If mineral are a shared inheritance, a mineral lease is effectively a long term agreement for asset stripping. The goal of the state as the original owner of the sub-soil mineral wealth is to ensure zero loss when selling off this wealth. This has at least three different aspects: (a) zero loss when contracting, i.e., entering into the mining lease; (b) laws, rules & regulations that control leakages thereby ensuring zero loss is achieved in reality; and (c) the will to implement both the previous points. Recently, the Ministry of Mines has released guidelines on misclassification of the grade of iron ore, which is a step towards achieving zero loss

Auctions are achieving Zero Loss

The recent nine mineral block auctions conducted so far indicate that the first aspect has been reasonably met, although some of the winning bidders have been found to conduct illegal mining in the past, and should have been blacklisted. Here’s the results of the auctions so far:

In summary, in exchange for the extracted sub-soil mineral, most winners have agreed to pay more the state than the mine gate price of the mineral.

Achieving Zero Loss in practice

The mineral sale proceeds are comprised of royalty (15%), contribution to the Goa Iron Ore Permanent Fund (10%) and auction premia (as per bid). These are calculated based on the IBM Average Sale Price (ASP) for each state for each month for each type/grade of ore. The IBM ASP the weighted average of the ex-mine prices of the non-captive mines and any merchant sale done by the captive mines, the weight being the quantity dispatched from the mining lease area.

In short, the mineral sale proceeds depends on the (i) amount dispatched, (ii) the type/grade of ore dispatched and (iii) the mine gate price for that type/grade of ore. All three are reported by the extractor. Control is therefore required to ensure all these parameters are properly reported. Unsurprisingly, all three can and have be mis-reported. Recently, the Ministry of Mines has released detailed guidelines to control the second issue, misreporting of the type/grade of ores.

Control over the type/grade of ore

A number of leases expired on 31-Mar-2020. After successful auctions of these iron ore mineral blocks, states like Odisha observed that the grade of ore extracted from the same mine dropped significantly. On 16-Jul-2021, the Ministry of Mines set up the Dr. Veena Dermal Committee to examine the issue of misclassification of grades of iron ore and other ores, and to suggest measures to prevent misclassification. The Committee had representatives from the four states with the largest iron ore reserves, Odisha (34%), Jharkhand (24%), Chhattisgarh (22%), and Karnataka (11%). Goa (5%) comes fifth in terms of reserves, but did not have any valid iron ore leases in 2021.

The Dermal Committee heard the state governments and the Indian Bureau of Mines (IBM), and received responses to its consultation from industry associations, companies and others. They visited two mines in Odisha to examine the various steps in the process first hand as well as what systems the extractors are using for their own purposes. Finally, various technology providers made presentations to the committee.

The recommendations in the Dermal Committee Report were accepted by the Ministry of Mines, and on 3-Oct-2023, the Guidelines for prevention of misclassification of different grades of iron ore and other minerals were published. There are quite a number of recommendations. Here’s the highlights:

1. States should implement an IT-enabled system with minimal human intervention, covering all processes beginning at the working seam all the way to factory/port. The system should be interoperable, scalable, technology-agnostic, with the ability to integrate with the internal systems of mining leaseholders. Random physical inspections and regular audit are also mandated.
2. At the beginning of each month, the state government should to conduct on the spot sampling and analysis of grade of iron ore for working seam(s) in a mine, which can be done by analyzers such as Pulsed Fast Thermal Neutron Activation (PFTNA) analyzers. This becomes the base for fixing tolerance limits downstream. If the seam face grade changes, this would need to be redone.
3. In large mines (10,000 tpd, at least 10-year life), automatic sample collection system and automated analysis through continuous online analyzers, based on technologies such as Laser Induced Breakdown Spectroscopy (LIBS), Pulsed Fast Thermal Neutron Activation (PFTNA), Prompt gamma neutron activation analysis (PGNAA), or X-Ray Fluorescence (XRF), may be mandatory. Auger-based auto-samplers can be integrated with continuous online analyzers mounted on cross belt conveyers, or for dispatch trucks & railway wagons. Continuous online elemental analyzers provide real-time online qualitative analysis of the ore. In the case of Goa, a likely benefit of continuous online elemental analyzers is that they can detect other minerals/ elements present in the ore that were not known earlier to be present in the area such as rare earth elements (REE) or other valuable minerals.
4. For smaller mines, where creating clusters are feasible, auger-based auto-samplers are recommended at common points, albeit with a lower sampling rate of trucks to avoid congestion.
5. Trucks would be pre-registered and have GPS tracking & carry RFID tags when transporting ore. Geofencing of the various areas within a mine and on the transport route with auto-alerts for breach of geofencing is recommended. CCTV systems at all key points are also mandated.
6. Videography of the sampling process along with random sampling and audit is mandated, using auto-samplers and labs having Inductively Coupled Plasma (ICP) Spectrometers for quick analysis. AI would be used to distinguish lumps and fines.
7. Blockchain based databases are recommended to prevent subsequent data tampering.
8. A redressal system in case of disputes between leaseholders and the state, as well as a provision for continuing operations even if a part of the system fails are recommended
9. Finally, it is recommended to implement this first on a pilot basis, perhaps through a PSU, and then extend it to other mines.

Just last year, the Goa government auctioned off a dump without bothering to verify its contents. The implementation of these guidelines would be staggering improvement.

Implementing the Guidelines

Section 23C of the MMDR Act empowers State Governments to make rules for preventing illegal mining, transportation and storage of minerals. The Goa (Prevention of Illegal Mining, Storage, and Transportation of Minerals) Rules, 2013 were issued on 13-Oct-2013, and amended on 28-Jan-2014, 6-Feb-2014 and 30-Mar-2016. In order to implement the guidelines, these rules will need to be amended.

Section 18 of the MMDR Act deal with mineral conservation and systematic development, and the Central Government may make rules as it sees fit to deal with, inter alia, under sub-section (2)(g), “the submission of samples of minerals from any mine by the owner thereof and the manner in which and the authority to which such samples shall be submitted; and the taking of samples of any minerals from any mine by the State Government or any other authority specified by it in that behalf”. In other words, if the state government is unable to include the Guidelines on misclassification into the illegal mining rules, the central government can issue rules instead.

Will to implement

In its 2012 report, the Shah Commission stated “that is observed that in number of occasions complaints have been received by Government of Goa through responsible persons about the illegal mining activity. Despite that, no inspections were carried out. It is clear that to avoid action the duty to inspect mines might have been evaded by DMG for such a long period i.e. more than 5 years.”

The Shah Commission further observed that “From the inquiry conducted by this Commission, it is apparent that all modes of illegal mining, as stated in the above Notification, are being committed in the State of Goa. … It is pertinent to state here that such illegal act can’t happen without connivance of the politicians, bureaucrats and lessees. There is a complete collapse of the system.”

At the moment, the nine auctioned mineral blocks are looking to start operations quickly. At the same time, the state proposes to auction off dumps outside these nine mineral blocks under the recent dump handling policy 2023, blithely ignoring the fact that dump handling would constitute mining operations under Section 3(d) of the MMDR Act, and therefore requires a mining lease under Section 4. Will the rules be amended immediately so that they become applicable to the mining restart? Has anything changed in the administration since 2012?