- Mine Developer and Operator (MDO) is a model of operation of mines adopted in India. The Ministry of Coal has an overall responsibility for determining policies and strategies in respect of exploration and development of coal and lignite reserves, sanctioning of important projects of high value and for deciding all related issues. Under the administrative control of the Ministry, these key functions are exercised through the Public Sector Undertakings (PSU or PSUs), namely, Coal India Ltd. and its subsidiaries and Neyveli Lignite Corporation Limited. In addition, the Ministry of Coal also has a joint venture with Government of Andhra Pradesh called Singareni Collieries Company Limited.1
- The MDO model was adopted in India because of limited resources which impacted production levels and also because sub-contracting mining operations to private players was a more capital efficient way forward to improve production. Since the privatization and liberalization of the Indian markets, the government has made attempts to attract private participation in this sector.
- However, the sector witnessed a major overhaul after the Supreme Court of India, in 2014, quashed allocation of 214 coal blocks cancelling nearly all existing permissions for the captive mining of coal blocks. The verdict set the ground for fresh legislation and reform in the coal industry.2
- The Coal Mines (Special Provisions) Act, 2015, was promulgated to provide for allocation of coal mines and vesting of the right, title and interest in and over the land and mine infrastructure together with mining leases to successful bidders and allottees with a view to ensuring continuity in coal mining operations and production of coal, and for promoting optimum utilization of coal resources consistent with the requirement of the country in the national interest.
- It is imperative to note that the law does not define what an MDO is, and the MDO model is not a creature of a statute. Still, it is being increasingly adopted as the preferred model of coal mining operations in India due to the balance of autonomy it provides between private players and the PSUs. It is perceived as a more economically feasible mode of operation for both players. In this note, the authors have covered the working model of an MDO and the important legislations on coal mining in India.
- The MDO, appointed under a Coal Mining Agreement (CMA) signed between the private entity and PSU, broadly undertakes precommencement activities including land acquisition, rehabilitation and resettlement, procurement of applicable permits, construction activities, setting-up of the mining plant infrastructure, setting-up of storage facilities, development of transportation and handling facilities, etc. for the coal mine. During the operation period of the project the MDO undertakes coal excavation operations and transportation to delivery points, for a mining charge on achieving a certain level of production of coal as specified in the agreement. Usually, the contract period of such CMAs is envisaged to last up to the life of the mine.
- This model mirrors public private partnership (PPP) concept, where private companies having state-of-the art coal evacuation technology, develop coal reserves on behalf of PSUs for a specific period of time. On June 06, 2016, the Ministry of Coal had released the Common Guidelines for Mine Developer and Operator projects (the MDO Guidelines) which clarify that the Draft Model Contract Agreement (MCA) as was released on August 05, 2015, was for the purpose of framing a standard contractual model for development and operation of the mines to be adopted by State Governments and local authorities.3 Therefore, the CMAs between parties follow the scheme of this MCA with project specific modifications as required.
- The waterfall of administrative and contractual actions which follow the allocation of coal blocks can be summarized as below:
Important Legislations Governing Coal Mining In India
- Coal Mines (Nationalization) Act, 1973
- The Indian Government nationalized the coal mines in India on May 01 1973, with the enactment of the Coal Mines (Nationalization) Act, 1973 (Act 1973) which determined the eligibility of coal mining in India. The Act 1973 came to be a highly criticized act of legislation as 'neither a well-planned, nor a conscious socialist act'4 and was often termed as an illconceived law as due to the said enactment coal mining became the monopoly of the Central Government.5
- The Coal Mines (Special Provisions) Act, 2015
- After the Supreme Court vide judgment dated August 25, 20146 read with its order dated September 24, 20147 cancelled the allocation of existing coal blocks, the Parliament enacted 'The Coal Mines (Special Provisions) Act, 2015' (Act, 2015) in order to provide for the allocation of coal mines and vesting of the right, title and interest in and over the land and mine infrastructure - by way of public auction and in the manner of licensing and leasing of the coal mines and to discharge the prior allotment of coal blocks, subject to terms and conditions prescribed under the Act, 2015.
- Pertinently, the Supreme Court determined that an 'Additional Levy of two hundred and ninety-five rupees per metric tonne of coal extracted'8 was to be paid by all 'prior allottees'9 in order to make them eligible to participate in the subsequent public auctions under the Act, 2015.
- The Coal Mines (Special Provisions) Rules, 2014
- The Coal Mines (Special Provisions) Rules, 2014 (Coal Mines Rules, 2014) were published vide the Gazette of India on December 11, 2014 and set out the rules to assist the Coal Mines (Special Ordinance) 2014 (now the Act, 2015). The Coal Mines Rules, 2014 set out the process for the setting up of the nominated authority, auction process & allotment of coal mines etc.
- The Coal Mines (Special Provisions) Amendment Rules, 2015
- The Coal Mines (Special Provisions) Amendment Rules, 2015 published vide the Gazette of India dated March 18, 2015, inserted a new sub-rule i.e. Sub-Rule 10 under Rule 11, after sub-rule 6 of the Coal Mines Rules 2014 to provide the Central Government the power to relax the provisions of Rule 11 for allotment of coal mines, in public interest, after recording its reasons in writing.
- The Mines and Mineral (Development and Regulation) Act, 1957
The Parliament enacted the Mines and Minerals (Regulation and Development) Act 1957 (MMRD Act) providing for the regulation of mines and development of minerals under the control of the Union. The term 'mineral' has been defined to include all minerals except mineral oil, including natural gas and petroleum.10 The MMRD Act provides that no person shall undertake reconnaissance, prospecting or mining operations except in accordance with terms and conditions of a reconnaissance permit or prospecting licence or mining lease granted under the Act.11 Prospecting Licences, which are issued for operations undertaken for the purpose of exploring, locating or proving mineral deposits12 and Reconnaissance Permit, which are issued for operations undertaken for preliminary prospecting of a mineral through regional, aerial, geophysical or geochemical surveys and geological mapping13 can only be granted for a period up to 3 years.14
The Mineral Laws (Amendment) Bill, 2020, was introduced in Lok Sabha on March 02, 2020 which introduced certain changes to the scheme of the Act, most notably being insertion of Section 4B which provides that the Central Government may prescribe conditions for efficiency in production in the interest of sustained production of minerals in the country.15 In addition to this Section 8B was inserted to provide that a new lessee can continue mining operations on the land, in which mining operations were being carried out by the previous lessee, for a period of two years from the date of commencement of the new lease.16
In the wake of the current pandemic, new reforms were announced by the Ministry of Finance, Government of India, paving way for an 'Atma Nirbhar Bharat' including liberalization of regime of the sector and introduction of commercial mining where the government proposes to introduce competition, transparency and private sector participation in the coal sector through a revenue sharing mechanism instead of regime of fixed Rupee/tonne. It is also proposed that any party can bid for a coal block and sell it in the open market.17 Thus, a significant shift in how business is conducted in the sector may be witnessed and it would be interesting to see the role of MDO model for operations in the future.
1 Ministry of Coal, available at https://coal.nic.in/content/about-ministry (Accessed on June 26, 2020).
2 Manohar Lal Sharma vs. The Principal Secretary, (2014) 9 SCC 516,
3 Available at https://coal.nic.in/sites/upload_files/coal/files/curentnotices/ draftmodelagreement_1.pdf(Accessed on June 26, 2020).
4 Rajiv Kumar, "Nationalisation by Default: The Case of Coal in India," Economic and Political Weekly 16, no. 18 (2 May 1981): 824-830, (Accessed on June 26, 2020).
5 Economic Times, News Article, available at https://economictimes. indiatimes.com/opinion/et-editorial/coal-mines-nationalisation-actwas- an-ill-conceived-law/articleshow/40886241.cms?from=mdr (Accessed on June 26, 2020),
6 Manohar Lal Sharma vs. The Principal Secretary, (2014) 9 SCC 516.
7 Manohar Lal Sharma vs. The Principal Secretary, (2014) 9 SCC 614.
8 See Para 40 of Id.
9 See Section 4(4), See Section 5(2), See Section 16 (4) & Section 22 of the Act, 2015
10 Section 3(aa) of MMRD Act.
11 Section 4 of MMRD Act.
12 Section 3(h) of MMRD Act.
13 Section 3(ha) of MMRD Act.
14 Section 7 of MMRD Act.
15 Section 4B of MMRD Act.
16 Section 8B(3) of MMRD Act.
17 Press Release, Ministry of Finance, available at https://pib.gov.in/ PressReleasePage.aspx?PRID=1624536 (Accessed on June 26, 2020).
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