Analysis of The Offshore Areas Mineral (Development and

Regulation) Amendment Bill, 2023

Background

• With a 7,517-kilometer coastline and a special marine position, India has enormous resources that can be exploited, including crust, heavy minerals, lime mud, polymetallic nodules, and natural gas and crude oil along its exclusive economic zone (EEZ) that covers more than two million square kilometers. In order to develop and regulate mineral resources on specific marine territories, Parliament passed the "Offshore Areas Mineral (Development and Regulations) Bill'' in 2002 (OAMDR).
• Taking into account the resources at offshores, which comprise 79 million tons of heavy mineral resources, 1,53,996 million tonnes of lime mud in the Indian EEZ, and 745 million tons of construction sand in the territorial waters¹, successive governments had been trying to open up offshore mining to the private sector.
• In order to cater the growing requirements of minerals for technology-driven economy and to align with the Government’s vision of increasing renewable capacity to 500GW by 2030^[1], it is now imperative that more focus shall be brought to investing in research and development of mineral resources.
• In the proposed Bill, the addition of new licenses for offshore mineral production and operations to private players is expected to bring benefits to economic development as well as marine and offshore development. The regulations which are introduced through this Bill are comprehensive and are under direct control of the Central Government which

“PSUs to get Exclusive Rights to Offshore Mineral Blocks”, Livemint, Available at: https://www.livemint.com/news/india/india-to-set-asideoffshore-mineral-blocks-for-psus-in-response-to-chinese-deep-sea-mining-sources-11681407629506.html. makes the implementation and monitoring of the Act more robust and less cumbersome. Through the Bill, imposition of punishments and heavy penalties is also being brought to curb the misuse of the rights given to license holders and disrupt the ecosystem of the marine and offshore areas.

What’s in the Bill?^[2]

• Insertions of new definitions - The proposed amendments bring new definitions explaining the new nature of licenses that are being introduced.

○ Composite Licence has been defined as a license that consists of both an exploration license and a production lease. It is a two stage operating right granted for the purpose of undertaking exploration operation followed by production operation. ○ Dispatch has been defined to be an activity to remove minerals or mineral products from the area covered under the production lease and includes the consumption of minerals and mineral products within such an area. ○ The definition of exploration license is being proposed to be amended to mean a license for the purpose of undertaking exploration operation. ○ The proposed amendment also adds the definition of ‘Government company’ meaning that any company which is under the control of Central Government or State Government or partly by Centre and partly by State. ○ Production has been defined to mean the winning of minerals within the area covered under a production lease for the purpose of processing or dispatch. ○ Standard Block is defined to mean a block of the offshore area of one minute latitude by one minute longitude and includes the seabed and its subsoil and waters superjacent to the seabed within such block.

• New nature of license introduced- Licensee under the Bill can hold a composite license or exploration license. Any person holding a composite license would enjoy the same rights of mining and operation of mines as any person holding an exploration license or production lease. That is, the person holding composite license, exploration license or production lease can undertake reconnaissance operation, exploration operation or production operation in the offshore areas.
• Grant of composite license- The new amendment lays down conditions for grant of composite license. Where the existence of mineral resources has not been adequately established for grant of a production lease, applications can be called for grant of composite license. Area covered by this license will comprise contiguous standard blocks. After satisfying the prescribed conditions a composite license holder can apply for one or more production leases as well. Such production lease shall be valid for a period of 50 years.
• Areas of Mining- Mining under the proposed Bill can be conducted in any area covered by the composite license, or an exploration license, or a production lease. The new amendments adds that in cases of reserved offshore areas, licenses can be granted to any government company or corporation. The government company or corporation can choose to either conduct operations exclusively or jointly.
• Mining by Central Government authorized agency- The proposed amendment while making changes to the proviso of Section 5 of the Principal Act inserts that any other agency including a private entity, duly authorised by the Central Government by notification in the Official Gazette doesn't require license or permit for mining operations.
• Data of operations to be furnished- Every license or leaseholder including the Government agency, is to submit all exploration and operational data, reports, samples, and other information in respect of or collected pursuant to an operation to the administering authority. Further, such data or information shall be in strict confidence, and any dissemination, pursuant to a sale or otherwise, of such data, reports or other information, or sharing of its samples, shall be subject to such terms and conditions, as may be prescribed.
• Restrictions on grant of rights- The amendment proposes that no exploration license, or composite license, or production lease will be granted for an area to any person other than the Government, a Government company or a corporation, in respect of any minerals, where the grade of such mineral in such area is equal to or greater than such threshold value as the Central Government may specify. For the purposes of production lease, the amendment proposes that no production lease will be granted in respect of any part of the offshore area, until and unless it is established that mineral resources exist in the offshore area.
• Termination of rights- The proposed amendment adds that the Government can also terminate the rights of a license or leaseholder where it is expedient in the public interest and strategic interest of the country. Where the termination is being done in the strategic interest of the country, the government can forfeit the right to be heard of the licensee.
• Lapse of operating rights- The new amendment proposes to add that where the holder of operating right fails to undertake operation or discontinues operation beyond the extended period given by the Government, then license or lease shall stand lapsed. It also adds that where the licensee fails to undertake operations within 4 years of date of execution of license or where the work is discontinued for 2 years, then such lease will lapse after expiry of 4 years. Where the conditions were beyond the control of the licensee, an extension may be given.
• Restrictions on the maximum area for which operating rights may be granted- The license holder holding all three nature of licenses and lease will be restricted to operation to maximum area of more than forty-five minutes latitude by forty-five minutes longitude. The Central Government can allow for more area to be covered if it is in the interest of development.
• Introduction of auction-based regime: The Bill proposes to introduce auction as a method for allocation of operating rights in the offshore areas to enable early allocation of operating rights through a transparent and non-discretionary process. This auction method will be adopted for grant of both composite license and production lease.^[3]
  • The Bill proposes that the production leases will now be allocated exclusively through auction (including e-auction) via competitive bidding.
  • Similar to production leases, composite licenses will also be granted solely through auction (including e-auction) via competitive bidding. These licenses can be transferred to eligible individuals as per the prescribed Rules.
• A new section is inserted in the 2023 Bill to empower the Central Government to establish a Offshore Areas Mineral Trust as a not-for-profit autonomous body. The Trust shall hold a non-lapsable fund, which will be funding the welfare and developmental activities pertaining to offshore areas, such as the administration and research in offshore areas, mitigation of ramifications ensuing from operations in offshores, providing relief to disaster thereto, and for the benefit of persons affected by exploration or production operations undertaken. This fund maintained under the Public Account of India will be endowed by payments from lessees not more than one-third of the royalty on mineral production.
• Offenses under the Act- The Bill proposes to add punishments for unauthorized

  exploration and production activities. It also provides for an amount of penalty that needs to be paid by the convicted offender under the Act. Failure to furnish data or information is also punishable under the Act.

• Expansion of powers of Central Government- The new Bill proposes to add provisions wherein the Central Government will have the power to revise any order made by the administering authority or any officer under the Act, give such directions to the administering authority, as it may deem necessary, in public interest, strategic interest of the country, conservation and development of mineral, or to carry out the provisions of this Act and to furnish such information as it may deem necessary for, or relevant to, any enquiry or proceeding, under this Act.

Pros of the Bill

• Ensures transparency and non-impartiality: The Bill introduces transparency in the allocation of production leases and exploration licenses through the method of auctioning. The proposed amendment will reduce the chances of discrimination, promote ease of doing business, and ensure an easy transfer of exploration license, composite license, or production lease.
• Ensures availability of funds: The introduction of the Offshore Areas Mineral Trust is aimed at making the funds available for the purposes of exploration, mitigation of adverse impact of offshore mining, disaster relief, research, work for interest and benefit of the persons affected by exploration or production operations, etc.^[4] The said provision will serve as a vital mechanism to ensure that the financial resources are effectively utilized for the betterment of both the offshore mining industry and the communities affected by its activities. By supporting critical projects and initiatives, the Trust aims to

  promote sustainable and responsible practices in offshore mining while safeguarding the well-being of all stakeholders involved.

• Reduction in the number of long-standing litigations: The potential of mineral resources remains untapped primarily because of unresolved legal disputes related to the irregular allocation of mining blocks in the past. The Offshore Areas Mineral (Development and Regulation) Act was enacted in 2002, however, no mining activity could be carried out from the sea bed owing to several pending litigations.⁶ To address this issue, the Bill proposes that all existing operation, production, and reconnaissance rights pertaining to these blocks will become invalid and cease to hold any legal standing. By allowing existing rights to lapse, the Government seeks to resolve long-standing litigations and bring clarity along with certainty to the mineral allocation process.⁷
• Ease of doing business ensured by the introduction of Composite Licenses: With a composite license, the entire process of obtaining exploration and production rights is streamlined. Instead of applying for separate licenses, entities can now acquire both rights under a single license, reducing administrative complexities. Moreover, it will incentivize entities to invest in exploration activities. This, in turn, promotes a better understanding of the mineral potential in the area, leading to the discovery of new mineral deposits.

Cons of the Bill

• Even though there are regulations being introduced for mining exploration in the Bill, there are no particular regulations when it comes to the exploitation of mineral resources. The commercialization of sea-mining could turn out to be an environmental hazard for marine species. Environmentalists have expressed their growing concern

6 “Centre To Introduce Bill In Lok Sabha For Allowing Auction Of Minerals Mined Offshore”, Business World, July 2023. Available at: https://www.businessworld.in/article/Centre-To-Introduce-Bill-In-Lok-Sabha-For-Allowing-Auction-Of-Minerals-Mined-Offshore-/27-07-2023485658/. 7 Ibid. about the possibility of oil spills and mining vehicles causing noise and light pollution, which could disrupt the entire marine ecosystem. There is a need for a legal framework for environmentally sound sea mining that requires an appropriate combination of mining and environmental laws.

• Moreover, the Ocean remains a major economic factor supporting fisheries and aquaculture, tourism, livelihoods, and blue trade. India has around 1,382 islands and about 30% of its population is living in coastal areas. Experts have also warned about the negative impacts of mining on global fisheries that could potentially threaten the protein source and livelihoods of people residing in poor coastal communities. The Bill could pave the way for the downfall of the fisheries sector at the cost of the livelihoods of the fishermen.
• While auctions are meant to reduce corruption, there is still a risk of collusive bidding or cartelization among entities, leading to artificially inflated bids. In the competitive bidding process, smaller entities or local players might find it difficult to compete with larger, financially stronger entities. This could result in the consolidation of mineral resources in the hands of a few big corporations, limiting opportunities for smaller businesses and local communities.
• As per the Bill, composite licenses or production leases will be granted to public/Government companies through nomination, unlike the competitive bidding process carried out for granting licenses to the private sector. This may lead to inclined/biased granting of licenses to Government companies, and therefore it is advisable to follow the same process of competitive bidding for granting licenses to Government companies as well.

    DISCLAIMER: The opinions expressed herein are entirely those of the author(s). Swaniti makes every effort to use reliable and comprehensive information, but Swaniti does not represent that the contents of the report are accurate or complete. Swaniti is   [1] PIB, Sept 2022, accessed at: Renewable Energy in India [2] Bill no.102 of 2023, Offshore Areas Mineral (Development and Regulation) Amendment Bill, 2023. [3] Clause 10 of the Offshore Areas Mineral (Development and Regulation) Amendment Bill, 2023 to amend the Section 12 and 13 of the Principal Act. [4] Statement of Objects and Reasons of the Offshore Areas Mineral (Development and Regulation) Amendment Bill, 2023.