Commercial Mining Policy [UPSC Notes]

In recent times, the Government of India has been promoting commercial mining to utilize natural mineral resources effectively and efficiently. Commercial mining allows the entry of the private sector into the mineral mining industry. This empowers private companies to mine different minerals without putting any end-use restrictions, that is they can decide whether to export it, sell it in the open market or even use it on their own end.

In this context, it is important to understand what is the commercial mining policy of the country and how it impacts the economy for the IAS exam.

What is Commercial Mining?

Allowing the private sector to mine minerals commercially without putting any end-use restrictions is referred to as commercial mining.

Need for Commercial Mining

• Coal India Ltd.’s production is unable to meet the increasing demand.
• Despite having the 4th largest coal reserves, India is the second-largest importer of coal.
• As per NITI Aayog, the demand for coal is expected to rise in the range of 1.3-1.5 billion tonnes by 2030.
• It will increase the competition in the sector resulting in an improved supply of coal.

Features of Commercial Mining

• Competitive bidding including companies from the private sector.
• Allocation of coal blocks based on ‘revenue sharing model’.
  • Unlike in the production sharing model where profit is shared with the government, in the revenue sharing model, a portion of revenue from the sale of the produced mineral is shared. 
• It does away with captive end-use criteria.
• Rolling auction: This mechanism is used to fasten the process of auction throughout the year.
• Single window clearance: to speed up the process of operationalisation of coal mines.

Benefits of Commercial Coal Mining

• Increased competition, which results in better revenues for the government.
• Increased private participation will bring efficiency and would increase the supply of coal.
• 100% FDI allowed under automatic route will result in increased FDI inflow to this sector.

Commercial Oil & Gas Mining

In 2016, the government of India introduced Hydrocarbon Exploration and Licensing Policy (HELP), replacing the erstwhile New Exploration Licensing Policy (NELP) to provide a level playing field for the private sector in oil and gas exploration and mining.

Features of HELP:

• Uniform license for the exploration and production of all forms of hydrocarbons.
• Revenue sharing model: Under this Government will receive a share of the gross revenue generated from the sale of hydrocarbons extracted. Earlier, NELP was using a profit-sharing model, which necessitated the Government to scrutinize the cost details of the private sector company involved.
• Open acreage licensing policy: Under this mechanism, companies are allowed to carve out blocks of their choice by submitting an expression of interest. These blocks will be allotted based on the bidding process.
• It provides marketing and pricing freedom on the crude oil and natural gas produced.
• A graded system of royalty rates has been introduced, under which royalty rates decrease from shallow water to deep water and ultra-deepwater.

Benefits:

• The revenue-sharing model ensures that the government does not interfere or scrutinize the company’s affairs a lot and this increases the ease of doing business.
• Open Acreage Licensing Policy (OALP) provides companies with the discretion to express interest.
• Marketing and pricing freedom reduces government interventions drastically.

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