Allocation of Mineral Concessions

A mining lease gives its holder the legal right to extract minerals from a specified area, subject to statutory conditions. Under the Mines and Minerals (Development and Regulation) Act, 1957, competitive auction is the principal method of allocating fresh mining leases for minerals covered by the ordinary non-coal allocation framework.

Legal framework and allocating authority

The Act establishes the national framework, while State governments ordinarily grant mineral concessions within their territories. The 2015 amendment made auctions the principal allocation mechanism, replacing discretionary allocation for the minerals covered by this framework.

• The Mineral (Auction) Rules, 2015 prescribe the auction procedure for mining leases and composite licences within their scope.
• Only applicants meeting statutory eligibility requirements and the prescribed auction conditions can obtain a concession.

Choice of concession and auction process

The concession offered depends on how far the mineral deposit has been explored. A mining lease permits extraction, whereas a composite licence provides a prospecting stage followed by a mining lease, subject to fulfilment of statutory conditions.

• A mining lease is auctioned where evidence of mineral contents has been established to the prescribed standard.
• A composite licence is auctioned where further exploration is required before mining can begin.
• The auction uses an electronic bidding process, with technical qualification followed by competitive financial bidding.
• For a mining-lease auction, bidders offer a percentage of the value of minerals dispatched; the highest qualifying final offer determines the preferred bidder.
• The preferred bidder must fulfil the prescribed conditions before receiving the lease, and mining requires the applicable approvals, including environmental and forest clearances where required.

Payments and lease tenure

The auction payment is additional to statutory mineral-sector levies. Allocation therefore creates both a right to mine and continuing financial obligations.

• The lessee pays the auction premium alongside royalty, applicable dead rent and prescribed contributions to the District Mineral Foundation and National Mineral Exploration Trust.
• For private-sector leases covering minerals other than coal, lignite and atomic minerals, the statutory lease period is 50 years; after expiry, allocation is through auction rather than automatic renewal.

Important exceptions and special arrangements

• Under Section 11D, the Central government conducts auctions for critical and strategic minerals listed in Part D of the First Schedule, while the State government grants the resulting concession.
• Areas may be reserved for government companies or corporations under Section 17A, providing a route distinct from competitive auction.
• Coal, lignite and atomic minerals have special statutory arrangements; minor minerals are governed by State-made concession rules under Section 15.