Mining rights and title in India

Mining rights and title

To what extent does the state control mining rights in your jurisdiction? Can those rights be granted to private parties and to what extent will they have title to minerals in the ground? Are there large areas where the mining rights are held privately or which belong to the owner of the surface rights? Is there a separate legal regime or process for third parties to obtain mining rights in those areas?

The federal government regulates mining and mineral development and the state government grants concessions, collects royalty and other fees when the mineral is located in land vested in the state. While earlier concessionary rights were granted on a first come first serve basis, under the amended MMDR Act, concessions to all major minerals are granted through an auction. A private party who has a mining lease for particular minerals has full title, albeit with permitted end use stipulations as may be applicable over these minerals.

There are large areas where mining rights are held by private parties and it is estimated that there are nearly 10,621 private mines. The Supreme Court, in 2013, conferred rights to mineral wealth on owners of surface rights rather than vesting them in the state. The Supreme Court, however, is yet to rule on certain aspects of ownership of minerals such as the liability of private owners to pay royalties to the state.

As part of the reforms, under the new regime, a land owner who wants to grant a prospecting licence or mining lease to a third party can do so only with state government authorisation. In cases of such private mining leases, the mining lessee must comply with the federal government mining regulations as well as provide the state government with a security deposit for ensuring compliance with the mine closure regulations.

What information and data are publicly available to private parties that wish to engage in exploration and other mining activities? Is there an agency which collects mineral assessment reports from private parties? Must private parties file mineral assessment reports? Does the agency or the government conduct geoscience surveys, which become part of the database? Is the database available online?

The National Mineral Inventory of the Indian Bureau of Mines provides a comprehensive overview of exploration, development and mining activities carried out in India by federal and state governments, public sector utilities and private agencies. The inventory provides mineral-wise and state-wise information with regard to location, infrastructure, geology, exploration, physical and chemical properties, freehold or lease hold status, etc.

The GSI carries out geological mapping and acquires geoscience data for the entire country. It generates and disseminates this information to other exploration agencies for accelerating the mineral exploration process.

Under the National Mineral Exploration Policy 2016, the GSI is required to provide all pre-competitive baseline geoscience data free of cost to parties. Other than the GSI, the Directorates of Geology and Mines of certain state governments, the Mineral Exploration Corporation Limited and other government-owned companies also carry out detailed exploration of mining areas and maintain information databases.

The NMET has also been newly created to carry out regional and detailed exploration for minerals. In addition, the Indian Bureau of Mines provides information on the number of mines in operation and their mineral quality either at a cost, or on a restricted access basis at its offices.

As regards reporting, a mineral concession holder is required to provide geophysical data relating to prospecting, mining, and engineering to the GSI and the state government. All mines are also required to mandatory file returns with Indian Bureau of Mines. With a view to encourage private players in exploration, non-exclusive reconnaissance permits (NREP) are also issued to applicants for preliminary prospecting of minerals in various parts of the country. There are also plans to incentivise NREP holders by giving them a right to a share in the future revenues from the mineral block that they discover.

What mining rights may private parties acquire? How are these acquired? What obligations does the rights holder have? If exploration or reconnaissance licences are granted, does such tenure give the holder an automatic or preferential right to acquire a mining licence? What are the requirements to convert to a mining licence?

A private party can obtain an NREP, a mining lease or a composite licence (prospecting licence-cum-mining lease).

Prior to the MMDR Amendment Act, a prospecting licence separate from the mining lease could also granted but now this has been subsumed under the composite licence.

Currently, mining leases and composite licences are only granted through a competitive bidding process. A composite licence holder has the right to move from prospecting to mining; however, a NREP holder is not entitled to a preferential claim for grant of a composite licence or mining lease. For those rights holders who had been granted reconnaissance or prospecting licences under the old regime prior to the MMDR Amendment Act, a right to obtain prospecting cum mining lease or mining lease, as the case may be, continues to exist.

Obligations of the rights holder include:

• obtaining all necessary permits and consents;
• operating the mine in accordance with the mining plan;
• commencing mining operations within two years of execution of mining lease;
• payment of royalty, dead rent, surface rate or other fees;
• keeping accurate accounts of minerals mined, waste material excavated, employees and all mining plans;
• allowing inspections by the authority;
• restoring the land, to the extent possible, affected by prospecting or mining activity; and
• payment of compensation for all damages, injury or disturbances caused in exercise of its rights.

What is the regime for the renewal and transfer of mineral licences?

The state government may renew a reconnaissance or prospecting licence subject to a maximum of five years. A mining lease is granted for a period of 50 years and cannot be renewed.

Other than for captive use, non-auctioned mining leases cannot be transferred by the lease holder. Captive-use mining leases not awarded though an auction can be transferred by paying an upfront fee (equal to 0.5 per cent of the value of the estimated resources) to the state government.

A mining lease or composite lease obtained through auction can be transferred to a third party. Such a transferee would be subject to all conditions and liabilities that the transferor was subject to at the time of the transfer.

What is the typical duration of mining rights?

In 2015, the term for mining leases was increased to 50 years, at the end of which, the lease cannot be renewed and is re-auctioned. A reconnaissance permit or prospecting licence may be granted for three years and may be extended subject to a maximum period of five years.

The state or federal government may terminate a lease or licence before its term on the following grounds:

• regulation of mines and mineral development;
• preservation of natural environment;
• control of floods;
• prevention of pollution;
• to avoid danger to public health or communications;
• to ensure safety of buildings, monuments or other structures;
• for conservation of mineral resources; and
• for maintaining safety in the mines.

No such order for premature termination can be made without giving the licence or lease holder a reasonable opportunity of being heard.

A mining lease lapses if an entity fails to start mining operations within two years of the date of execution of the lease or discontinues mining for a period of two years unless the state government is satisfied with the reasons for such delay.

Is there any distinction in law or practice between the mining rights that may be acquired by domestic parties and those that may be acquired by foreign parties?

Mineral concessions in India are granted to Indian nationals or entities incorporated in India only. However, foreign parties can invest up to 100 per cent in the equity of such companies through the automatic route under Indian FDI policy.

How are mining rights protected? Are foreign arbitration awards in respect of domestic mining disputes freely enforceable in your jurisdiction?

There are no special courts or tribunals to adjudicate on mining rights. However, the amended MMDR Act provides for the establishment of special courts to deal with cases of illegal mining. Further, the National Green Tribunal may also adjudicate on disputes regarding environmental non-compliance in any mining activity. India has an independent judicial system that consists of the Supreme Court of India as the apex judicial body under which are the High Courts, subordinate courts as well as the various tribunals.

India is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) as well the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 (Geneva Convention). If a party receives a binding award from a country that is a signatory to the New York Convention or the Geneva Convention and the award is made in a territory that has been notified as a convention country by India, the award would then be enforceable in India.

What types of surface rights may mining rights holders request and acquire? How are these rights acquired? Can surface rights holders oppose these requests?

A mining rights holder is required to obtain surface rights over the area or obtain the consent of the owner to start prospecting or mining operations.

In relation to government-owned land, the selected bidder is granted surface rights by the government authorities. During prospecting, the approval of the government authority, such as the deputy collector, needs to be taken to clear vegetation in order to construct drains or use any water in that land. The rights holder is liable to pay surface rent, water cess for the surface area used by him or her for the purposes of mining operations. The mining lease holder must prior to using any land for new surface operations give written notice to the government authority, which has a right to raise objections and restrict the rights holder’s use of the surface.

When private owners grant prospecting licences or mining leases (see question 8) the land owners may grant surface rights to such third parties according to the terms of their agreement.

Further, the government exercising the power of eminent domain can acquire land for public purposes such as mining under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 (LARR Act). However, this is subject to consent requirements from the surface rights holders and such acquisitions can be opposed (see question 43).

Does the government or do state agencies have the right to participate in mining projects? Is there a local listing requirement for the project company?

Yes. The government and state agencies have a right to participate in mining projects and the public sector companies tend to dominate in the mining sector. All companies undertaking mining activity must be incorporated in India.

Are there provisions in law dealing with government expropriation of licences? What are the compensation provisions?

While there is no formal ability for expropriation, the government has the right to prematurely terminate a prospecting licence or a mining lease (see question 12).

Are any areas designated as protected areas within your jurisdiction and which are off-limits or specially regulated?

Under the Indian Constitution, the Indian President may notify certain lands as ‘scheduled areas’ that have a special governance mechanism. Scheduled areas are tribal dominated areas that are underdeveloped and show marked economic disparity. Laws formulated in relation to scheduled areas typically have more restrictions on land acquisitions and transfers (see question 43). Further, the federal or state government may also reserve certain areas (that are not already held under lease or licence) with a view to conserve any mineral. Any mining activity in such reserved areas is only done by government companies.