News Analysis 08 Aug, 2022

NEWS HIGHLIGHTS

1. Tapping Technology to check minor Mineral Plunder.
2. Repo Rate.
3. Non Performing Assets (NPA)
 

1. Tapping Technology to check minor Mineral Plunder.

Context
With the Increasing pace of Development, the demand for Minor Minerals such as Sand and Gravel has crossed  60 million metric tons in India.This also makes it the second largest extractive industry on the planet, after water.The issue of illegal mining needs the utmost attention as it causes both the Loss to Environment and the Revenue generation.

What are Major minerals ?
Major minerals are those specified in the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act 1957) . Some of the major minerals include Lignite, Uranium, Coal, Gold, Iron ore, etc. And it is to be taken that whatever is not declared to be a minor mineral is a major mineral.

Mines and Minerals (Development and Regulation) Amendment 2021 

1. Removal of restriction on end-use of minerals: The Bill provides that no mine will be reserved for particular end-use.
2. Sale of minerals by captive mines: The Bill provides that captive mines (other than atomic minerals) may sell up to 50% of their annual mineral production in the open market after meeting their own needs.The central government may increase this threshold through a notification.
3. Auction by the central government in certain cases: The Bill empowers the central government to specify a time period for completion of the auction process in consultation with the state government.  If the state government is unable to complete the auction process within this period, the auctions may be conducted by the central government.
4. Transfer of statutory clearances: The Bill provides that transferred statutory clearances will be valid throughout the lease period of the new lessee.
5. Allocation of mines with expired leases: The Bill says that mines (other than coal, lignite, and atomic minerals), whose lease has expired, may be allocated to a government company in certain cases. The state government may grant a lease for such a mine to a government company for a period of up to 10 years or until the selection of a new lessee, whichever is earlier.

Significance

1. This will speed up the process of implementation of projects, ease of doing business, simplification of procedure and benefit all the parties in areas where minerals are located.
2. It will create an efficient energy market and bring in more competition as well as reduce coal imports. India imported 235 million tonnes (mt) of coal last year, of which 135 mt valued at Rs 171,000 crore could have been met from domestic reserves.
3. It might also put an end to Coal India Ltd’s monopoly in the sector.
4. It would also help India gain access to high-end technology for underground mining used by miners across the globe.

Previous amendments In MMDR Act 
MMDR Act of 1957, was amended in 2015 to usher in a new regime of granting mineral concessions through auction to ensure transparency and non-discrimination in the allocation of the mineral wealth of the country. The auction regime has matured since then.
To give further impetus to the mineral sector, the Act has been further amended in 2021. Under the reforms, the Government has given a major boost to the auction of mineral blocks,increasing production, improving ease of doing business in the country and increasing the contribution of mineral production to Gross Domestic Product (GDP).

Issue Of Regulation
Unlike major Minerals, the regulatory and administrative powers to frame rules,prescribe rates of royalty,mineral concessions,enforcement,etc.,are entrusted exclusively to the State Governments.

Environmental Impact Assessment  and Regulation 

a) EIA is a tool to anticipate the likely environmental impacts that may arise out of the proposed developmental activities and suggest mitigation measures and strategies.
b) EIA was introduced in India in 1978, with respect to river valley projects.
Later the EIA legislation was enhanced to include other developmental sections.
c) EIA comes under Notification on Environmental Impact Assessment (EIA) of developmental projects 1994 under the provisions of Environment (Protection) Act, 1986.

1. The EIA Notifications of 1994 and 2006 made Environmental clearance compulsory for  mining in areas more than or equal to 5 Hectares.
2. However, the SC of India after taking cognisance of a report by the MOEFCC on “Environmental Aspects of Quarrying of Minor Minerals” (2010) directed all State governments to make the requisite changes in regulatory framework of Minor Minerals,requiring  Environmental Clearance for mining in areas less than 5 Hectares.
3. Consequently, the EIA was amended in 2016 which made Environmental Clearance mandatory for mining in areas less than 5 Hectares, including Minor Minerals.The amendment also provided for setting up  of a District Environment Impact Assessment Authority (EIAA) and District Expert Appraisal Committee (EAC)

Problems Of Illegal Mining
Challenges/Concerns Faced by Mining Sector in India
          
(A) Displacement and rehabilitation issues

1. Large scale displacement of local people leads to grievances and improper rehabilitation measures, thereby, leading to people’s alienation and developing distrust over the government machinery.
2. It's not just a loss of land for the local population, but rather the loss of a tribal way of life and their rich cultural heritage.
3. It has given space to left-wing extremism in resource-rich areas like Chhattisgarh, Jharkhand, Odisha, etc.
4. Mining also puts the lives of miners at risk due to the rudimentary ways adopted and the absence of adequate safety gear and protocols. For instance, mine-related accidents at Ksan coal mine in Meghalaya- Jaintia Hills (2018), Chasnala near Dhanbad in 1975.
5. Human Rights violations have taken place in forms of mine-related deaths, inadequate rehabilitation, and developmental steps, etc. Massive local protests have taken place against mining in Niyamgiri Hills of Odisha, POSCO in Odisha, Sterlite protest in T.N.
6. Rathole mining: This is a form of illegal mining, especially practiced in North eastern areas like Meghalaya (Ksan coal mine incident). It involves digging of very small tunnels [only 3-4 feet high], done both vertically and horizontally. The NGT banned it in 2015 on the grounds of it being unscientific and unsafe for workers.

(B) Environmental/Health issues

1. Environmental pollution has been caused by the Makrana marble mines in Rajasthan, the Granite mines of Karnataka have left a large hole on earth, 2.Damodar river has been severely polluted by coal mining.
2. Loss of biodiversity and local heritage due to mining activities.
3. The prevalence of mining in an area causes various diseases like fibrosis, Pneumoconiosis, and silicosis in workers as well as locals.
4. Water Pollution – water from streams and rivers in mining areas have become acidic and unfit for drinking. Eg: Meghalaya’s Kopili river, Damodar river etc.
5. Contaminated air with high particulate matter is also a major problem in mining rich regions.

(C) Administration Issues

1. Arbitrary allocation of coal mines leads to the long litigation and eventually cancellation of allocations and charges of corruption in block allocations.
2. Delay in environmental clearances due to bureaucratic hindrances.
3. Judicial interventions lead to long delays and losses for investors.
   For eg: SC imposed a heavy penalty on illegal mining without green clearances in Andhra Pradesh, Telangana, Karnataka, and Odisha in 2017. Banning of Vedanta group in Niyamgiri Hills of Odisha and shut down of 88 illegal mining leases in Goa in 2018.

Examples Of Illegal Mining 
There have been numerous cases of the illegal mining of dolomite,marble and sand across States. For examples : In Andhra Pradesh’s Konkani Limestone quarries alone, 28.92 lakh metric tonnes of Limestone have been illegally quarried.
As per an estimate, UP is losing revenue from 70% of mining activities as only 30% area is legally mined.

Constitutional Provisions Related To Mining

1. The entry at serial No. 23 of List II (State List) to the Constitution of India mandates the state government to own the minerals located within their boundaries,
2. The entry at serial No. 54 of List I (Central List) mandates the central government to own the minerals within the exclusive economic zone of India (EEZ).In pursuance to this Mines & Minerals (Development and Regulation) (MMDR) Act of 1957 was framed.
3. The central government has the ownership over all offshore minerals (i.e, minerals extracted from the sea or ocean floor in the Indian maritime zones such as the territorial waters, continental shelf and exclusive economic zones).
    

2. Repo Rate

Context 
With inflation remaining at ‘elevated levels’, the Monetary Policy Committee (MPC) of the Reserve Bank of India unanimously decided to raise the policy repo rate by 50 basis points (bps) to 5.4%.

Repo Rate

1. A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities.
2. The repo rate is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds. Here, the central bank purchases the security.

Why did the RBI hike the repo rate?

1. Inflation is projected to remain above the upper tolerance level of 6% through the first three quarters of 2022-23
2. Two Black Swan events [pandemic and Russia’s invasion of Ukraine] which led to inflation.

Impact of increase in Repo Rate

1. Expected to push up interest rates in the banking system. EMIs on home, vehicle and other personal and corporate loans are likely to go up.
2. Deposit rates, mainly fixed term rates, are also set to rise.
3. Consumption and demand may be impacted by the hike.

About Monetary policy committee

1. It is a committee constituted by the Central Government and led by the Governor of RBI.
2. Reserve Bank of India Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC.
3. It fixes the benchmark interest rate — or the base or reference rate that is used to set other interest rates — in India.
4. It is entrusted with the responsibility of deciding the different policy rates including MSF, Repo Rate, Reverse Repo Rate, and Liquidity Adjustment Facility.
5. Consists of 6 members: 3 members will be nominated by the government. No government official will be nominated to the MPC. Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment.
6. The other 3 members would be from the RBI with the governor being the ex-officio chairperson. Deputy governor of RBI in charge of the monetary policy will be a member, as also an executive director of the Central Bank.

3. Non Performing Assets (NPA)

Context
The Centre informed Parliament that concrete steps taken by the government and RBI helped banks recover bad loans worth more than ?8.6 lakh crore in the last eight fiscal years.

What is NPA?

Non-Performing Asset is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.

Classification of NPA

1. Substandard Assets: If assets have remained NPA for a period of less than or equal to 12 months
2. Doubtful Assets: If asset is in the substandard category for a period of 12 months
3. Loss Assets: assets of little value that can no longer continue as a bankable asset, there could be some recovery value

Reasons for Rise in NPA:

• huge growth in the economy between 2004-2009, which led to firms taking bank loans very aggressively.
• Most of the investment in infrastructure sectors like roads, power,aviation, steel
• Laxity in lending norms by the banks, without analyzing the financial health of the companies and their credit ratings
• Banning of mining projects, delay in environmental permits, led to a rise in prices of raw materials and a big gap in demand and supply thereby affecting the power, steel, and iron industries affecting the capacity of the companies to repay the loans to banks resulting in NPAs.

Steps taken to tackle the NPA problem

1. Debt Recovery Tribunal (DRT), 2013: set up to reduce the time required for settling cases. It is governed by Recovery of Debt due to Banks and Financial Institutions Act, 1993
2. Credit Information Bureau (2000): to prevent NPA’s by sharing of information on wilful defaulters
3. ARC (Asset Reconstruction Companies): Recovering value from stressed loans by passing courts which was a time-consuming process.
4. Corporate Debt Restructuring (2005): Reduce the burden of debts on the company by giving more time to the company to payback as well as decreasing the rates along with it
5. Mission Indradhanush (2015): Most comprehensive reforms undertaken to improve the functioning of the Public Sector Banks, by using the ABCDEFG formula.
6. Strategic Debt Restructuring (SDR) (2015): Corporates who have taken loans from banks if they are unable to repay, then the banks can convert part or complete loans into equity shares
7. Asset Quality Review (2015): kind of preventive measure, involving early identification of assets which could turn out to be stressed at a later stage.
8. Insolvency and Bankruptcy Code (2016): One-stop process for solving insolvency which aims to protect small investors.