Position Paper

Issues and Challenges in the

Heavy Minerals Mining Industry
Issues regarding Grant of Licences for Offshore
Mining
o

Preamble
The Offshore Areas Mineral (Development and Regulation) Act, 2002 was
enacted to provide for the development and regulation of mineral
resources in the territorial waters, continental shelf, exclusive economic
zone and other maritime zones of India and to ensure clarity in all relevant
issues.
Under the auspices of the Act, the Government of India decided that the
Administering Authority would be the Indian Bureau of Mines (IBM) and
empowered the Controller General of IBM vide a notification dated 11
February 2010.

Call of Bids for Allocation of Offshore Mining Blocks

The Call of Bids was notified on 09 June 2010 and the timeframe for
applications was set between 15 June and 14 September 2010. A total of
63 blocks were notified, including 37 in the Arabian Sea and 26 in the
Bay of Bengal. In response, 377 applications were submitted for evaluation
by 18-20 companies/entities.
Bids were evaluated and 62 blocks granted to 16 companies/entities.

Irregularities and complaints about lack of transparency in

allocation of Offshore Blocks
It is alleged that some mining officials failed to follow prescribed norms. As
per these norms, only companies with experience and expertise in
exploring natural mines in designated offshore areas, as well as
possessing proven financial capability and technical knowhow, could be
allocated offshore blocks.
The applicants were few and some were granted the Exploration Licence
for more than one block from among the available 62 Mineral-Bearing
Offshore Blocks. This indicates there was minimal competition in granting
the Exploration Licence and the entire process having been conducted in a
non-transparent manner.
Moreover, some companies were allegedly registered just before the
applications process. Others were incorporated after bids were invited,
without having any offshore mining experience at the time of notification.
How such companies were chosen over others for these lucrative contracts
needs to be investigated.

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Significantly, 28 blocks were granted to four different companies with the
same address and, apparently, the same ownership. Four companies with
five allotments in 28 blocks are RVG Minerals, Standard Alloys, APEX Meta
Alloys and UA Minerals belonging to the same group.
Besides this, five blocks were granted to two different companies with the
same address. The other two companies with five blocks allotted were PM
Geo and PMB Rare belonging to same owner.
Such was the opacity and rush in allocations that the most eligible players
with requisite experience were sidelined. Even the principal Government
Enterprise, Indian Rare Earths Limited, was not allotted any block, despite
applying.
Measuring about 800 sq km, each block is estimated to have huge
unexplored mineral wealth, which implies immense loss to the State
Exchequer.
o

Ambiguity in Block Notification

The latitude and longitude notified for each block (5 minutes by 5 minutes)
were not appropriately selected. As per the Governments stated
definition, Offshore Area means the territorial waters, continental shelf,
exclusive economic zone and other maritime zones of India under the
Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other
Maritime Zones Act, 1976. But notified blocks do cover landward areas
also, which overlap mining areas granted to other ONSHORE players as
well.
Some parties have appealed in court against the allotment procedure.
Sections of the media have also reported that the CBI has taken
cognisance of purported irregularities and initiated investigations.

Imperatives for allocation

It must be reiterated that while all irregularities are taken note of,
investigated and legally executed as required, the Government should
consider that as and when blocks are auctioned, due emphasis is given
ONLY to companies/entities with prior, proven experience and expertise
in exploring natural mines within designated areas. Also, experience in
identification, segregation and extraction of minerals must be considered.
These companies/entities must possess the requisite, validated financial
capability, technical knowhow and resources to be allocated blocks.
Additionally, the Government should accord top priority to existing
onshore mining companies while issuing block allocations for offshore
mining.
During evaluation, due importance should be given to companies that
maximize/realize the regions true mineral potential, while minimising the
impact on the ecosystem and simultaneously delivering maximum
revenue benefits to the Exchequer.

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100m High Tide Line issues and its impact on Heavy
Minerals Mining
The mining of rich inland mineral-bearing deposits 100m away from the
High Tide Line faces severe restrictions in Andhra Pradesh and other
States. These restrictions are often based on spurious pleas such as the
areas serving as nesting grounds for the Olive Ridley Turtle or containing
endangered species.
Such decisions are rarely backed by scientific studies or sound reasoning
and overlook the recommendations of renowned domain experts. This has
caused tremendous damage to the industry in AP and other States.
Accordingly, permission to mine the entire deposit 100m from the HTL
towards the landward side (presently prohibited) should be allowed.
Restrictions may only be imposed if scientific studies and domain experts
highlight the need for precautions to safeguard the environment and
protect endangered species such as the Olive Ridley Turtle, particularly
during annual breeding visits to parts of the Odisha Coast.

Withdrawal of Export Duty

Indian producers face problems in overseas markets due to the low
competitiveness of their mineral products caused by high capital and
production costs in India. The Centres imposition of 10% export duty on
Ilmenite and 5% export duty on upgraded Ilmenite seriously hurts Indias
Heavy Minerals Mining industry, including its value-addition facilities.
Given the complex suite of minerals in Indian placer deposits, the
extraction and segregation costs are high. Thereafter, high power and fuel
costs, including recurring input expenses, substantially inflate production
costs, making these products uncompetitive globally. With Indias lowgrade Ilmenite (48-51% TiO2) accepted mostly in the Chinese market, all
the additional costs and duties only exacerbate competitive challenges.
Coupled with the above costs, the recent downward trend in Ilmenite
prices will continue to depress the industrys profitability and
sustainability. The titanium feedstock market (Ilmenite, Rutile) is cyclic in
nature. Recently, prices have dropped drastically and the downtrend
persists. Therefore, Indian companies burdened with additional duties will
suffer financially, affecting the growth and sustainability of the Heavy
Minerals industry, including the creation of value-added facilities.
Export duty should therefore be withdrawn and reviewed after the industry
achieves sustainable growth and stability.
o

Multi-stage Extraction akin to Value Addition

Considering these constraints, the multi-stage extraction of heavy
minerals is akin to value addition. Against this backdrop, removal of export

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duty will boost the industrys long-term
competitiveness and overall profitability.

sustainability,

global

In this nascent industry, Indian companies need a few years at the least to
benchmark
their
operational,
technological
and
environmental
management systems with global standards. Respite from export duties
could thereby play a crucial role in sustaining the industry in the interim.

Mining Rules and Regulations

Presently under revision, the Draft MMDR Act contains certain anomalies
that need to be reviewed and revised.
o

Section 11 (2) of the Draft Act pertaining to Virgin Areas

Instructions sent to State Governments do not conform to the provisions
in the MMDR Act, Section 11(2) (first proviso) applicable to Virgin Areas.
Section 11(2) of the Draft Act provides preferential rights for Mineral
Concessions such as Reconnaissance Permit (RP) or Prospecting Licence
(PL) or Mining Lease (ML). The above provision also implies that Virgin
Areas covered by the earlier applicant should not be notified by the
Government. The State Government should dispose prior applications
before issuance of notification.
If this issue is not addressed, it will jeopardise plans and investments of
domestic as well as multinational companies, sending out wrong signal to
investors.
The Supreme Court has clearly emphasised that the concept of first-come,
first-serve is necessary. It has also said preferential rights must be given to
the holder of Reconnaissance Permits or a Prospecting Licensee who has
identified mineral resources in areas allotted.
Further, the Supreme Court has stressed the need to give preference to
prior applicants for grant of Reconnaissance Permit, Prospecting Licence or
Mining Lease. Return/rejection of pending applications by the Ministry of
Mines for non-notified areas would be a violation.

Other key issues to review

The Draft MMDR Act (presently being reviewed and redrafted) has
captured several industry inputs from different segments and verticals of
the mining sector. At this juncture, it must be emphasized that the nascent
and far-from-stable Heavy Minerals Mining industry requires policy,
institutional and regulatory support from a larger legislative and
administrative perspective.

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Both public and private sector entities in this nascent industry are
grappling with myriad hurdles that impact operational and financial
sustainability. Some of these issues are:

Subsequent to the deletion of Ilmenite, Rutile, etc. from the list

of prescribed substances, the Beach Sand Mineral Policy of 1998
needs to be reviewed and a New Policy announced.

Need to withdraw export duty on extracted minerals, since

primary value addition occurs during the stages of sifting and
segregation while producing the final product. Presently, the
extracted mineral is not treated as a value-added product
despite the multi-stage segregation/extraction from sand.

To ensure viability, it is imperative to provide at least two

statutory renewals of lease to companies that have invested in
their own processing units.

Mining Plans are presently approved by two agencies, viz., AMD

(under DAE) for Ilmenite, Rutile and Zircon and IBM for Garnet
and Sillimanite. Instead, a single agency may be designated for
speedy approval of Mining Plans for all sand minerals.

Unlike ore mining, the land acquisition policy for Beach Sand
Mining should not be stringent because, in this case, land is
returned to the owners within a few years after simultaneous
backfilling of mined areas, once mining is completed.

Indian beach sand mineral deposits usually contain all minerals

such as Ilmenite, Rutile, Zircon, Garnet, Sillimanite and Monazite.
But mining leases are often given selectively for one or two
minerals or for all minerals except Monazite. Since individual
minerals vary from deposit to deposit, selective leasing affects
mineral conservation. Hence, the rules should be modified to
include all suite minerals in the Lease Deed to incentivize
exploitation of as many as possible. In order to maximize
revenue and ensure full utilization of placer mineral deposits,
regulated permission must be given for extraction of all minerals
in the lease area.

Subject to safeguards, the private sector should be allowed to

process Monazite, at least in the case of captive quantities, since
it is a critical resource that helps fuel nuclear power plants and
facilitates recovery of valuable Rare Earth Minerals. The present
private sector ban leads to captive quantities of Monazite being
buried.

CSR funds presently allocated to District Committees or Bodies

in the mining and related regions are not always directly used in
these areas but redistributed to non-designated zones. The New
Act should consider reallocating funds and handing them back to
the mining/operating companies to ensure these are used to
provide direct benefits to the mining areas.

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