Parliament passes Offshore Areas Mineral Amendment Bill. What does it mean for PSUs?

New Delhi: With the Rajya Sabha passing the Offshore Areas Mineral (Development and Regulation) Amendment Bill, 2023 on Thursday, the bill now stands passed by both Houses of Parliament. It will now be sent to the President for her assent. The bill seeks to make amendments to the Offshore Areas Mineral (Development and Regulation) Act, 2002 (‘OAMDR Act’), paving the way for the grant of two kinds of licenses to the private sector and operating rights to PSUs only in the case of atomic minerals and the mineral-bearing areas reserved by the Central government.

The proposed amendment in the Act will bring a major reform by introducing auction as the method of allocation of operating rights in the offshore areas.

Offshore Areas Mineral Amendment Bill 2023

The bill provides for the grant of two types of operating rights to the private sector only through auction by competitive bidding, viz, production lease and composite licence. Composite licence introduced in the Act is a two-stage operating right granted for the purpose of undertaking exploration followed by production operation. Operating rights will be granted to PSUs only in the mineral-bearing areas reserved by the Central government and in the case of atomic minerals.

Provision for renewal of production leases has been removed and its period is fixed as 50 years on the lines of the MMDR Act. A limit has been introduced on the total area one person can acquire in the offshore. Now, a person cannot acquire more than 45 minutes latitude by 45 minutes longitude in respect of any mineral or prescribed group of associated minerals under one or more operating rights (taken together).

To ensure the availability of funds for exploration, mitigation of adverse impact of offshore mining, disaster relief, research, interest and benefit of the persons affected by exploration or production operations, etc, a provision has been made for setting up of a non-lapsable Offshore Areas Mineral Trust which will maintain a fund under the Public Account of India. This will be funded by an additional levy on the production of minerals, not exceeding one-third of the royalty. The exact rate of additional levy will be prescribed by the Central government.

To promote ease of doing business, a provision has been made for easy transfer of composite licence or production lease. To ensure the timely start of production from the leases, the bill introduces the timelines for the commencement of production and dispatch after the execution of the production lease. Royalty, auction premium and other revenues from the production of minerals from offshore areas shall accrue to the Central government.

OAMDR Act 2002

The OAMDR Act, 2002 came into force in 2010. However, no mining activity has been undertaken in the offshore areas till date. The OAMDR Act in its current form contains scope for discretion and does not provide for fair and transparent allocation of operating rights in the offshore areas. The Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) was amended in January 2015 to provide for the allocation of mineral concessions in onshore areas through auction. Since its implementation, 286 mineral blocks have been auctioned for which mining lease or composite licence has been granted. The transparent process has also generated additional revenue source to the state governments in terms of auction premium.

According to the Geological Survey of India (GSI), India’s Exclusive Economic Zone (EEZ) of over two million square kilometers holds significant recoverable resources. GSI has delineated the resources of the following minerals in the offshore areas:

• 1,53,996 million tons of lime mud within the EEZ off Gujarat and Maharashtra coasts

• 745 million tons of construction-grade sand off Kerala coast

• 79 million tons of heavy mineral placers in the inner-shelf and mid-shelf off Odisha, Andhra Pradesh, Kerala, Tamil Nadu and Maharashtra

• Phosphorite in the Eastern and Western continental margins

• Polymetallic Ferromanganese (Fe-Mn) nodules and crusts in Andaman Sea and Lakshadweep Sea

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