In a setback for the mining industry, the government is set to reject a proposal to extend non-captive mining leases of companies that are expiring after completing 50 year period in March, 2020.

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The move will impact about 334 mines belonging to companies such as Tata Steel, Vedanta Limited, Essel Mining, VM Salgaocar and Rungta Mines in 10 states that are facing expiry of lease and closure by March next year under current regulations. Of these 46 working mining leases have a significant contribution to the production of iron ore, manganese ore and chromite ore in the country.

Sources said a high level committee (HLC) set upon by Niti Aayog to identify key challenges of the sector and negate their impact has recommended that all existing mining lease of companies that have completed 50 years of operation will expire on March 31, 2020 and these would then be allocated through an auction process to be conducted in the January-March. Government is set to implement these recommendations, sources said.

"The committee took note of the fact that these mines have known reserves and their period of lease will come to an end on 31-03-2020 as per MMDR (Amendment) Act, 2015 was also known. The legislature had already given a time of 5 years to ward off any situation causing disruption in supplies to local industry. Therefore, an extension of time for the continued operation of these mines is not desirable," the committee has said in its report.

The mining industry had sought an extension of leases of all operational non-captive mines for a period of 10 years beyond 2020 with another 20 years extension to be considered beyond this period. This, they felt, was necessary to prevent disruption in production while allowing full exploitation of resource available in a mine.

"Non-extension of the lease of non-captive mines is a setback for the industry that is already facing a slowdown in demand and lower prices. This would also disrupt existing mining operations and put jobs of lakhs of workers under risk," said an executive of a private sector miner asking not to be named.

While disallowing extension of mining leases, the HLC has said that post-auction new leaseholders could continue operating on approved mining plan of previous leaseholders and environment clearance (EC) for an initial period of 2 years.

This will help in preventing disruption in mineral production during the period of transition from one leaseholder to others. Moreover, this would provide time to new leaseholder to apply for fresh environment and forestry clearance without facing delays.

The government is studying the recommendations of the HLC and will soon come up with an action plan including further amendments to the Mines and Minerals (Development and Regulation) Act. The HLC is chaired by Niti Aayog vice-chairman Rajiv Kumar and consists of the cabinet secretary and secretaries of mines, steel, coal, revenue and finance. The committee was set up in April on mines, minerals and coal sectors to identify key challenges and negate their impact. It has given its report to the Centre.