The Mines and Minerals Act and District Mineral Foundation

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The Parliament recently passed the Mineral Laws (Amendment) Bill, 2020. The mining sector in India has been going under a face change since last year as the government took a series of actions regarding the mining sector. In the fourth tranche of the Atmanirbhar economic package, the Finance Minister spelled out reforms in the Mining sector. In this background, it is important to study the above-mentioned Bill.

This topic of “The Mines and Minerals Act and District Mineral Foundation” is important from the perspective of the UPSC IAS Examination, which falls under General Studies Portion.

What is the Mineral Laws (Amendment) Act, 2020?

  • The Mines and Minerals (Development and Regulation) Act regulates the overall mining sector in India while the Coal Mines (Special Provisions) Act provides for the allocation of coal mines with the vesting of the right, title and interest in and over the land and mine infrastructure together with mining leases to successful bidders to ensure continuity in coal mining operations.
  • The recently passed Mineral Laws (Amendment) Bill, 2020 seeks to replace the ordinance for amendment of the MMDR Act and the Coal Mines (Special provisions) Act, 2015 which were promulgated in January this year.

What is the Mines and Minerals (Development and Regulation) Act?

  • It is the main law that governs the mining sector in India since 1957 when it was passed.
  • The Act classifies minerals under two heads: Major Minerals and Minor Minerals.
  • The Central government deals with the policy and legislation issues of the major minerals.
  • The state governments have been entirely delegated with the policy and legislation issues of the minor minerals.
  • It was last amended in 2015 when some big changes regarding increasing the lease period, creation of a new category of license, auction of notified and other minerals were made.

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What are the Salient Features of the New amendment act?

  • Provision of composite licensing for prospecting and mining
  1. The act brings in a new type of license, namely prospecting license-cum-mining lease.
  2. This new license will apply to both prospecting and mining as against the old system of separate licenses for prospecting and mining of coal and lignite.
  • Removal of Restriction on End-use of Coal

The companies will now be free to use the extracted mineral both for captive use of end-use plants and for commercial sale in the open market.

  • Changes in eligibility criteria

The amended law allows the companies which do not have any prior coal mining experience in India but are financially capable or have mining experience in mining of other minerals or other countries to participate in the auction of coal and lignite blocks.

  • Reallocation of terminated mining leases
  1. The mines whose licenses have been terminated may be reallocated through auction or allotment by the central government.
  2. There is a provision of appointing a designated custodian to manage these mines until they are reallocated.
  • Clause of prior approval removed
  1. There is no requirement of prior approval of the central government in granting reconnaissance permit, prospecting license or mining lease in respect of minerals, in certain cases such as
  2. An allocation has been issued by the central government.
  3. A notification of reservation of area has been issued by the central or the state government.
  • Advance auction provisions
  1. The state governments have been allowed to take an advance auction of the mining lease before the expiry of the lease period.
  2. Previously, the new bidding could only start after the end of the lease period.
  • Allocation of statutory clearances to the new bidders
  1. Currently, the new lessee has to obtain all the clearances before he can start mining.
  2. The new successful bidder will be allocated with various approvals, licenses, and clearances given to the previous lessee for two years.
  3. Before that period, the new lessee will have to obtain all the required clearances.

What are the advantages of the new amendment measures?

  • The measure to allow companies without prior experience will create a level playing field between the new and established players, ending the monopoly of the established players in mining.
  • With the amendment, companies who had mining experience in other countries will also be eligible to participate in auctions.
  • The removal of restrictions of end-use opens doors for companies not specifically engaged in end-use activities to participate in the auction.
  • The measure to give composite prospecting-cum-mining license streamlines the process of allocation for coal and lignite mining.
  • The amendments remove many approvals deemed unnecessary by experts and time-consuming repetition of re-approvals have been also done away with.
  • The measure to allocate old clearances in environment and forest laws to the new lessee will result in smooth transitions without any delay and will make mining seamless.
  • The amendments can reduce India’s coal import bill (worth around 2.7 lakh crores) by utilizing its natural resources effectively.
  • According to the Coal minister, this amendment will stress on using our resources without harming the environment.
  • The new amendments effectively end the monopoly of state-owned Coal India Ltd.
  • The timely amendments will take care of the mining activities in 334 non-captive mineral mines whose lease was expiring in March 2020.

What are the issues raised on this amendment?

  • The critics argue that the new amendments dilute the eligibility criteria by doing away with the want of expertise in a very specific sector of coal mining.
  • Opening up of the mining sector by removing end-use restriction and 100% FDI can result in excess drawing of natural resources and misuse by large MNCs.
  • The increased mining of coal will lead to environmental degradation as the need for new environmental clearances have been done away with. The elimination of new clearances effectively eliminates any stock-take of environmental issues that came up during the previous mining lease.
  • It is not in line with India’s INDCs which commits India to reduce fossil-fuel-based energy resources.
  • The amendment weakens the standing of the Coal India Ltd. and raises a question mark over its future.

Why the District Mineral Foundations (DMF) are in news?

  • Recently, the Odisha government mooted an idea to use DMF to combat COVID-19 in all affected districts.
  • Faced with fiscal crunch due to a big fall in revenue receipt and inadequate transfer of state’s share in central tax, the government had requested the center to relax norms of the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) permitting utilization of unspent balance of DMF in non-mineral bearing states.
  • The argument forwarded by the Odisha government, there are a large number of COVID-19 positive cases in districts adjacent to mineral-bearing districts. As it is essential to contain the spread of COVID-19 in DMF districts, the fund should also be allowed to be spent in no-mineral bearing districts.
  • The Central government rejected the idea as per the guidelines framed by the Ministry of Mines which gave one-time relaxation, the DMF can only be utilized in mineral bearing districts having at least one positive COVID-19 case.
  • The Central government has said that it has limitations as the DMF fund is regulated as per the laid down procedure of PMKKKY
  • The civil societies in the mining areas have raised voices over diversion of DMF funds saying that the state government has already taken 30% for the health expenditure relate to COVID-19.
  • The 30% utilization was allowed by the Mining Ministry notification in March 2020.
  • The DMF in Odisha has an unspent amount of RS. 6518 crores till March 2020. It is to be utilized for the development and welfare of people affected by mining activities. It has already utilized 30% as per the guideline provisions.
  • The overall funds at the DMFs across India are about Rs. 238 billion. Many mineral-bearing states have used DMF funds for various COVID-19 related issues.

What is the DMF?

  • DMFs are statutory bodies in India established by the state governments.
  • They derive legal status form the MMDR act, Amendment Act which came into force in 2015.
  • Each District Mineral Foundation is established by the State Governments by notification as a trust or non-profit body in the mining operation affected districts.
  • The objective of the District Mineral Foundation is to work for the interest of and the benefit of the persons and areas affected by mining-related operations in such manner as may be prescribed by the State Government.
  • The DMFs implement the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY).
  • The DMFs generates fund by way of reserving 10% or 30%, as the case may be, of the royalty proceeds from the mining of minerals in the respective districts.
  • From the total collections accrued under DMF, the mechanism provided envisages spending the same in the ratio of 60:40, 60% being for projects classified as high priority areas which include health care, education, sanitation, drinking water supply, women and child care, environment conservation, etc while the balance 40% being for projects classified as other priority areas which include the construction of roads, railways, bridges, etc.

What is the way forward?


  • The COVID-19 induced economic hardships have led to many innovative solutions to fundraising.
  • The DMF has been already opened for fighting COVID-19 pandemic with 30% utilization relaxation.
  • But the experts believe that this kind of diversion of special funds such as DMF and CAMPA defeats the purpose for which they have been set up.
  • We already have various funds such as PM CARES, PMNRF, Chief Minister’s Relief Funds for fighting COVID-19. There is no need to divert funds that are specially designated for important issues like tribal welfare, forest development, etc.
  • Though the DMF has remained unutilized, it does not mean that its mandate has been fulfilled.
  • The underutilization of funds pertains to other implementational lacunae like disinterestedness of public officials, unaware target population. Without any guidelines and accountability in place, the divergent funds stand threatened by misuse, improper, unjustifiable utilization, etc.

The Minerals (Amendment) Act

  • The amended MMDR Act is a big opportunity to propel Coal production in the country and to minimize the import bill.
  • The domestic industry is facing an acute shortage of iron ore, coal, Lignite, etc. If implemented well, this act can usher in huge growth in the core sectors.
  • It is aimed at Ease of Doing Business, the creation of jobs in the mining sector, propel growth rate in the mining sector.
  • The Mines Minister has assured that Coal India will be supported and strengthened with adequate blocks. This promise must be upheld as millions of jobs depend on it.
  • The amended Act, on the face of it, certainly is a threat to environmental checks as it tries to carry-forward old clearances without stock taking. This provision needs to be discussed thoroughly even if the law is in place now. At no cost, we can be complacent when it comes to environmental issues.


The Amendment Act is in line with the vision of the Ministry of Mines to promote optimal utilization of India’s mineral resources for its industrial growth and create economic surplus using scientific exploration and sustainable mining practices. The issue of the District Mineral Foundation must be dealt with legal recourse as it has a statutory status. Any diversion form laid procedures must be done with proper precautions and guidelines.

Practice Question for Mains

Critically analyze the efficacy of the amended Minerals Law 2020 in solving the mining sector issues. (250 words)

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