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National Institute of Science & Technology
Project Presentation-2008
PRESENTATION ON MANAGEMENT OF MINES AND MINERALS-A CASE STUDY WITH RESPECT TO STATE OF ORISSA Under the guidance of Mr. Bora Balaram Debiprasan Swain And Sanjit Tripathy
[1]
National Institute of Science & Technology
Project Presentation-2008
CONTENTS • • • • • • • • •
INTRODUCTION MINERAL RESOURCE OF ORISSA MINERAL LEGISLATION IN INDIA MINING POLICY INVESTMENT POLICY REVENUE FROM MINING METHODLOGY FOR CALCULATION OF ROYALITY ILLEGAL MINING CONCLUSION
Debiprasan Swain And Sanjit Tripathy
[2]
National Institute of Science & Technology
Project Presentation-2008
INTRODUCTION • Orissa is a maritime State on the East coast of India, between 17 degrees 49minutes north to twenty-two degrees thirty-four minutes North latitudes and 81degrees 27 minutes east to 87 degrees 29 minutes East longitudes . • Orissa is the tenth largest state (in terms of geographical area) in India and has about 4% of India’s population. One of the poorest State of the Indian Union, with more than 40% of the population below poverty line .
Debiprasan Swain And Sanjit Tripathy
[3]
National Institute of Science & Technology
Project Presentation-2008
INTRODUCTION(CONTD) Morphologically, Orissa can be divided into five parts: • 1. Coastal Plains: stretch from Subarnarekha in North. to Rushikulya in South • 2. Middle Mountainous Country: covers about threefourths of the area of the State • 3. Rolling Upland: rich in soil nutrients, are the products of continued river action • 4. River Valleys: associated with Brahmani, Mahanadi and Vansadhara rivers • 5. Subdued Plateau: monotony of orography is interrupted by the river valleys
Debiprasan Swain And Sanjit Tripathy
[4]
National Institute of Science & Technology
Project Presentation-2008
MINERAL RESOURCE OF ORISSA • Orissa occupies an important position in India’s mineral-map. • Reserves of major minerals like Chromite, Nickel, Bauxite, Iron-Ore and Coal in • Orissa were approximately 97%, 95%, 49%, 33% and 24% respectively of the total • deposits in India during 2006-07. Other minerals like China Clay, Fire Clay, Lime • Stone, Quartz, Precious and Semi-Precious Stones, Copper, Manganese, Graphite, • Titanium, Vanadium etc. are also available in the State. Total production of • minerals and ores in the State during 2003-04 has registered an increase of 23.95% • in quantity and 40.72% in value
Debiprasan Swain And Sanjit Tripathy
[5]
National Institute of Science & Technology
Project Presentation-2008 MINERAL RESOURCE OF ORISSA(CONTD) • A number of mineral based industries have been set up in Orissa which include : • Rourkela Steel Plant (RSP), Aluminium Plants by INDAL and National Aluminium Company (NALCO), and Charge Chrome Plants by Orissa Mining Corporation (OMC),Ferro Alloys Corporation (FACOR) and Indian Charge Chrome Ltd. (ICCL). The other • important mineral based industries established include Sponge Iron Plants in Keonjhar district, Refractory in Dhenkanal district and Mineral Sands Separation • and Synthetic Rutile Plants in Ganjam district. Several Cement Plants have been set up in the State and three Coal-based Thermal Power Plants also have been set up.
Debiprasan Swain And Sanjit Tripathy
[6]
National Institute of Science & Technology
Project Presentation-2008
MINERAL LEGISLATION IN INDIA •
FLOW CHART
Debiprasan Swain And Sanjit Tripathy
[7]
National Institute of Science & Technology
Project Presentation-2008
MINING POLICY •
CENTRAL GOVERNMENT AT POLICY LEVEL :-
• Should announce a complete moratorium on new mining projects in green field areas. • The communities should have legally enforceable right to natural resources - land and mineral rights - towards ensuring communities' command over natural resources
Debiprasan Swain And Sanjit Tripathy
[8]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should not disinvest mining companies, in favour of private and multinational companies. • Should not accept industry codes of conduct • Should not grant license or lease to global mining corporates or their joint ventures • Should ensure right to mining by indigenous people and their co-operatives
Debiprasan Swain And Sanjit Tripathy
[9]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should neither seek nor allow multilateral banks such as World Bank, ADB or other international financial institutions including surrogates like FII, FDI, export credit guarantee agencies, to invest in mining and extractive industries • Should promote Community Sector ownership in mining projects through workers and communities in mineral bearing areas Debiprasan Swain And Sanjit Tripathy
[10]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should ensure mandatory higher standards in relation to international environmental and human rights in all mining projects in the country • Samata Judgement to be implemented while granting license and lease to new mines.
Debiprasan Swain And Sanjit Tripathy
[11]
National Institute of Science & Technology
Project Presentation-2008
CONT… • The decision to mine should be taken only after EIA, social impact assessment and public hearing processes already in place are strictly adhered to. Unequivocally respect and enforce Surface and subsurface rights of adivasis and indigenous peoples and all miningaffected communities, as well as their right to veto unacceptable projects. • At the Implementation level of Legal and Site Enforcement
Debiprasan Swain And Sanjit Tripathy
[12]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should enforce all entitlements of women with regard to land and natural resources. • Must ensure, where mining exists or must continue, equal opportunities for women. • Wages and working conditions for women miners should strictly follow international standards and agreements, and ensure equality and equity without discrimination. • Child labour should be strictly abolished
Debiprasan Swain And Sanjit Tripathy
[13]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Enforce the true sprit of legal provisions for occupational health and safety. • Ensure social security benefits for all casual and temporary mine workers. • No discrimination in wages and benefits between permanent and casual and temporary mine workers • A part of royalty from mining and license fees of mines should be distributed among mining affected communities
Debiprasan Swain And Sanjit Tripathy
[14]
National Institute of Science & Technology
Project Presentation-2008
INVESTMENT POLICY • The Mines and Minerals (Development and Regulation) Act, 1957, (MMDR) and the Mines Act, 1952, together with the rules and regulations under them constitute the basic laws governing the mining sector. Further, the Government has formulated the National Mineral Policy, which was revised in 1994 to permit private investment in exploration and exploitation of 13 specified minerals. • In 1999, the foreign investment policy has been further liberalised to promote Foreign Direct Investment (FDI) in the mining sector: • For exploration and mining of diamonds and precious stones, FDI upto 74 percent is permitted under automatic route. • For exploration and mining of gold and silver and minerals other than diamonds and precious stones, FDI is allowed upto 100 percent under automatic route.
Debiprasan Swain And Sanjit Tripathy
[15]
National Institute of Science & Technology
Project Presentation-2008
CONT… • In a significant relaxation of the general policy governing process of automatic approval for FDI for the mining sector, the automatic route for FDI and/ or technology collaboration is also available to those who have or had any previous joint venture or technology transfer agreement, subject to a declaration being filed that they have no existing joint venture for the same area and/ or the mineral concerned. • • Private Indian companies setting up/operating power projects as well as coal and lignite mines for captive consumption are allowed FDI upto 100 percent. • • 100 percent FDI is allowed for setting up coal processing plants subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.
Debiprasan Swain And Sanjit Tripathy
[16]
National Institute of Science & Technology
Project Presentation-2008
REVENUE FROM MINING • The major revenue accrual to the state governments from the mining sector is by way of royalty on minerals extracted from the mines within the state. • Besides royalty, dead rent also accrues to the states from lessees who have not been operating their mines for any reason and thus not paying any royalty. • In addition to royalty and dead rent, the states also get some revenues from the initial application fee payable by a concession seeker, annual fee payable by RP/PL holder on the basis of the area held, surface rent, sales tax or VAT, local area tax (e.g. Panchayat tax), and stamp duty.
Debiprasan Swain And Sanjit Tripathy
[17]
National Institute of Science & Technology
Project Presentation-2008
REVENUE CONT… • Conceptually, royalty is a payment made by the mining lessee to the state as owner of the mineral as a consideration for the mineral extracted and sold by the lessee. • Dead rent is a charge to be paid by the lessee for that area included in the ML from which minerals are not extracted. • The main purpose of levying dead rent is to discourage the lessee from keeping the mineral property idle. • The existing rates of dead rent are based on the area of the lease and the value of minerals. • Accordingly, the dead rent applicable is higher for the higher value group of minerals
Debiprasan Swain And Sanjit Tripathy
[18]
National Institute of Science & Technology
Project Presentation-2008 METHODLOGY FOR CALCULATION OF ROYALITY
• For calculation of royalty three systems are prevalent worldwide. These are: • Quantity based or rate per tonne, • ad valorem or percentage of revenue, and • profit based or percentage of profit.
Debiprasan Swain And Sanjit Tripathy
[19]
National Institute of Science & Technology
Project Presentation-2008
CONT… • QUANTITY BASED ROYALITY :• Quantity based royalty, also known as specific rate royalty, is charged on the basis of a unit of quantity such as weight, e.g. $ or Rupees per tonne. • This system is easy to administer but is inefficient in fiscal terms as the collection of royalty revenue is a function of the quantity extracted, and rising prices do not get reflected in the receipts. • It is generally used for low-value and high-volume minerals
Debiprasan Swain And Sanjit Tripathy
[20]
National Institute of Science & Technology
Project Presentation-2008
ILLEGAL MINING • Prevention of illegal mining is equally important for augmenting revenue from the mining sector. • Illegal mining is known to be widespread not only in major minerals but also in minor minerals for which the state government is competent to frame its respective Minor Mineral Concession Rules (MMCRs). • Not only is mining taking place at many places without a valid lease.
Debiprasan Swain And Sanjit Tripathy
[21]
National Institute of Science & Technology
Project Presentation-2008
CONCLUSION… • Orissa has an estimated 85 billion tonnes of mineral reserves remaining to be exploited. • Besides coal, oil and gas reserves, the mineral inventory in Orissa includes 13,000 deposits/ prospects of 61 non-fuel minerals. • Expenditure outlay on mining is a meagre sum when compared to other competing emerging mining markets and the investment gap is most likely to be covered by the private sector. • Orissa welcomes joint ventures between foreign and domestic partners to mobilise finances and technology and secure access to global markets.
Debiprasan Swain And Sanjit Tripathy
[22]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Potential areas for exploration ventures include gold, diamond, copper, lead, zinc, nickel, cobalt, molybdenum, lithium, tin, tungsten, silver, platinum group of metals and other rare metals, chromite and manganese ore, and fertiliser minerals. • The main opportunities in the mining sector (excluding coal and industrial minerals) are in the development and production of surplus commodities such as iron ore and bauxite, mica, potash, few low-grade ores, mining of small gold deposits, development of placer gold resources.. • Considerable potential exists for setting up manufacturing units for value added products.
Debiprasan Swain And Sanjit Tripathy
[23]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should announce a complete moratorium on new mining projects in green field areas. • The communities should have legally enforceable right to natural resources - land and mineral rights - towards ensuring communities' command over natural resources. • Should not disinvest mining companies, in favour of private and multinational companies • Should not grant license or lease to global mining corporates or their joint ventures. Should neither seek nor allow multilateral banks such as World Bank, ADB or other international financial institutions including surrogates like FII, FDI, export credit guarantee agencies, to invest in mining and extractive industries.
Debiprasan Swain And Sanjit Tripathy
[24]
National Institute of Science & Technology
Project Presentation-2008
THANK YOU
Debiprasan Swain And Sanjit Tripathy
[25]
Project Presentation-2008
PRESENTATION ON MANAGEMENT OF MINES AND MINERALS-A CASE STUDY WITH RESPECT TO STATE OF ORISSA Under the guidance of Mr. Bora Balaram Debiprasan Swain And Sanjit Tripathy
[1]
National Institute of Science & Technology
Project Presentation-2008
CONTENTS • • • • • • • • •
INTRODUCTION MINERAL RESOURCE OF ORISSA MINERAL LEGISLATION IN INDIA MINING POLICY INVESTMENT POLICY REVENUE FROM MINING METHODLOGY FOR CALCULATION OF ROYALITY ILLEGAL MINING CONCLUSION
Debiprasan Swain And Sanjit Tripathy
[2]
National Institute of Science & Technology
Project Presentation-2008
INTRODUCTION • Orissa is a maritime State on the East coast of India, between 17 degrees 49minutes north to twenty-two degrees thirty-four minutes North latitudes and 81degrees 27 minutes east to 87 degrees 29 minutes East longitudes . • Orissa is the tenth largest state (in terms of geographical area) in India and has about 4% of India’s population. One of the poorest State of the Indian Union, with more than 40% of the population below poverty line .
Debiprasan Swain And Sanjit Tripathy
[3]
National Institute of Science & Technology
Project Presentation-2008
INTRODUCTION(CONTD) Morphologically, Orissa can be divided into five parts: • 1. Coastal Plains: stretch from Subarnarekha in North. to Rushikulya in South • 2. Middle Mountainous Country: covers about threefourths of the area of the State • 3. Rolling Upland: rich in soil nutrients, are the products of continued river action • 4. River Valleys: associated with Brahmani, Mahanadi and Vansadhara rivers • 5. Subdued Plateau: monotony of orography is interrupted by the river valleys
Debiprasan Swain And Sanjit Tripathy
[4]
National Institute of Science & Technology
Project Presentation-2008
MINERAL RESOURCE OF ORISSA • Orissa occupies an important position in India’s mineral-map. • Reserves of major minerals like Chromite, Nickel, Bauxite, Iron-Ore and Coal in • Orissa were approximately 97%, 95%, 49%, 33% and 24% respectively of the total • deposits in India during 2006-07. Other minerals like China Clay, Fire Clay, Lime • Stone, Quartz, Precious and Semi-Precious Stones, Copper, Manganese, Graphite, • Titanium, Vanadium etc. are also available in the State. Total production of • minerals and ores in the State during 2003-04 has registered an increase of 23.95% • in quantity and 40.72% in value
Debiprasan Swain And Sanjit Tripathy
[5]
National Institute of Science & Technology
Project Presentation-2008 MINERAL RESOURCE OF ORISSA(CONTD) • A number of mineral based industries have been set up in Orissa which include : • Rourkela Steel Plant (RSP), Aluminium Plants by INDAL and National Aluminium Company (NALCO), and Charge Chrome Plants by Orissa Mining Corporation (OMC),Ferro Alloys Corporation (FACOR) and Indian Charge Chrome Ltd. (ICCL). The other • important mineral based industries established include Sponge Iron Plants in Keonjhar district, Refractory in Dhenkanal district and Mineral Sands Separation • and Synthetic Rutile Plants in Ganjam district. Several Cement Plants have been set up in the State and three Coal-based Thermal Power Plants also have been set up.
Debiprasan Swain And Sanjit Tripathy
[6]
National Institute of Science & Technology
Project Presentation-2008
MINERAL LEGISLATION IN INDIA •
FLOW CHART
Debiprasan Swain And Sanjit Tripathy
[7]
National Institute of Science & Technology
Project Presentation-2008
MINING POLICY •
CENTRAL GOVERNMENT AT POLICY LEVEL :-
• Should announce a complete moratorium on new mining projects in green field areas. • The communities should have legally enforceable right to natural resources - land and mineral rights - towards ensuring communities' command over natural resources
Debiprasan Swain And Sanjit Tripathy
[8]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should not disinvest mining companies, in favour of private and multinational companies. • Should not accept industry codes of conduct • Should not grant license or lease to global mining corporates or their joint ventures • Should ensure right to mining by indigenous people and their co-operatives
Debiprasan Swain And Sanjit Tripathy
[9]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should neither seek nor allow multilateral banks such as World Bank, ADB or other international financial institutions including surrogates like FII, FDI, export credit guarantee agencies, to invest in mining and extractive industries • Should promote Community Sector ownership in mining projects through workers and communities in mineral bearing areas Debiprasan Swain And Sanjit Tripathy
[10]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should ensure mandatory higher standards in relation to international environmental and human rights in all mining projects in the country • Samata Judgement to be implemented while granting license and lease to new mines.
Debiprasan Swain And Sanjit Tripathy
[11]
National Institute of Science & Technology
Project Presentation-2008
CONT… • The decision to mine should be taken only after EIA, social impact assessment and public hearing processes already in place are strictly adhered to. Unequivocally respect and enforce Surface and subsurface rights of adivasis and indigenous peoples and all miningaffected communities, as well as their right to veto unacceptable projects. • At the Implementation level of Legal and Site Enforcement
Debiprasan Swain And Sanjit Tripathy
[12]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should enforce all entitlements of women with regard to land and natural resources. • Must ensure, where mining exists or must continue, equal opportunities for women. • Wages and working conditions for women miners should strictly follow international standards and agreements, and ensure equality and equity without discrimination. • Child labour should be strictly abolished
Debiprasan Swain And Sanjit Tripathy
[13]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Enforce the true sprit of legal provisions for occupational health and safety. • Ensure social security benefits for all casual and temporary mine workers. • No discrimination in wages and benefits between permanent and casual and temporary mine workers • A part of royalty from mining and license fees of mines should be distributed among mining affected communities
Debiprasan Swain And Sanjit Tripathy
[14]
National Institute of Science & Technology
Project Presentation-2008
INVESTMENT POLICY • The Mines and Minerals (Development and Regulation) Act, 1957, (MMDR) and the Mines Act, 1952, together with the rules and regulations under them constitute the basic laws governing the mining sector. Further, the Government has formulated the National Mineral Policy, which was revised in 1994 to permit private investment in exploration and exploitation of 13 specified minerals. • In 1999, the foreign investment policy has been further liberalised to promote Foreign Direct Investment (FDI) in the mining sector: • For exploration and mining of diamonds and precious stones, FDI upto 74 percent is permitted under automatic route. • For exploration and mining of gold and silver and minerals other than diamonds and precious stones, FDI is allowed upto 100 percent under automatic route.
Debiprasan Swain And Sanjit Tripathy
[15]
National Institute of Science & Technology
Project Presentation-2008
CONT… • In a significant relaxation of the general policy governing process of automatic approval for FDI for the mining sector, the automatic route for FDI and/ or technology collaboration is also available to those who have or had any previous joint venture or technology transfer agreement, subject to a declaration being filed that they have no existing joint venture for the same area and/ or the mineral concerned. • • Private Indian companies setting up/operating power projects as well as coal and lignite mines for captive consumption are allowed FDI upto 100 percent. • • 100 percent FDI is allowed for setting up coal processing plants subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.
Debiprasan Swain And Sanjit Tripathy
[16]
National Institute of Science & Technology
Project Presentation-2008
REVENUE FROM MINING • The major revenue accrual to the state governments from the mining sector is by way of royalty on minerals extracted from the mines within the state. • Besides royalty, dead rent also accrues to the states from lessees who have not been operating their mines for any reason and thus not paying any royalty. • In addition to royalty and dead rent, the states also get some revenues from the initial application fee payable by a concession seeker, annual fee payable by RP/PL holder on the basis of the area held, surface rent, sales tax or VAT, local area tax (e.g. Panchayat tax), and stamp duty.
Debiprasan Swain And Sanjit Tripathy
[17]
National Institute of Science & Technology
Project Presentation-2008
REVENUE CONT… • Conceptually, royalty is a payment made by the mining lessee to the state as owner of the mineral as a consideration for the mineral extracted and sold by the lessee. • Dead rent is a charge to be paid by the lessee for that area included in the ML from which minerals are not extracted. • The main purpose of levying dead rent is to discourage the lessee from keeping the mineral property idle. • The existing rates of dead rent are based on the area of the lease and the value of minerals. • Accordingly, the dead rent applicable is higher for the higher value group of minerals
Debiprasan Swain And Sanjit Tripathy
[18]
National Institute of Science & Technology
Project Presentation-2008 METHODLOGY FOR CALCULATION OF ROYALITY
• For calculation of royalty three systems are prevalent worldwide. These are: • Quantity based or rate per tonne, • ad valorem or percentage of revenue, and • profit based or percentage of profit.
Debiprasan Swain And Sanjit Tripathy
[19]
National Institute of Science & Technology
Project Presentation-2008
CONT… • QUANTITY BASED ROYALITY :• Quantity based royalty, also known as specific rate royalty, is charged on the basis of a unit of quantity such as weight, e.g. $ or Rupees per tonne. • This system is easy to administer but is inefficient in fiscal terms as the collection of royalty revenue is a function of the quantity extracted, and rising prices do not get reflected in the receipts. • It is generally used for low-value and high-volume minerals
Debiprasan Swain And Sanjit Tripathy
[20]
National Institute of Science & Technology
Project Presentation-2008
ILLEGAL MINING • Prevention of illegal mining is equally important for augmenting revenue from the mining sector. • Illegal mining is known to be widespread not only in major minerals but also in minor minerals for which the state government is competent to frame its respective Minor Mineral Concession Rules (MMCRs). • Not only is mining taking place at many places without a valid lease.
Debiprasan Swain And Sanjit Tripathy
[21]
National Institute of Science & Technology
Project Presentation-2008
CONCLUSION… • Orissa has an estimated 85 billion tonnes of mineral reserves remaining to be exploited. • Besides coal, oil and gas reserves, the mineral inventory in Orissa includes 13,000 deposits/ prospects of 61 non-fuel minerals. • Expenditure outlay on mining is a meagre sum when compared to other competing emerging mining markets and the investment gap is most likely to be covered by the private sector. • Orissa welcomes joint ventures between foreign and domestic partners to mobilise finances and technology and secure access to global markets.
Debiprasan Swain And Sanjit Tripathy
[22]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Potential areas for exploration ventures include gold, diamond, copper, lead, zinc, nickel, cobalt, molybdenum, lithium, tin, tungsten, silver, platinum group of metals and other rare metals, chromite and manganese ore, and fertiliser minerals. • The main opportunities in the mining sector (excluding coal and industrial minerals) are in the development and production of surplus commodities such as iron ore and bauxite, mica, potash, few low-grade ores, mining of small gold deposits, development of placer gold resources.. • Considerable potential exists for setting up manufacturing units for value added products.
Debiprasan Swain And Sanjit Tripathy
[23]
National Institute of Science & Technology
Project Presentation-2008
CONT… • Should announce a complete moratorium on new mining projects in green field areas. • The communities should have legally enforceable right to natural resources - land and mineral rights - towards ensuring communities' command over natural resources. • Should not disinvest mining companies, in favour of private and multinational companies • Should not grant license or lease to global mining corporates or their joint ventures. Should neither seek nor allow multilateral banks such as World Bank, ADB or other international financial institutions including surrogates like FII, FDI, export credit guarantee agencies, to invest in mining and extractive industries.
Debiprasan Swain And Sanjit Tripathy
[24]
National Institute of Science & Technology
Project Presentation-2008
THANK YOU
Debiprasan Swain And Sanjit Tripathy
[25]
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