out herein concern major minerals (other than atomic and fuel minerals, for which the legal and regulatory framework is distinct and separate).

Mineral Production

Mineral production was valued at INR1,07,466 crore in FY 2022–23, marking a decrease of about 19% over the previous year. In FY 2021–2022, about 88.7% of production was in four states: Odisha led with a share of 44.11%, followed by Chhattisgarh with a share of 17.34%, Karnataka with 14.10%, and Rajasthan at 13.24%. Jharkhand comes in next at 4.36%.

The industry is characterised by a number of small operational mines; 1,319 mines reported mineral production in FY 2021–22. Most mines are in Madhya Pradesh, followed by Gujarat, Karnataka, Odisha and Chhattisgarh. During FY 2021–22, the private sector emerged to play a dominant role in mineral production, accounting for 58.54% of the total value (or INR77,713 crore).

Auction of Mineral Blocks

The law contemplates two types of mineral concessions that grant a person the right to undertake mining operations, as set out below.

• Mining leases are granted for undertaking mining operations – ie, operations undertaken for the purpose of winning any mineral. Mining leases are granted in respect of areas where there is evidence to show the existence of mineral contents in the manner prescribed.
• Composite licences envisage a prospecting licence for undertaking prospecting operations (ie, operations undertaken for the purpose of exploring, locating or proving mineral deposit), upon successful and satisfactory completion of which the licensee is granted a mining lease for undertaking mining operations. Composite licences are granted in respect of areas where there is inadequate evidence to show the existence of mineral contents as prescribed.

Owing to rulings of the Supreme Court of India urging the distribution of state largesse in a fair and transparent manner, auctions conducted by the state governments have been the predominant mode of awarding mining concessions since 2015. Since the commencement of the auction regime, 335 mineral blocks have been auctioned. The auctions have been dominated by iron ore (106 blocks), limestone (95 blocks), manganese (37 blocks), bauxite (32 blocks) and gold (15 blocks). The majority of the blocks auctioned are in the states of Madhya Pradesh (68 blocks), Odisha (48 blocks), Karnataka (41 blocks), Rajasthan (39 blocks), Maharashtra (38 blocks) and Chhattisgarh (35 blocks).

The Constitution of India stands at the apex of the Indian legal system, which has its basis in common law. The Constitution provides for a tripartite demarcation of legislative powers between the centre and states:

• List I, the Union List, sets out the subjects over which the centre has exclusive powers of legislation;
• List II, the State List, sets out the subjects over which states have powers of legislation; and
• List III, the Concurrent List, sets out the subjects over which the centre and states have shared power.

In this regard, the following is notable.

• Entry 54 of the Union List reads as follows: “Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest.”
• Entry 23 of the State List reads as follows: “Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union.”

Pursuant to Entry 54 of the Union List, the Parliament of India has enacted the Mines and Minerals (Development and Regulation) Act, 1957 (the MMDR Act), which is the main source of legislation governing the development and regulation of mines and minerals in India. The MMDR Act declares that it is in the public interest that the Union should take the regulation of mines and the development of minerals under its control, to the extent provided in the MMDR Act. This means that the jurisdiction of the states is excluded to the extent of the fields covered by such declaration.

The MMDR Act lays out various key aspects regarding the mining sector, including the types of mineral concessions that may be granted, the manner of granting such concessions, the persons eligible to win such concessions, and the maximum permissible area for mining by any particular person. The following rules have been notified by the central government pursuant to the MMDR Act, and are key elements of the governing framework:

• the Mineral (Auction) Rules, 2015, which set out the terms, conditions and procedure for conducting mineral auctions, including the net worth requirements and bidding parameters;
• the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016, which detail the terms and conditions of mineral concessions, stipulations concerning mining plans, procedures for transferring mineral concessions and the manner of calculating royalty payable on minerals; and
• the Mineral Conservation and Development Rules, 2017, which set out provisions concerning sustainable mining, the requirements for plans and sections, and the stipulations concerning mining operations.

The central government has also formulated the NMP, which highlights the following principles/objectives for the mining sector in India:

• the promotion of domestic industry, reducing import dependency and feeding into the Make in India initiative;
• in order to make the regulatory environment conducive to the ease of doing business, the procedures for the granting of mineral concessions shall be transparent and seamless, with an assured security of tenure along with transferability of concessions playing a key role in mineral sector development;
• simpler, transparent and time-bound procedures for obtaining clearances to ensure the regulatory environment are conducive to the ease of doing business;
• the government will endeavour to design fiscal measures, within the context of the budget, that are conducive to the promotion of mineral exploration and development, including beneficiation and other forms of product refinement; and
• efforts will be made to benchmark and harmonise royalty and all other levies and taxes with mining jurisdictions across the world to make India an attractive destination for exploration and mining.

Lastly, the Mines Act, 1952 (read with the rules issued thereunder) consolidates the law relating to the regulation of labour and safety in mines, with detailed provisions concerning health and safety, hours and limitation of employment, and leave of absence.

The issue of the ownership of minerals is not conclusively settled in law. While it is commonly understood that the state governments own minerals located within their respective boundaries, the Supreme Court of India held in its 2013 judgment in Threesiamma Jacob and Ors. v Geologist, Department of Mining and Geology and Ors., reported as (2013) 9 SCC 725, that there was nothing in the law declaring that all mineral wealth and sub-soil rights vest in the state, holding that ownership of sub-soil/mineral wealth should normally follow the ownership of the land, unless the owner of the land is deprived of the same by some valid process.

Nevertheless, it is noteworthy that the MMDR Act clearly stipulates that no person shall undertake any mining operations in any area without a mining lease granted under the MMDR Act and the rules made thereunder. As noted in 1.1 Main Features of the Mining Industry and 1.2 Legal System and Sources of Mining Law, mineral concessions to undertake mining operations are ordinarily granted by the state government by way of auctions. Thus, from a practical perspective, it would appear that, regardless of the issue of ownership, no mining operations may be undertaken except under a right granted by the state government pursuant to the MMDR Act.

As outlined in 1.2 Legal System and Sources of Mining Law, the regulation of mining is vested in the central government (including the manner of and eligibility for the granting of mineral concessions, and the terms and conditions of mineral concessions), while the state government is ordinarily responsible for conducting the process of granting mineral concessions, and for the granting thereof. Thus, the role of the state is that of grantor-regulator, with the central government being the regulator and the state government being the grantor.

There is no mandate for national or government joint venture, contracting or participation. The MMDR Act stipulates that any Indian national or company that satisfies such conditions as may be prescribed is eligible for the granting of a mineral concession. However, the law does empower the central government or state government to reserve any area (that is not already held under any prospecting licence or mining lease) for undertaking prospecting or mining operations through a government company or corporation owned or controlled by the central or state government, as the case may be. If such company or corporation proposes to carry out the operations in a joint venture with other persons, the joint venture partner is required to be selected through a competitive process, and such company or corporation must hold more than 74% of the paid-up share capital in such joint venture. Such reservation, however, lapses if such operations are not commenced within five years from the date of the reservation.

Please see 1.2 Legal System and Sources of Mining Law and 1.3 Ownership of Mineral Resources. Mineral rights are granted by the state governments pursuant to law (ie, the MMDR Act), by way of a mining lease, which permits the lessee to undertake mining operations. Mining leases may be transferred by their holder to another person, subject to obtaining requisite approval from the state government in this regard.

State governments are the granting authority for mineral concessions; please see 1.5 Nature of Mineral Rights.

Notably, by way of amendments to the MMDR Act, the central government has been empowered to conduct the auction of mineral concessions in certain circumstances – namely, where the state government fails to complete the auction or reauction of a mineral block within the stipulated timeframe. The central government is also empowered by way of a 2023 amendment to the MMDR Act to exclusively undertake auctions for certain “critical minerals”, such as lithium, cobalt, nickel bearing minerals, etc. Nevertheless, even in such instances, the eventual grantor of the mineral concession continues to be the state government, so there is no overlap in jurisdiction.

Term for Mineral Concessions

With effect from the 2015 amendments to the MMDR Act, all mining leases are granted for a period of 50 years; the amendment also extended the term of pre-2015 mining leases to 50 years. There is, however, no allowance for the renewal or extension of such a term. Blocks in respect of which the mining leases have expired are put up for reauction.

With regard to composite licences, which govern prospecting operations pursuant to a prosecting licence before the commencement of mining operations under a mining lease, the MMDR Act states that prospecting licences may be granted for a maximum period of three years. A prospecting licence may be renewed for a period not exceeding two years if the state government is satisfied that a longer period is required to enable the licensee to complete prospecting operations.

Progress From Exploration to Mining

The MMDR Act originally contemplated a vested right to obtain a mining lease after completing prospecting operations (and a prospecting licence followed by a mining lease after completing reconnaissance operations). However, these rights were brought to an end by way of an amendment to the MMDR Act in 2015, although pre-existing rights were grandfathered. Subsequently, even grandfathered rights were entirely extinguished by way of another amendment to the MMDR Act in 2021. Notably, these amendments are pending challenge before the writ courts.

Nevertheless, as noted above, the law recognises the concept of a “composite licence” whereby a prospecting licence is first granted for undertaking prospecting operations (ie, operations undertaken for the purpose of exploring, locating or proving mineral deposit) and, upon the successful and satisfactory completion of such prospecting operations, the licensee is granted a mining lease for undertaking mining operations.

Maintenance Requirements and Operating Control

Pursuant to rules notified under the MMDR Act, the central government has prescribed various conditions for undertaking mining operations, including an obligation to carry out mining operations in a proper, skilful and workman-like manner, and in such a manner so as to ensure the systematic development of mineral deposits, the conservation of minerals and the protection of the environment. In this regard, it is notable that the NMP envisages the promotion of zero-waste mining, the prevention of sub-optimal and unscientific mining, and the conservation of minerals oriented towards the augmentation of reserve/resource base.

Cancellation Procedures

The rules notified under the MMDR Act empower the state government to terminate a mining lease to the extent that the mining lessee is in breach of certain obligations thereunder, such as failing to permit the state government from carrying out inspections or failing to make payment of statutory dues.

In addition, the state government may – either of its own accord or upon the request of the central government, and subject to giving the mineral concession holder an opportunity to be heard – prematurely terminate a prospecting licence or mining lease in the interest of the regulation of mines and mineral development, the preservation of the natural environment, the control of floods, the prevention of pollution or avoiding danger to public health or communications, or ensuring the safety of buildings, monuments or other structures, or for such other purposes as may be deemed appropriate.

The MMDR Act also stipulates that a mining lease will lapse if a mining lessee fails to undertake production and dispatch for a period of two years after the date of execution of the lease or, having commenced production and dispatch, discontinues the same for a period of two years. Notably, in Common Cause v Union of India, reported as (2016) 11 SCC 455, the Supreme Court of India held that such lapsing of a mining lease is not automatic – the lease is not deemed to have lapsed until the state government passes an order declaring and communicating the same to the leaseholder.

Marketing

A mining lessee is entitled to market and sell the ore that has been won pursuant to mining operations to any person of its choosing, subject to making requisite payments or royalties and other amounts due to the government under law. The regime earlier contemplated the concept of “captive mining”, with mining leases awarded subject to the restriction that all or part of the mined output would be utilised in a specified end-use plant. However, this concept has been done away with following the 2021 amendment to the MMDR Act, with mines no longer being permitted to be reserved for captive purpose in auctions.

Transferability

As noted in 1.1 Main Features of the Mining Industry and 1.5 Nature of Mineral Rights, the MMDR Act permits the transfer of a mineral concession subject to prior approval of the state government. No transfer charges are due in respect thereof. The framework allows for deemed approval, inasmuch as the permission is deemed to have been granted if the state government does not convey its approval within a period of 90 days.

The transferor is required to intimate to the state government the consideration payable by the successor-in-interest for the transfer, including the consideration in respect of the prospecting operations already undertaken and the reports and data generated during the operations. Any transfer is subject to the condition that the transferee accepts all conditions and liabilities under any law to which the transferor was subject in respect of such a mineral concession.

There is some ambiguity as to whether the acquisition of a controlling equity stake in a company holding a mineral concession would amount to a transfer of such concession, thereby necessitating approval of the state government. In this regard, in State of Rajasthan and Ors. v Gotan Lime Stone Khanji Udyog Pvt. Ltd and Anr, reported as (2016) 4 SCC 469, the Supreme Court of India made a pronouncement that may be interpreted as holding that the transfer of shares would, in substance, amount to a transfer of a mineral concession, requiring prior approval of the state government.

Regulatory Framework

The Constitution of India provides a holistic foundation for Indian environmental law, comprising:

• Article 48-A – a directive principle of state policy requiring the state to endeavour to protect and improve the environment and safeguard forests and wildlife; and
• Article 51A(g) – citizens have a fundamental duty to protect and improve the natural environment, including forests, lakes, rivers and wildlife.

In addition, the Supreme Court of India has interpreted the fundamental right to life guaranteed under Article 21 of the Constitution to include the right to live in a clean environment.

The legislative framework for environmental protection comprises several federal-level environmental protection laws, including the following.

• The Water (Prevention and Control of Pollution) Act, 1974 provides for the prevention and control of water pollution and the maintaining or restoration of the wholesomeness of water. Pollution control boards at the state and federal levels have been constituted pursuant to this law.
• The Air (Prevention and Control of Pollution) Act, 1981 provides for the prevention, control and abatement of air pollution.
• The Environment (Protection) Act, 1986 provides for the protection and improvement of the environment. Various notifications/rules/regulations have been issued under this act concerning, amongst others, emissions reduction, management of waste, regulation of activities in coastal zones, ozone-depleting substances, etc.
• The Forest (Conservation) Act, 1980 sets out provisions relating to the conservation of forests (read with the Compensatory Afforestation Fund Act, 2016).
• The Wildlife (Protection) Act, 1972 provides for the protection of wild animals, birds and plants.
• The Public Liability Insurance Act, 1991 provides for public liability insurance in order to provide immediate relief to persons affected by accidents occurring while handling hazardous substances.
• The Biological Diversity Act, 2002 provides for the conservation of biological diversity, the sustainable use of its components, and the fair and equitable sharing of the benefits of using biological resources.
• The National Green Tribunal Act, 2010 provides for the establishment of the National Green Tribunal, which has jurisdiction over cases relating to environmental protection and the conservation of forests and other natural resources, including the enforcement of any legal rights relating to the environment.

Environmental Licensing

The above legal and regulatory framework for environmental protection prescribes various approvals that have to be obtained before establishing, operating or undertaking mining activities. The key permits include the following.

• Consent to establish/operate – prior consent of the State Pollution Control Board has to be obtained in order to establish and operate any industry or plant in a designated air pollution control area, or any industry or plant that is likely to discharge sewage or trade effluent into a stream, well or sewer or on land.
• Environmental approvals – various approvals have to be obtained under the notifications/rules issued under the Environment (Protection) Act, 1986, including “prior environmental clearance” (from the central government in case of mining projects with over 100 ha of lease area, and otherwise from the state government) as well as approvals regarding the use of hazardous waste, development in coastal areas, etc.
• Forest clearance – permission has to be sought from the government for the use of any forest land for any non-forest purpose, with a process of “compensatory afforestation” required to be undertaken in this regard.

As can be seen from the above, the environmental licensing regime operates at both the national and state levels, with a mix of executive and statutory agencies being responsible. These agencies are fairly robust, with suitable and sufficient capabilities and personnel. Previously, criticisms were levelled that the licensing regime was slow and inefficient, resulting in undue delays in project implementation. These concerns have somewhat eased in recent years, with digitisation and time-bound service commitments hastening processes.

In a notable development, in its June 2022 judgment in In Re: TN Godavarman Thirumulpad v Union of India and Ors., I.A. No 1000 of 2003 in WP (C) No 202 of 1995, the Supreme Court upheld that mining within national parks and wildlife sanctuaries (and up to a certain distance from the demarcated boundary of such area) shall not be permitted. By an order dated 26 April 2023 in said matter, the Supreme Court has also prohibited mining activities within an area up to one kilometre from the boundary of national parks and wildlife sanctuaries.

It is also notable that the NMP envisages that mining operations shall not ordinarily be taken up in identified ecologically fragile and biologically rich areas, with the government identifying such areas as “inviolate areas” or “no-go areas” out of bounds for mining.

The MMDR Act stipulates that the state government shall establish a “District Mineral Foundation” in any district affected by mining-related operations, with the aim of working for the interest and benefit of persons and areas affected by mining-related activities. A mineral concessionaire is required to pay a percentage (which will not exceed one third) of the royalty payable by such lessee to the foundation of the district in which the mining operations are carried on. The operation of the foundation for the inclusive and equitable development of project-affected persons is guided by the provisions of a scheme entitled “Pradhan Mantri Khanij Kshetra Kalyan Yojana”, which has been launched by the central government.

The MMDR Act also empowers the central government to issue directions to the state governments on any policy matter in the national interest, including to promote restoration and reclamation activities so as to make optimal use of mined out land for the benefit of local communities.

Furthermore, where land is acquired by the government for the purpose of any mining project, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 is applicable. This law mandates the conduct of a social impact assessment, based on which the land that is eventually identified for acquisition should ensure the minimum displacement of people, minimum disturbance to the infrastructure and ecology, and minimum adverse impact on the individuals affected.

Notably, the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 provide that a mining lessee shall, in matters of employment, give preference to tribals and to persons who become displaced because of the taking up of mining operations.

Lastly, the NMP recognises that, where mining activities are spread over decades, mining communities become established and the closure of the mine means not only the loss of jobs but also the disruption of community life. In order to address this, the NMP provides that mines shall be closed in an orderly and systematic manner.

The process of obtaining “prior environmental clearance” under the Environment (Protection) Act, 1986 requires a public consultation to be conducted by the State Pollution Control Board. There are two elements to the consultation:

• a public hearing at the project site or in its close proximity; and
• obtaining written responses from other concerned persons who have a plausible stake in environmental aspects.

This process aims to ascertain the concerns of local affected persons and others who have a plausible stake in the environmental impacts of the project or activity in order for all the material concerns in the project or activity design to be taken into account, as appropriate. All such concerns are required to be addressed in the environmental impact assessment and environmental management plan that are required to be prepared as part of the approval process (and which are to be complied with by the project proponent).

India is home to various tribal communities. The Constitution of India accords special protections to certain identified tribes, with the state being responsible for promoting the educational and economic interests of such tribes with special care, and for protecting them from social injustice and all forms of exploitation. Notably, there are district councils in respect of tribal areas in the states of Assam, Meghalaya, Tripura and Mizoram that are granted a degree of autonomy and are entitled to a certain share of the royalties accruing each year from licences or leases for the purpose of prospecting for, or the extraction of, minerals granted by state government in respect of any such area.

Various laws also seek to protect the rights and interests of such tribes. For example, the federal Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 recognises and grants forest rights and occupation in forest land to forest-dwelling scheduled tribes. Furthermore, as noted in 2.3 Impact of Community Relations on Mining Projects, the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 provide that a mining lessee shall, in matters of employment, give preference to tribals and to persons who become displaced because of the taking up of mining operations.

The NMP also emphasises an integrated approach encompassing mineral development, regional development and the social and economic well-being of the local tribal population.

Community development agreements are not mandatory under the mining laws in India. Please see 2.5 Impact of Specially Protected Communities on Mining Projects.

There are no specific ESG guidelines or regulations in India for the mining sector. Instead, the framework in this regard is spread across various laws governing corporate governance (the Companies Act, 2013), environmental protection (as outlined in 2.1 Environmental Protection and Licensing of Mining Projects), labour laws and stipulations in the MMDR Act and the rules issued thereunder.

In May 2021, the Securities and Exchange Board of India introduced new reporting requirements on ESG parameters: the “Business Responsibility and Sustainability Report” (BRSR). These requirements took effect from the financial year 2022–23, and are mandatory for the top 1,000 listed companies (by market capitalisation). This initiative is aimed at enabling companies to engage more meaningfully with their stakeholders, by encouraging them to look beyond financials and towards social and environmental impacts. The report covers research, development and investments in technologies that improve ESG impact, social impact assessments of projects undertaken as per applicable law, beneficiaries of corporate social responsibility projects (including from vulnerable and marginalised groups), emissions reduction and waste-management initiatives, and mechanisms for addressing human rights issues.

In July 2023, the “BRSR Core” was introduced, as a sub-set of the BRSR, consisting of a set of key performance indicators/metrics under nine ESG attributes, and will mandatorily apply to the top 150 listed companies (by market capitalisation) in FY 2023–24 and to the top 1,000 listed companies over the subsequent three financial years in a phased manner.

The central government is considering introducing similar reporting obligations for unlisted companies. Indian companies have also begun to voluntarily adopt various ESG policies aimed at reducing their carbon footprint and increasing expenditure on corporate social responsibility.

The mining sector in India has been witness to both positive and negative cases of environmental and community relations/consultation. A good example of community relations is the strategy adopted by a large mining conglomerate in India, whose outreach efforts span multiple fronts, including:

• children’s wellbeing and education;
• women’s empowerment;
• healthcare;
• drinking water and sanitation;
• sustainable agriculture and animal welfare;
• labour market-related skills for young people;
• environmental protection and restoration;
• sports and culture; and
• the development of community infrastructure.

These efforts are aimed at improving the quality of life of the communities in and around its operational areas, and have yielded positive responses from locals, thereby fostering a sense of trust and inclusion.

An instance of a public consultation being poorly conducted is the public hearing for the expansion of an iron ore mining facility in the Surjagarh Hills region of Maharashtra. On grounds of security concerns, the public hearing was planned at a location 130 km away from the affected villages. This did not sit well with locals, and reportedly triggered panic and protest over rumours that 13 villages would be displaced as a result of the proposed expansion plans. While the authorities had arranged transport for the villagers, it is understood that many from the 13 hamlets did not have an opportunity to speak at the hearing, being constrained to remain outside the venue as mute spectators (video screens had been set up for them in order to observe proceedings). The media was also kept out of the public hearing. Suspicions were also raised regarding the presence of police officials to allegedly intimidate those attending the hearing. Such a public hearing process can undermine the legitimacy of the approval process, and can subsequently be struck down if challenged in court. Belated cancellation would, in turn, have the undesirable impact of impeding project development.

Given the nature of mining operations, the mining industry has long been subject to stringent environmental norms. Please see 2. Impact of Environmental Protection and Community Relations on Mining Projects regarding the applicable environmental regime and licensing requirements.

In addition, India has committed to ambitious goals to manage the threat of climate change, most recently committing to reduce the emission intensity of its GDP by 45% from the 2005 levels by 2030. While there are no specific climate action-related measures presently applicable to the mining sector, India is contemplating a number of measures, including a carbon trading market, with a view to meeting these goals.

See 3.1 Climate Change Effects.

The Mineral Conservation and Development Rules, 2017 confer upon a mining lessee the responsibility for taking all possible precautions to undertake sustainable mining while conducting mining operations. In this regard, the Indian Bureau of Mines has instituted a “Star Rating” system for evaluating sustainability efforts. Mining lessees are required to obtain at least a three-star rating within four years from the date of commencement of mining operations, and to maintain such rating on a yearly basis.

Furthermore, the MMDR Act empowers the central government to issue directions to the state governments for the scientific and sustainable development and exploitation of mineral resources, including, without limitation, with regard to:

• the implementation and evaluation of sustainable development frameworks;
• a reduction in waste generation and related waste management practices and the promotion of the recycling of materials;
• minimising and mitigating adverse environmental impacts, particularly in respect of ground water, air, ambient noise and land;
• ensuring minimal ecological disturbance, in terms of bio-diversity, flora, fauna and habitat; and
• promoting restoration and reclamation activities so as to make optimal use of mined out land for the benefit of the local communities.

The NMP recognises that mining needs to be carried out sustainably – ie, mining that is financially viable, socially responsible and environmentally, technically and scientifically sound, with a long-term view of development, and that uses mineral resources optimally and ensures sustainable post-closure land uses. To this end, the NMP envisages:

• that environmental, economic and social considerations must be considered early in the decision-making process, to ensure sustainable development in the mining sector;
• that the central government shall set a benchmark for evaluating the sustainability of mining operations, and enforce commitments to adopt sustainable development practices for achieving environmental and social goals; and
• an inter-ministerial body to institutionalise a mechanism for ensuring sustainable mining with adequate concerns for environment and socio-economic issues in mining areas, and also to decide the limits of the extent of mining activities, having regard to the principles of sustainable development and intergenerational equity.

The MMDR Act was amended in 2023 so that energy-transition minerals such as lithium, cobalt and nickel are now classified as “Critical and Strategic Minerals”. Notably, lithium had earlier been classified as an atomic mineral, with minerals concessions in this respect being restricted to the public sector. Pursuant to this amendment, the central government alone is empowered to conduct auctions to grant mineral concessions for such minerals to any person who is otherwise eligible to receive a mineral concession under the terms of the MMDR Act. Upon successful completion of the auction, the central government intimates the details of the winning bidder to the state government, which then grants a mineral concession to such bidder. All royalties in respect of minerals won under the concession accrue to the state government.

Notably, the amendment has also introduced the concept of an “exploration licence”, which is to be granted by state governments in respect of certain identified minerals (which include lithium, cobalt and nickel). These licences are for the purpose of undertaking reconnaissance or prospecting operations, or both. The exploration licence is granted for a period of five years, with an option to extend by a period of two years. To the extent that a mining lease is granted in respect of the area so explored, the licensee is entitled to a prescribed share of the auction-discovered amounts payable by the mining lessee to the state government. The auction for grant of the mining lease is required to be completed within one year of the exploration licensee having submitted their geological report in the manner prescribed. If a winning bidder is not selected within such period, the state government shall pay the exploration licensee a prescribed amount.

These amendments were introduced with the objective of increasing the exploration and mining of critical minerals that are essential for economic development and national security in the country and helping India achieve net-zero emissions by 2070, the unavailability of which may lead to supply chain vulnerabilities and even disruption of supplies. The proposed reforms are expected to facilitate, encourage and incentivise private sector participation in all spheres of mineral exploration for these critical minerals.

Under the MMDR Act, a mining lessee is liable to make payment of the following.

• A royalty in respect of any mineral removed or consumed by them or by their agent, manager, employee, contractor or sub-lessee, the rate of which is set out in the second schedule to the MMDR Act, and varies from mineral to mineral. The royalty is payable either as a flat rate per tonne or on an ad valorem basis, having regard to a sale price published by the Indian Bureau of Mines.
• Dead rent for all the areas included in the instrument of lease, at rates set out in the third schedule to the MMDR Act. Lessees that are also liable to pay royalties are liable to pay either such royalty or the dead rent in respect of that area, whichever is greater.
• A contribution to the National Mineral Exploration Trust constituted by the central government with the objective of using its funds for regional and detailed exploration. The rate of such contribution is 2% of the royalty paid.
• A contribution to the District Mineral Foundation in the manner set out in 2.3 Impact of Community Relations on Mining Projects.

Other taxes that are applicable without being specific to the mining industry include Income Tax, indirect taxes (customs duties, Goods and Services Tax, etc) and stamp duties.

The present dispensation does not distinguish between national and foreign investors when it comes to the above levies. In any case, as noted in 1.4 Role of State in Mining Law and Regulations, mineral concessions can only be granted in favour of Indian entities (although such entities may have foreign investment or be foreign-owned or controlled).

The Income Tax Act, 1961 allows any entity engaged in any operations relating to prospecting for, or extraction or production of, any mineral to claim a deduction of one tenth of the expenditure on any prospecting operations or on the development of a mine. There are, however, no tax stabilisation agreements in India.

The transfer or sale of a mineral concession attracts capital gains tax, as mineral rights are considered a capital asset.

Foreign Direct Investment (FDI)

The central government has permitted FDI up to 100% under the “automatic route” (ie, without requiring prior government approval) with regard to the mining and exploration of metal and non-metal ores, including diamonds, gold, silver and precious ores.

Ease of Doing Business

The Department for Promotion of Industry and Internal Trade has spearheaded reform aimed at improving India’s business regulatory environment, in co-ordination with various central ministries/departments, states and union territories. The reform initiatives are focused on streamlining existing regulations and processes and eliminating unnecessary requirements and procedures. They cover areas such as reducing the compliance burden to improve the overall business regulatory environment in the country.

Production-Linked Incentive Scheme

The central government has announced a production-linked incentive scheme for specialty steel. The scheme envisages a financial outlay of INR6,322 crore. The objective of the scheme is to promote the manufacturing of such steel grades within the country by attracting significant investment and helping the Indian steel industry to mature in terms of technology as well as moving up the value chain. As of March 2023, companies participating in the production-linked incentive scheme have committed to an investment of INR29,530 crore, a downstream capacity addition of 24.78 million tonne and employment for about 55,000 people.

As noted in 5.1 Attracting Investment for Mining, under India’s FDI regime, 100% FDI is allowed under the automatic route in the area of mining and the exploration of metal and non-metal ores, including diamonds, gold, silver and precious ores (subject to the provisions of the MMDR Act).

However, FDI in the mining of titanium-bearing ores (an atomic mineral) is subject to government approval, and no FDI is permitted in certain prescribed atomic minerals.

The central government has been working to strengthen its co-operation in the area of geology and mineral resources with mineral-rich countries such as Australia and Russia, and African and Latin American countries. To this end, numerous memoranda of understanding have been signed or are proposed to be signed with mineral-rich countries, including, more recently, with Argentina and Cote D’Ivoire in the field of geology and mineral resources.

Commencing in the 1990s, India has been party to a number of bilateral investment treaties aimed at the reciprocal promotion and protection of investments. However, these treaties have been terminated in recent years, and India is currently in the process of negotiating fresh treaties with various countries.

Mining activities undertaken by private companies are ordinarily funded through a mix of equity and debt (domestic or foreign) from banks and non-banking financial companies. Project finance for mining is available based on the strength of the projected cash flows from the mining activity.

Mining companies in India may opt to finance exploration, development and mining by way of domestic or foreign equity investments, by availing debt, by the issuance of debt instruments (such as debentures) and by listing their securities on domestic and foreign stock markets.

Rule 25 of the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 provides that the holder of a mineral concession may create an encumbrance over the concession. If the security interest over the encumbrance is enforced, the mineral concession may be transferred only to such persons who meet all eligibility conditions required to be met by the transferor for the grant of the concession. An application for the transfer of the concession may be made by the creditors enforcing the security interest.

Considering the abundance of minerals in India, the mining sector has huge economic potential and could play a crucial role in making this aspiration a reality in terms of its own economic output and also in responding to the demands of other allied/dependent industries. In addition, the sector has the capacity to create more than 50 million jobs directly and indirectly, which will be vital given the burgeoning Indian population.

The central government envisions doubling the production of important minerals in coming years, with a view to reducing import dependency. It intends on doing so by allocating and regulating minerals in a transparent and sustainable manner, promoting the exploration and mining of deep-seated and critical minerals, and by attracting foreign investment to meet growing needs. To this end, recent years have witnessed a flurry of amendments to the legal framework for mining, indicating the authorities' intent to rapidly and proactively address issues in the sector and facilitate smooth and timely project development. A similar level of alacrity is expected to persist in the ensuing years.

The mining sector has also been gradually adopting advanced technologies to improve operational efficiency and safety, while also practising sustainable mining practices such as waste management and investing in eco-friendly technologies. Mining companies are increasingly focusing on corporate social responsibility initiatives, investing in local communities, education, healthcare and sustainable development projects.

As the economy expands, recovers and rebounds from the ill-effects of the pandemic and the subsequent global economic slowdown/headwinds, and as the demand for mineral resources grows, the challenge of balancing economic growth with environmental sustainability will be ever more pressing. It is imperative that India charts the course of its economic development and mineral exploitation in a manner that is responsive to the dire and pressing demands for climate action, both present and future.